Category Archive: General

BITCOIN CRYPTOCURRENCY: WHAT IS IT AND HOW DOES IT WORK?

April 6th, 2023 by

What is bitcoin and what is it used for?

Bitcoin is a digital currency, or a cryptocurrency. With it, it is possible to buy and sell over the internet: unlike other currencies, such as the dollar, euro or the real itself, bitcoin only exists and can be used virtually or in physical stores that accept cryptocurrency as payment.

Bitcoin was the first cryptocurrency to circulate in the digital environment. It appeared in 2009, in the middle of the economic crisis, and since then it has been traded without any interruption. 

The creator of the bitcoin cryptocurrency goes by the pseudonym Satoshi Nakamoto . When announced, the asset was discredited by many as this was not the first attempt to conceive of a digital currency. 💰 

However, it has a very important feature that helped to its success: bitcoin is a decentralized currency. That is: it is not regulated by any government, company or bank. With this, it is possible to buy and sell bitcoins without intermediaries. 

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What are cryptocurrencies?

Cryptocurrencies (or virtual currencies) are a means of digital payment, through which it is possible to carry out purchase and sale transactions online, as we said above.

Bitcoin, which is based on a blockchain network created by the pseudonym Satoshi Nakamoto, was the first cryptocurrency to enter into circulation in the digital world.  

As you can imagine, it is not the only one, but it was the big bang of this new market, as it started the idea of ​​decentralized digital currencies in the year of its announcement, back in 2009.  

The notion of electronic money, however, is not so new. In 1980, for example, cryptographer David Chaum wrote an article entitled “Blind signatures for unraceable payments”, which inspired several other cryptographers in the attempt to create a cryptocurrency. 

Bitcoin means the digitization of money, cash, and with it it is possible to send money directly between two people without depending on any centralized intermediary in a global, transparent, open and borderless network, just like the internet itself. 

But how does bitcoin become “real” money? Well, some alternatives are to make the transfer to a bank account or to your credit card, and it can be converted into different types of currency. 

And what are Altcoins?

Altcoin is the name given to cryptocurrencies on the market that are alternatives to bitcoin.

Inspired by the invention of bitcoin itself, countless other cryptocurrencies have emerged in recent years. Today, there are literally thousands of digital currencies of all kinds. 

Some are copies almost identical to the original, changing only a few simple features; others are much more complex and ambitious platforms — as is the case with Ethereum — that promise much more than just electronic money. 

And, just like the bitcoin precursor, most of them are traded on the internet, on organized and specialized trading platforms , thus forming a new market in growing effervescence: the cryptocurrency market. 💸 

How does bitcoin work?

Bitcoin is based on an encryption system, which guarantees the operation of transactions, which take place anonymously. It does not undergo any regulation – whether from governments, companies or financial institutions, as it is traded on its own network: the blockchain – a large database, where transactions take place.   

Bitcoin

In the bitcoin mining process , computers connected to the network work to solve problems and, when solved, “receive” a block of bitcoins. This is how this cryptocurrency comes about. 

According to the Bitcoin protocol, there is a finite and immutable number of bitcoins to be produced: 21 million units by the year 2140. 

Are you curious about how to buy bitcoin? Below we explain! 👇 

How to buy bitcoin?

There are three ways to buy bitcoins and other cryptocurrencies: 

  1. Accepting bitcoins as payment in your business.
  1. Buying from someone who has bitcoins.
  1. Mining bitcoins on a cryptocurrency exchange. 

The simplest and fastest way to buy your bitcoins is through an exchange. 😉 

Thus, to trade bitcoin, you must have an account at a cryptocurrency brokerage, which are similar to a conventional exchange office, where you can exchange reais for dollars or euros, but in this case, you would exchange reais for bitcoin . 

Cryptocurrency ETFs: What Are They? 

Before we talk about what cryptocurrency ETFs are, you need to understand what ETFs are. 🤚  

The answer is simple: ETF, or Exchange Traded Fund , is nothing more than an investment fund based on a specific index, such as Ibovespa .  

That is, it is a “package” of assets selected by the fund manager, seeking those that are close to the defined index. In this way, you can acquire an ETF portion that best suits your vibe, thus having a portfolio that will follow the same directions.

👉 You can invest in cryptocurrencies in a simpler and more diversified way through ETFs like HASH11 , one of the main digital currency investment funds available at B3. 

This diversification has numerous benefits, especially if you are discovering this new world now. Considering that, currently, more than 10,000 cryptos circulate in the market, starting with an established group based on an index can be the ideal path.

Did you find it interesting? Go even deeper into the universe of ETFs with this complete content that we have separated for you:

👉  Cryptocurrency ETF: how to invest? | master clear

Bitcoin: why are people searching for it?

The search for bitcoins is on the rise. Cryptocurrency has some characteristics that can be viewed positively. Just look:

Bitcoin as the “Digital Gold”

Some analysts call this asset “digital gold”: an asset that replicates the characteristics of gold itself as it is not issued by any government , easy to transport and verifiable (by the way, investing in gold on the stock exchange can be a good option for you to stay eye).

Portfolio diversification

Bitcoin can be considered a diversification asset against global tensions , precisely because it is “independent”.

But since we are talking about how to buy bitcoin, it should be borne in mind that its quotation may not change less in case of global crises and tensions. The above scenario is just one of many.

24-hour cryptocurrency market

This cryptocurrency is part of a market that works 24/7. Any trade or transfer can be done at any time easily and quickly, either through a web platform or app.

Bitcoin is a deflationary asset

Bitcoin is a deflationary asset: there will only be 21 million bitcoin units in the world.

Affordable cryptocurrency!

The digital currency can be traded up to its 8th decimal place called Satoshi. Thus, the investor or trader can choose with more options the amount to trade.

Bitcoin risks: what to know before investing

Every type of investment has risks. Investing in bitcoin is no different. Therefore, before choosing to invest in this currency, you need to know your risk profile , that is, what your risk tolerance is and what they are.

We can separate 3 groups of risks of digital assets/cryptocurrencies:

  1. System Risk
  1. Usability Risk
  1. Market Risk

Let’s look at each of them in more detail:

System risks

System risk is related to the technology required for the cryptocurrency system to function. Here, we are talking about what is behind bitcoins.

This refers to bugs or vulnerabilities that could threaten the functioning of the bitcoin system , threatening its trust. These problems can directly interfere with the price of cryptocurrencies. Furthermore, they may result in asset losses as well.

Therefore, the system is the basis of the bitcoin market. If his technology is threatened, the entire asset market is impacted.

usability risks

Among the three types of risks, usability risk has the highest chance of causing losses to users. This risk is related to the storage of bitcoins.

Unlike physical money, which you can keep in your wallet, bitcoins need to be stored virtually in a secure environment.

Thus, you do not run the risk of losing the information stored on your computer or cell phone and not being able to access your cryptocurrencies.

The best way to store your cryptocurrencies is to look for digital wallets . Research them and see reliable options.

market risks

Market risk refers to the fluctuation in the price of cryptocurrencies itself – this is a risk that different variable income assets suffer.

In the market, the oscillation of asset prices is called volatility . Some digital assets are more volatile than others.

In addition, as they are freely traded assets worldwide, the price is defined by the simple interaction of buyers and sellers, that is, the law of supply and demand .

This means that it is not possible to predict the bitcoin price for the next day. Several external factors, such as political crises, financial crises or some event in the financial market, such as the merger of two large companies, can infer the value of cryptocurrency.

Thus, you should be aware of market risk before trading cryptocurrencies. These assets have high volatility in relation to their price and their investment is considered high risk.

Investing in Bitcoin: How much does it cost?

The cost to invest in cryptocurrency varies by broker. Just like investing in stocks , for example, some brokerages may charge fees for investing in bitcoin.

Therefore, whatever the asset of your choice, it is always important to analyze the conditions of the broker.

Here at Clear we do not trade cryptocurrencies. But our brokerage fee is zero for all our equity products.

  • Find out how to start investing in Clear with zero fees!

Is there a minimum amount to invest in bitcoin?

Each broker usually sets a minimum amount for depositing and a minimum amount for sending an order.

Regarding the minimum amount to invest, one of the most revolutionary proposals in relation to the way in which we use traditional currency is the potential for accessibility and inclusion that bitcoin offers.

An example of this is the possibility of: with just R$0.01 buying a fraction of bitcoin, as the cryptocurrency can be transacted up to its 8th decimal place, as we have already said.

Its smallest fraction (0.00000001btc) is called Satoshi, a name derived from the creator of Bitcoin himself, Satoshi Nakamoto.

How much is a bitcoin worth?

It is important to remember that bitcoin behaves like any other currency: its value is volatile and undergoes daily variations according to market movements.

However, the fluctuation of bitcoin can be much greater: for example, the cryptocurrency can fluctuate 20% in the same day. Therefore, some people see it as a good opportunity to invest in day trading (i.e. an asset that is bought and sold on the same day).

⚠️ But attention: it’s worth noting that just as you can win with these oscillations, you can also lose. So, be cautious when investing your capital.

The price of bitcoin can vary within the same day. And it is usually based on the dollar. That is, if the dollar undergoes changes in its price, this will probably impact the value of bitcoin in Brazil.

What is the profile of a bitcoin investor?

Before choosing any investment or opting for one of the ways to buy bitcoin, you need to know your investor profile. Depending on your profile, the investment may or may not be right for you.

👉 Bitcoins are recommended for investors and traders who have a risk appetite and who are familiar with investing in assets that have high volatility in relation to their price, such as the stock market.

Is investing in bitcoin worth it?

As with any other type of investment, the answer is: it depends. 🤷‍♂️

Choosing or not to invest in bitcoin will depend on several factors, such as your risk profile, amount you have to invest, what your objective is and how long you want to keep the investment, for example.

All these factors should influence your choice of investments.

But if you don’t feel safe investing in bitcoin, we’ve separated some investments for you to diversify your portfolio:

Minicontracts

Starting with mini contracts, investments made in the futures market, that is, contracts for the purchase and sale of products that will be carried out on a future date . These contracts can be index and dollar — if you want to invest in currencies.

Mini-contracts allow individual investors to have more participation and options to invest in the Stock Exchange, even with little capital. And here at Clear we have one of the lowest guarantee margins on the market!

  • Learn more about minicontracts and see how to invest through Clear!

Stock day trading

Investing in shares operating day trade is when the trader buys and sells the asset on the same day. The purpose of this operation is to profit from small market fluctuations in a short period of time.

The advantages of this investment are the agility in carrying out transactions and the possibility of leveraging .

options market

Options are contracts in which the right to buy or sell a share of shares is negotiated for a certain period. This contract guarantees the right to the transaction, but not the obligation to carry it out.

Investing in options is a good alternative to hedging or leveraging your investments.

So, let’s start investing? 🚀