Bitcoin (BTC) has been associated with scams and illegal transactions across the web, but Bitcoin itself isn’t a scam. How people sell it and the platforms—websites and tools—that store this digital currency can be used to defraud or scam people.
Whether you’re still researching about Bitcoin or you’re planning to invest in a few coins, you’ll find out more about the pros and cons in this article.
Before moving forward, remember these four principles as you dig deeper:
- Don’t invest if you don’t know how the technology behind it works.
- If it’s too good to be true, then it’s not true.
- If you tend to invest with your emotions, Bitcoin isn’t for you.
- It’s a highly volatile market— invest at your own risk.
What is Bitcoin?
Bitcoin is a digital currency that has a corresponding value just like your cash on hand. The difference is that it’s not tangible. You can’t hold or touch it physically. But you can use it to make transactions, whether you’re into buying or selling products and even services.
Here’s an analogy: Think of Bitcoin as your prepaid load. When you have credit on your mobile phone, let’s say P1,000. You can use that to call or text your friends. You can’t hold onto that P1,000, but you know it exists and it has a value. It’s yours, and you can use it for a purpose.
Bitcoin, on the other hand, can be a form of payment. Some early adopters of merchants here and overseas accept it as your payment.
Where to use Bitcoin?
There are three ways on how and where to use Bitcoin
- Remittance – if your loved ones are working overseas, they can send you Bitcoin instead of cash, which are usually transmitted via remittance centres with transaction fees. When you receive Bitcoin in your digital wallet, you cut the fees and you can convert it later from BTC to Pesos via a digital wallet like Coins.PH
- Buy and sell online– if you’re shopping overseas and want to save more from the transaction fees, you can convert your cash into BTC and buy items from verified merchants accepting it as an online payment. For example, Shopify merchants can accept BTC.
- Buy and hold it like an investment – you can buy BTC with your cash and store in either in e-wallets or digital wallets like CoinsPH, Abra, or BSP regulated exchanges like PDAX, Citadax and Coins.Pro. Bitcoin’s all-time high of almost $20,000 USD (about P1 million) was in December 2017. BTC’s value as of this writing is about more than $5,200 USD (around P270,000 at the time this article was written). This just goes to show how volatile these cryptocurrencies can be. But, more on that later.
How does Bitcoin work?
Bitcoin was used as a peer-to-peer system for online payments. It cuts the middlemen or a central authority (e.g. banks, remittance centres, etc.)
It started in 2008 as P2P online payment and then morphed into a technology as the community adopted its use. It grew into a cryptocurrency, which was then treated as an investment tool, but it is ultimately a digital currency which people can use in various transactions.
One of the unique characteristics of Bitcoin’s technology is that it’s decentralised. There’s no central authority to dictate or control the truth to other Bitcoin owners that put their computers to work in order to mine Bitcoin (more about Bitcoin mining in our next post). So, in a decentralised environment, your information isn’t stored or owned by an authority. Everyone in the network has access to the information.
Each Bitcoin transaction can be traced with a hash code. So, the main concept of Bitcoin is that you are in charge of your money. No need to go to a bank (some banks charge withdrawals and cashing of cheques with fees) or even PayPal that sometimes charge fees of more than 4% on your transaction.
How to invest in Bitcoin?
There are three ways on how to start investing in Bitcoin. Remember, keep in mind those four principles mentioned above. If you’re not sure about Bitcoin, don’t go any further. Invest at your own risk. You won’t be a great investor if you don’t know how to manage your emotions when the markets dropped.
For example, if you have bought (1) Bitcoin at an all-time high, valued at about $20,000 two years ago, are you willing to still hold on to your coins at this time now that it has decreased its value at $5,000? It’s a massive loss in two years, but that’s how volatile and unpredictable the Bitcoin market and its value.
1. Trading Bitcoin
Create your digital wallet via Coins.PH or Abra and start funding your digital wallets via bank-to-bank transfer, 7/11 stores with Cliqq kiosks, debit card, and others.
Coins.PH Bitcoin wallet
Abra Bitcoin wallet
After funding your digital wallet with BTC (as of this writing: 1 BTC = P270,000), you can create and register an account on BSP-regulated, SEC registered exchanges like PDAX, Coins.Pro, and Citadax. As of this writing, these three aren’t accepting registrations, however you will be able to join the waitlist. Opt-in to their website notifications for updates.
Alternatively, there are overseas exchanges (listed below), but these are not licensed or regulated by Banko Sentral ng Pilipinas. If you start trading in these exchanges. Research, compare, and read reviews about each platform.
You also need to verify your account by submitting the required documents online to these exchanges, which may take some time.
4 Ways to Invest in Bitcoin via Trading
- Create your digital Bitcoin wallet (Coins.PH, Abra, Bitcoin.info, Exodus, etc.)
- Check the CMC or CoinMarketCap website for the current price.
- Decide how much you’re willing to invest (you can also use a calculator to check the value of 1 BTC = PHP)
- Transfer your BTC to exchanges or buy from local sellers or transfer your coins from the digital wallet to exchanges.
2. Bitcoin mining
This approach requires intermediate to advanced knowledge of the Bitcoin. If you want to mine Bitcoin, you need to invest in mining software and hardware. You solve a Bitcoin algorithm or math problems, and you get Bitcoins in exchange.
In this way, it gives more people incentives of coins whenever they solve these problems and mine more coins. In the process, the miners are the ones that approve the Bitcoin transactions in the decentralised network.
Is it profitable these days? It’s challenging to get a return on your investment from this method.
The investment – you need to buy the software and hardware for mining, and you’re going to more electricity as you mine with a computer (or computers) with high specifications that can mine the coins faster.
3. HODL (and embrace the “Bodega” mindset)
You need a Bitcoin wallet for this next approach. Unlike the first two mentioned above, “Holding” or HODL as labelled by the cryptocurrency community is a passive approach. If you really believe that Bitcoin will be the future of money and will change the way people make transactions, then embrace that “Bodega” mindset and start buying coins now. (Mag-bodega na! “Load up your stock room”)
Just like in stocks, if you’re willing to let your money sleep for about 5 to 10 years, start creating a digital wallet and store it there.
You may also buy a Ledger Nano S or TREZOR (price range P5,000-P7000 or more) that you can order online via Ledger if you have a large amount of Bitcoin to store.
This is a hardware wallet or cold wallet. It’s better to use or keep your currency this way and keep your private keys. It means you also need to invest in a safe hard wallet if you’re going to store a huge amount of Bitcoin for the long-term.
Why should you invest in Bitcoin?
There’s no central bank or financial entity that controls the prices of Bitcoin. Compared with the world’s currencies, the respected central banks regulate them.
When a currency loses its value, the purchasing power also decreases. The price is not dependable on the government policies or regulations.
Bitcoin is a global currency. You can use it to buy items online and offline.
It’s also portable, and you can carry a considerable amount of money even in a cold wallet like a paper wallet or a digital wallet. Bringing millions in bags could be risky. But if you’re money is in BTC, you have control when to use or convert it into cash.
BSP has also legitimised Bitcoin as a mode of payment. This means that the Philippines central bank acknowledges it as a currency for your transactions.
What are the risks involved when investing in Bitcoin?
As the price isn’t regulated, it’s one of the most volatile markets in the investment realm. Compared it with stocks, the prices in cryptocurrencies such as Bitcoin are volatile.
If you don’t know how to keep your private keys, Bitcoin investment isn’t for you. You need to do a lot of research and be responsible for keeping those passwords and private keys.
Once you store your Bitcoin in hot wallets such as digital wallets and exchanges, they are at risk. You don’t have any control of these exchanges, no matter how “credible” and high-rated they seem.
Hackers often target these Bitcoin exchanges. Before you know it, they could transfer your BTC to their wallets. The BTC transactions are traceable and transparent among the network. But you can’t recover them once they’re transferred.
There are a lot of Bitcoin scams out there. Watch out for those MLM type of Bitcoin “investment” as they claim to be. When you signed up, they guarantee a certain rate that you will gain. Avoid these scams and be mindful of referral links that promise “high ROI.”
Is Bitcoin safe?
Bitcoin, and the Blockchain technology that runs it, is safe and proven. Bitcoin experts say that the public ledger’s system is pretty much hack-proof.
Why? To change the ledger, a hacker that masks themselves as a Bitcoin miner needs to harness a ton of computing power to make amends. They have to execute those changes in a public space like the ledger where thousands of other computers and miners see what’s going on. A person or computer that wants to compromise or reverse an entire blockchain will find the task impossible as people in such a decentralised network can track all the transactions.
If you are still in doubt, we’d always recommend sticking to investments that you’re comfortable with. However, if you’re the bold type it might be just the investment you’ve been waiting for.