In Depth

What is bitcoin and how can you buy it?

Everything you need to know about the volatile cryptocurrency 

Created in January 2009, bitcoin is a unit of digital currency and a worldwide payment system. Often described as a cryptocurrency, it is a type of money that is completely virtual – “it’s like an online version of cash”, the BBC said. 

Bitcoin has “no physical form” and exists “only as a string of computer code”, The Times said. It is bought and sold online, generally in exchanges and stored in an online “wallet”. Bitcoin code can also be stored on memory sticks or computer hard drives.

Transactions are made with “no middle men – meaning, no banks”, CNN said. It can be used to book hotels on Expedia and to buy Xbox games. “But much of the hype is about getting rich by trading it.” 

How much is a single bitcoin worth now?

Bitcoin is incredibly volatile and its price varies wildly. At 9.30am on 18 January, CoinMarketCap valued a single coin at $41,815.56. By the time you read this, the value will probably have changed.

After a December dip, long-term investors are “doubling down on its stashes of the cryptocurrency”, hoping it was “merely a festive blip”, Reuters reported. The wind has been taken out of the market’s sails after a “bad start to 2022”, said Forbes. Even as some big-name investors issue “huge bitcoin price predictions”.

Guido Buehler, CEO of Swiss bank Seba, has predicted that bitcoin would hit a new high in the next 12 months, Yahoo! Finance reported. Bitcoin’s price reached an all-time high of $69,000 in November 2021 and Buehler said the bank’s internal valuation models indicate a price between $50,000 and $75,000. “I’m quite confident we’re going to see that level,” he added. “The question is always timing.”

How do you buy bitcoin?

Investors can only get their hands on bitcoin through an exchange. These include Coinbase, a popular online exchange that can be accessed through an app or a computer. 

Bitcoin can be purchased in fractions, meaning investors don’t need to spend thousands to get hold of the virtual currency. For instance, an investor can hold £10 worth of the cryptocurrency, which would equate to roughly 0.00033 BTC. 

Investors can store and manage their bitcoin in a virtual “hot wallet” on Coinbase. Some investors prefer a “cold wallet”, which takes the form of a small USB drive. These cost around £100 and are less vulnerable to cyber attacks.

Where can you spend bitcoin?

Bitcoin has gone a bit mainstream and it can be used for purchases at some of the world’s biggest retailers, including Apple, Amazon and Expedia, Financial News reported. And vendors are “jumping on the wagon”.

More retailers across the world are beginning to accept different forms of cryptocurrency, said Retail Gazette. In the UK outlets such as Phillipp Plein, Shopify, Whole Foods, Microsoft and Lush accept bitcoin. 

If you want to buy something using bitcoin, you need to make sure the seller accepts the cryptocurrency. If they do, you need the anonymous identification number attached to the seller’s “wallet” so that you can move coins from your virtual wallet to theirs.

The “anonymity” of these transactions has made the currency particularly popular with drug dealers, ABC News reported.

What drives the bitcoin market?

The digital currency is a highly speculative venture that typically appeals to investors hunting for higher yields. A chunk of the market is driven by the “bitcoin whales” – the 1,000 or so individuals who own 40% of the market. “A few massive investors can rock it with a shrug,” Bloomberg said. “They can send prices plummeting by selling even a portion of their holdings.”

Other external factors can have a significant impact on the value of cryptocurrencies. According to BBC News, a price crash in 2018 was attributed to China and South Korea’s crackdown on digital coin exchanges, which led to a sell-off “across the market globally”.

Business Insider said a cryptocurrency price crash is often followed by a rally. One such example is Japan. In April 2017, the market quickly recovered from a crash after the country announced bitcoin would be accepted as legal tender.

Who invented bitcoin?

Good question. The identity of the mastermind behind bitcoin is a Japanese developer who goes by the pseudonym “Satoshi Nakamoto”, The Daily Telegraph said. The identity of the mysterious Nakamoto has never been publicly revealed, with some suggesting that the alias must represent multiple developers.

Ted Nelson, one of the web’s founding fathers, suggested Nakamoto is actually mathematician Shinichi Mochizuki. While in 2014 Newsweek claimed the founder was Dorian Prentice Satoshi Nakamoto, a 64-year-old father-of-six living near Los Angeles, although a brief interview with Nakamoto garnered no concrete evidence of this.

However, Australian entrepreneur Craig Wright told the BBC that he was part of a team of people who created the currency that is collectively known as “Satoshi Nakamoto”.

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