Bitcoin is up quite 700% within the past year, and 13,500% within the past five years. Those are life-changing returns -- and a few analysts still see big gains on the horizon.
For instance, investment bank JPMorgan Chase said Bitcoin's price could hit $146,000, a huge increase from today's prices around $58,000. More recently, Ark Invest CEO Cathie Wood explained how its price could climb to over $400,000. In other words, there's still time for investors to take advantage on cryptocurrency.
Here are three reasons Bitcoin could double your money (and more).
- Bitcoin is powered by blockchain
Blockchain is that the ingenious recordkeeping system behind decentralized cryptocurrencies like Bitcoin. to know why that matters, it is necessary to understand how mining works.
As Bitcoin transactions occur, they're grouped into blocks. These blocks are secured by cryptography (i.e. complex math problems) -- specifically, all data within a block is run through a cryptographic hash function, which generates a singular signature for that block. Notably, each block's signature is added to the next block, allowing them to be linked in chronological order.
Miners use expensive hardware to unravel these complex math problems. Once they find an answer , it's verified by all other nodes (computers) on the network, then the validated block is added to the blockchain.
This process is vital for 2 reasons: First, when miners successfully solve the cryptographic puzzles, they're awarded Bitcoin as compensation -- and are often "> this is often the sole way Bitcoin can be created. Second, by validating blocks and adding them to the blockchain, miners create a ledger of all past transactions.
In other words, Bitcoin doesn't got to be (and cannot be) controlled by any central authority. there's no need for a financial institution to issue new currency or keep records because the network takes care of both by itself. this technique isn't only efficient, it is also very secure.
If anyone attempted to change information within an existing block (i.e. fabricate new Bitcoin), it might alter the output of the cryptographic hash function, changing the block's signature. meaning the new signature would not match the signature incorporated into the next block.
As a result, the network would recognize the fraudulent change and reject it, reverting to its original state. In fact, so as to successfully hack the Bitcoin blockchain, a private would wish to regulate a minimum of 51% of all computing power on the network. That's virtually impossible.
So here's the takeaway: Blockchain may be a highly secure and self-governing database, both valuable qualities during a economic system .
- Bitcoin benefits from scarcity
The supply of Bitcoin is restricted to 21 million tokens. That's because every 210,000 blocks, the mining reward is cut in half. Currently, miners receive 6.25 Bitcoin for adding a block to the blockchain, but eventually, that figure will drop to zero. then , miners will only earn transaction fees.
The idea of scarcity may sound trivial, but it's actually critical to Bitcoin's long-term value. consistent with theory , supply and price are inversely related. So if supply rises to infinity, the worth should fall to zero -- that is the problem with cryptocurrencies that haven't any supply limits. But if supply is held constant, the worth will rise as demand increases, or fall as demand drops.
As a practical example, assets like gold have value because they exist in limited supply. Bitcoin has been called digital gold because it benefits from an equivalent economic principles.
- Bitcoin is that the hottest cryptocurrency
Bitcoin was the primary digital currency, and it remains the foremost popular. In fact, the combined value of all Bitcoin in circulation is now roughly $1.1 trillion -- quite fourfold that of second-place Ether. More to the purpose , its real-world utility is improving.
Fintechs like Square and PayPal now allow consumers to trade Bitcoin, and PayPal recently launched Checkout with Crypto, making it possible to fund purchases with Bitcoin. Likewise, Mastercard and Visa have launched crypto payment cards, which serve an identical purpose.
These products make one thing clear: Cryptocurrency is gaining popularity. And Bitcoin -- the primary and largest cryptocurrency -- has a plus over the remainder . Going forward, as more payment processors and merchants accept digital currencies, Bitcoin is virtually bound to be their first choice, which should perpetuate its popularity and drive demand.
Final word
Investors should remember Bitcoin may be a highly volatile asset. In fact, it's lost over half its value several times over the last decade. as an example , between December 2017 and December 2018, the worth of a token fell quite 80% -- and it's possible (perhaps even likely) that an identical event will occur again. However, for investors who can tolerate that sort of risk and volatility, Bitcoin might be a rewarding long-term investment. To know more: How to invest and double bitcoin
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