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5 Things You Need to Know About the Bitcoin Craze

Mar 06, 2018 | 2 min read | Rebecca Lake

 

If you've already gotten used to seeing cat memes and snapshots of food in your Twitter and Facebook feeds, you may have noticed something else is getting more attention lately: Bitcoin.

But what is it? And why are so many investors in a rush to get their hands on it? Here's a quick rundown of some of the information you should know to talk Bitcoin with your friends like a “pro.”


1. Bitcoins don't physically exist. This may be hard to wrap your head around, but bitcoins are essentially digital money. You buy bitcoins through exchanges or private sellers using your bank account and then store them in an electronic wallet online.


2. Bitcoins have no set value. The value of a U.S. dollar is backed by the United States Government, but bitcoins are different. Bitcoin's value is based on market demand, similar to stocks. The more in demand bitcoins are, the more their value increases and the more money you have to pay to buy them. The same is true in reverse.  The less demand the lower the value.


3. There's no bank regulation involved. Bitcoin cuts banks out of the picture when making purchases. To send and receive bitcoins electronically, you use a public key, which functions kind of like your own personal Bitcoin email address. You also have a private key that identifies which bitcoins belong to you.


4. You can use bitcoins for… more than just sending money to individuals. Many major brands like Microsoft, Overstock and Expedia now allow shoppers to pay online using bitcoins.


5. Transactions are irreversible. If you send money to someone through your bank or credit card and it turns out to be a scam, you may have some recourse to get your money back. Bitcoin doesn't work that way. Once the money's sent, it's gone and there's no way to reverse it.

 

Bottom Line


Bitcoin is a hot topic among investors and, like any other investment, it can be volatile. These "cryptocurrencies" represent an entirely new category of asset. Consider talking over the risks and rewards of these financial instruments with a trusted financial professional before making any investment decision.

 

 

These materials are for informational purposes only and are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services and should not be used as the basis for any investment decision. Past performance is not a guarantee or a reliable indicator of future results.

 

 

Rebecca Lake has been writing about finance, investing and small business for nearly a decade. Her work has appeared online at U.S. News & World Report, MSN Money, Business Insider and Investopedia.

 

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