At any point of the digital transition,…
Bitcoin is a currency, born in 2009. Unlike the old coins, Bitcoin
is free: it does not belong to any particular country, but can be used all over the world.
To understand how the price of Bitcoin moves, you need to consider 3 elements:
-There will only be 21 million Bitcoins.
-The value depends on the market.
You must know that the price of Bitcoin can rise or fall in a short time. Depending on the amount of total Bitcoins that are bought or sold on the market, its price updates. The Bitcoin market is in fact still very young and is subject to fluctuations.
This feature can be very interesting if you want to use it just to try to make money, buying when the price is lower and reselling when the price is higher.
There will be only 21 million Bitcoins
The algorithm behind the system was created so that a total of 21,000,000 Bitcoins are produced. Today, around 12 new Bitcoins are generated every 10 minutes. However, the number of new Bitcoins generated will decrease over time, until there are at
most 21 million Bitcoins.
Why only 21 million?
Having a maximum number of Bitcoins allows you to avoid the risk of inflation. With traditional coins, in fact, every time a state prints new banknotes by increasing the number in circulation, people become poorer, as their money loses value. Bitcoin, like gold, is a limited resource: this means that, once this figure is reached, there will be no new Bitcoins. Thanks to this numerical limit, the
value of Bitcoins will only depend on the market.
The value depends on the market
The price of Bitcoin depends on the amount of supply and demand in the market.
The set of people who want to buy Bitcoin constitutes the market “demand”
. The “offer” instead is determined by the people who want to sell the Bitcoin and by the new ones
Bitcoins generated by the algorithm:
However, once we reach 21 million Bitcoins, the offer ”will only be made up of people who want to sell Bitcoin. What does it mean? If Bitcoin is in high demand, that is, if the number of purchases is greater than that of sales, its price increases. Conversely, if the supply of Bitcoin is greater than the demand (i.e. there are more sales than purchases), then the price goes down. In practice, the more people want to buy Bitcoin, the more its value increases; the more interest falls and people want to sell Bitcoin, the more its value decreases.
How much can you gain or lose
The great thing about Bitcoin is that, unlike the traditional financial market, you can decide to invest a very small amount to start trying.
At this point, if the value of Bitcoin increases, you can earn more and more, while if its value decreases, you can lose at most the amount you have decided to bet.
Calculate the possible gain
Investing in Bitcoin works just like changing money to go to another country, for example when you exchange Euros to get Dollars in exchange.
If you decide to buy € 10 of Bitcoin and at that moment the price for 1 Bitcoin is € 1,000, by buying € 10 you get exactly 0.01 Bitcoin (calculation: how much you bought in Euros / divided / price of Bitcoin, that is: € 10 / € 1,000 = 0.01 Bitcoin). Let’s assume that, the next day, the price of Bitcoin reached € 1,500. You will always have the same number of Bitcoins, therefore 0.01 Bitcoins, but their value will have reached € 15 (calculation: amount of Bitcoins you have * for * current Bitcoin price, that is: € 1,500 * 0.01 Bitcoin = € 15). You will therefore have € 5 more than the day before as the equivalent (your € 10 transformed into Bitcoin has made € 5 more, becoming € 15). At this point, if you decide to resell your 0.01 Bitcoin, you will get € 15 in exchange and you will have earned € 5 in one day. Similarly, if you have invested € 100 in exchange for 0.1 Bitcoin, by reselling your 0.1 Bitcoins when the price is increased, you will get € 150; if you have invested € 1000 in exchange for 1 Bitcoin, reselling it at an increased price will get € 1500, and so on. So if you buy Bitcoins and resell them when their value has increased, the amount you receive will be higher than at the time of purchase. Of course, the opposite is also true: if you sell them when the value in euros is lower than when you bought them, you will receive less euros than what you spent on buying them. However, you can also choose not to re-sell your Bitcoins right away and wait to see if they still increase in value. if you buy Bitcoins and resell them when their value has increased, the amount you receive will be higher than at the time of purchase. Of course, the opposite is also true: if you sell them when the value in euros is lower than when you bought them, you will receive less euros than what you spent on buying them. But you can also choose not to re-sell your Bitcoins right away and wait to see if they increase in value again. if you buy Bitcoins and resell them when their value has increased, the amount you receive will be higher than at the time of purchase. Of course, the opposite is also true: if you sell them when the value in euros is lower than when you bought them, you will receive less euros than what you spent on buying them. However, you can also choose not to re-sell your Bitcoins right away and wait to see if they still increase in value.
When you buy Bitcoins, you are making a bet where you naturally earn if their value increases. So if you decide to buy them, you are betting that in the future more people will want to buy them and consequently their value will increase. Once you have bought Bitcoins, there are 2 main strategies you can choose to follow, based on your expectations:
- Short Term Strategy.
- Long Term Strategy.
If you decide to make a short-term investment, you are placing a bet that the price of Bitcoin will rise in no time. In this case you will take advantage of the price fluctuations: as soon as the value of your Bitcoins has reached the amount you wanted to earn, you can immediately resell them.
If you decide to invest long-term instead, you are making a bet that Bitcoin has great potential and that in the future many more people will use it, leading to a sharp increase in its value. In this case, what happens is that, once you buy the Bitcoins, you will wait to see if they will gain a lot of value over the years.
Those who started investing in the first years after the birth of Bitcoin, literally made a fortune if they didn’t sell them right away. Count that in 2010 two pizzas were bought with 10,000 Bitcoins … today their value would be tens of millions of Euros! In fact, until 2012 Bitcoin was still unknown to most people, and its price was less than € 10. Over the years, the price of Bitcoin has repeatedly grown a lot and dropped as well. If you look at the Bitcoin price history, you will see that it is continually marked by peaks and successive declines, only to return to peaks again and so on. Consider that, only at the beginning of 2017, the price of a Bitcoin was still worth less than € 1,000 and, in the same year, a single Bitcoin even reached over € 16,000, only to drop again to around € 3,000. In fact, during 2017 many people began to hear about Bitcoin and interest grew. At the same time, as the price rose, many sold for profit, and the price fell again. Those who bought at times when the price was low and sold at times when the price increased earned a lot. Of course, the opposite is also true: whoever bought when the price was higher and resold after it went down, has instead lost money. Even after the peak of 2017, however, the price of Bitcoin is constantly moving and there are continuous peaks and dips, and as many continuous opportunities for profit. Just think of the recent price recovery, which started in 2019, which corresponds to the probable restart of the market in view of the next change in the pace of generation of Bitcoin.