What is bitcoin
Peer-to-peer network
Immutable Ledger of transactions
Decentralized
Bitcoin solved the “double spend” problem
World wide access (internet)
Fixed supply. Rate of inflation cannot be altered
Relatively fast and cheap transactions
Risks:
In a normal market, as demand increases the price increases which leads to more supply being created by producers joining the market which lowers the price which leads to less supply being created as producers leave the market.
This happens constantly which allows the price (supply and demand) to reach an equilibrium.
If you have something with a fixed supply then there is no way for supply to adjust to meet demand. This means that the price is completely tied to demand. And because demand is the unpredictable and uncontrollable aspect of price. The swings can be irrational at times.
This is predicted to lead to volatility.
There are other, theoretically better, cryptocurrencies out there that could make bitcoin obsolete.
There could be a new technology that renders bitcoin useless. Perhaps quantum computers
Conclusion:
Many people have gotten rich from the large price swings of bitcoin.
Many people have lost everything from the large price swings
At this early stage it isn’t really an investment, it’s speculation. Which means that you should only speculate with money that you are willing to lose because you probably will.
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