Is Bitcoin, which can make people rich overnight, really worth playing with?

Brother Qian once wrote an article titled "What Opportunities to Make Money Did You Miss in 2016", in which the first item was "Bitcoin" - in 2016, the price of Bitcoin rose by 160%, creating many legends of getting rich overnight.

At that time, many fans left messages asking, "What the hell is Bitcoin?" How can you make money if you don't even know the tools to make money?

Today I will tell you what Bitcoin is, how to play it, and whether it is reliable.

What the hell is "Bitcoin"?

Although "Bitcoin" sounds mysterious and contains a lot of high-tech elements, its essence and principles are easy to understand.

In essence, Bitcoin, like other currencies, is a tool for payment and pricing. However, due to the different acceptance of it in the laws of different countries, people do not have much feeling about its payment function, and it has become a valuable asset like gold and antiques, with investment attributes.

Even though Bitcoin’s monetary properties are not obvious, I will still briefly explain how it came to be:

On November 1, 2008, when the world was still immersed in the shadow of the economic crisis, a man who called himself Satoshi Nakamoto posted a research report on a secret cryptography discussion group, which elaborated on his new concept of electronic currency.

In 2009, he established an open source project for the system, officially announcing the birth of Bitcoin. However, in late 2010, when Bitcoin was gaining popularity, Satoshi Nakamoto disappeared from the Internet.

There are many speculations about the true identity of Satoshi Nakamoto: some believe that he is not an individual, but a mysterious organization, a Google team, or the National Security Agency; others believe that he is a Japanese American, a physicist who graduated from California Polytechnic State University... But none of these speculations have been confirmed. The only clue is that as the founder of Bitcoin, Satoshi Nakamoto is now worth over 100 million.

The Japanese-American Satoshi Nakamoto was rumored online, but was eventually denied

Unlike the currencies of various countries that we see in banks, Bitcoin has the characteristic of "decentralization", that is, it is not issued under the control of any central bank, but is generated through a process called "mining". As long as you have a computer and an internet connection, you can act as a "miner" to mine "treasures" such as Bitcoin.

The so-called "mining" simply means that participants use a bunch of complex computer algorithms to continuously seek a specific solution to a mathematical problem.

If you still don't understand, you just need to know that Bitcoin is a string of numbers generated by computer software. Every time a participant calculates a set of numbers, he or she can get a certain number of new Bitcoins as a reward. The initial number is 50, and then it will be halved every 4 years...

The total amount of bitcoins will not exceed 21 million.

The mining speed of Bitcoin is rhythmic, with one produced every 10 minutes. It is expected that all Bitcoins will be mined by 2140. Currently, more than 13 million Bitcoins have been mined.

Since "mining" can earn Bitcoins and Bitcoins can be exchanged for money, "mining" has now developed into a fairly large business. The technical and equipment thresholds are getting higher and higher. For newcomers, it is becoming increasingly difficult to "mine" Bitcoins.

After all, other people’s “mining machines” are like this:

In a Bitcoin factory in Northeast China, 2,500 mining machines consume 400,000 yuan of electricity per month. Three workers are responsible for supervising the normal operation of the machines.

Professional "mining machines" on Taobao have been sold for tens of thousands of yuan.

People who are interested in "mining" and have a certain IT foundation can study the principles and methods of "mining" through other channels.

For ordinary people, the main opportunity to get in touch with "Bitcoin" is investment, so this article is mainly aimed at ordinary users with investment needs.

As an investment product, Bitcoin may be somewhat similar to stocks, and it can be exchanged into RMB, USD and other currencies. However, due to its "decentralized" characteristics, its credibility is not strong, its currency value is quite unstable, and its exchange rate with other currencies fluctuates frequently and violently.

When Bitcoin was created on January 3, 2009, it was worthless. It was not until February 9, 2011 that the price of 1 Bitcoin reached 1 US dollar for the first time.

In the following six years, Bitcoin started its counterattack from a few cents to thousands of dollars. On November 27, 2013, Bitcoin reached a historical high of $1,242 (equivalent to RMB 8,529). On January 14, 2015, it fell to a historical low of $114 (equivalent to RMB 782).

Since the beginning of 2016, speculation, derivatives, leveraged bets and program trading have pushed up the price of Bitcoin, causing it to rise by more than 250%. On January 5 this year, it hit an all-time high of 8,995 yuan. On January 12, it fell to a nearly three-month low of 4,902 yuan, with a fluctuation of nearly 50% within 7 days.

K-line chart of Bitcoin to RMB market trend in the past 10 months

Users can make money by buying at a low price and then selling at a high price. This is not difficult to understand for users with stock trading experience.

However, Bitcoin’s value fluctuates much more frequently and lacks regulation, so we remind everyone:

Bitcoin carries huge risks, so be extremely cautious when investing!

Want to trade Bitcoin, where do you start?

To trade Bitcoin, you have to find a dedicated Bitcoin trading platform online.

At present, there are three major Bitcoin trading platforms in China: Huobi, Bihang and BTCChina. To trade on these platforms, you only need to open an account on the trading platform and transfer funds through the bank account or Alipay associated with it, which is similar to the common P2P platform operation steps.

Common Bitcoin trading platforms

However, the difference between Bitcoin and ordinary investment and financial management is that its value fluctuates frequently. If you want to make money from Bitcoin, which does not follow the rules, you still need certain skills and psychological preparation.

First of all, you should pay attention to the latest Bitcoin market every day.

The price of Bitcoin fluctuates greatly. The price will be different every minute and every second. If you want to grasp the market trend, you must first pay more attention to it. It is best to keep staring at the computer to study when the price fluctuates faster and more significantly.

Second, maintain a good attitude and don’t be too greedy.

Large price ranges and frequent fluctuations are a major feature of virtual currencies. After all, the price of currency is driven up by people and has little to do with economic factors. Therefore, when investing in Bitcoin, you must first maintain a good attitude and not let temporary price fluctuations disrupt your judgment. When the price continues to rise, choose a reasonable and satisfactory price and sell it immediately; when the price is low, you must also be brave enough to buy it and must not be indecisive.

What are the risks of investing in Bitcoin?

Benefits and risks coexist. While Bitcoin has made many people's dreams of getting rich overnight come true, the risks behind it should not be underestimated.

The first is the risk of the trading platform running away. Similar to the P2P platform running away, Bitcoin trading platforms often suddenly run away on the pretext of being "attacked by hackers", leaving investors with nothing.

The second is legal risk. The People's Bank of China has stated that Bitcoin is a specific virtual commodity that does not have the same legal status as currency and cannot and should not be circulated and used as currency in the market. The central bank also pointed out that Bitcoin has a high risk of speculation, a high risk of money laundering, and the risk of being exploited by criminals or organizations. Investors participating in Bitcoin transactions bear their own risks.

Finally, there is the technical risk. On the one hand, the technical risk comes from the frequent hacker attacks on the trading platform. On the other hand, as long as a loophole is found in the mathematical model of Bitcoin, the entire Bitcoin world will collapse immediately.

Can you still make money by investing in Bitcoin now?

With the advancement of technology, demonetization will inevitably emerge and the use of electronic currency will become more frequent.

Bitcoin has opened up new ideas for the development of digital currencies. Currently, many countries have referred to the settlement and payment technologies that Bitcoin relies on to explore future national legal digital currencies.

Blockchain technology, which is closely related to Bitcoin, is increasingly showing its investment value and has won the favor of many technology and financial giants.

In addition, Bitcoin transactions face the global market, and the policy of a single country has limited impact on the value of Bitcoin. For example, China has recently taken many actions to crack down on illegal Bitcoin transactions, while Bitcoin transactions are booming in Japan, India and the Middle East, so there has been no Bitcoin crash.

Regarding the trend of the Bitcoin market after the central bank and other regulatory authorities have strengthened supervision, some analysts believe that as the first virtual currency in human history that has been widely recognized by the public, its real and effective investment value is not expected to disappear completely due to regulatory crackdowns. After the speculative tide quickly recedes, the price and transaction volume of domestic Bitcoin may continue to fall and shrink.

However, regulatory intervention is not necessarily bad news. In the current environment, regulatory policies for Bitcoin will make Bitcoin's trading volume and price return to rationality, and investors' rights and interests will be better protected, which will be conducive to the long-term healthy development of Bitcoin.