Bitcoin: how cryptocurrency works and what an investor should know.

The price of Bitcoin over the last 10 years

According to The Sun: Ten years ago, the price of Bitcoin was around £180, and today it is over £88,000. This impressive growth, especially when compared to traditional savings accounts, is noteworthy. However, the road to success has not been smooth.

Bitcoin has experienced significant volatility, including a 61% drop in value against the pound in 2022.

Basics of crypto assets

In the UK, there is the pound, in the US, there is the dollar, and in many European countries, there is the euro. These are examples of traditional currencies, but crypto assets have significant differences.

First, crypto assets are not controlled by central banks such as the Bank of England or the US Federal Reserve. This means that there is no institution that can influence their supply and value, which defines them as "decentralized" assets.

Transactions are recorded on the blockchain—a public ledger that guarantees the impossibility of using the same asset twice.

Second, crypto assets are digital. For example, you can withdraw £100 in cash from a bank account, but crypto assets exist solely as a digital code in your online wallet.

What is Bitcoin?

Bitcoin is a type of crypto asset similar to Ether or Solana. Unlike a £10 note that can be printed by the Bank of England, the number of Bitcoins is limited. This inability to issue more Bitcoins explains the rise in their value as demand increases.

When demand decreases, the price falls. You can also own a fraction of a Bitcoin since one Bitcoin is divided into 100,000,000 satoshis—a unit named after the founder Satoshi Nakamoto.

In the investment world, Bitcoin can also be used as a means of exchange. In 2021, El Salvador became the first country to recognize Bitcoin as legal tender, although critics point to its volatility, which complicates transactions.

Popularity of crypto assets

Since their launch, crypto assets have attracted the attention of many investors. Four years ago, Proshares launched the first Bitcoin-linked ETF, offering a traditional way for investors to access this asset.

Other companies have also introduced their own ETFs. President Donald Trump actively supported cryptocurrencies and promised to make the US "the crypto capital of the world." Many consider his support a significant reason for the rise of cryptocurrencies this year.

Are crypto assets dangerous?

Investing in cryptocurrency can be part of your portfolio; however, it is essential to be aware of the risks. Unlike savings accounts, crypto assets do not guarantee returns.

You may lose all your investments, but you also have the opportunity to earn returns that exceed the best offerings of savings accounts. Always remember the necessity of having backup funds to cover expenses, preferably at least three months' worth of salary, before investing.

Using eToro Academy

Many investment platforms offer the opportunity to start investing, but eToro offers more. eToro Academy is an online resource that helps investors of various skill levels improve their knowledge. Within eToro Academy, you will find materials in various formats such as articles, videos, courses, podcasts, and webinars.

Part of eToro Academy includes educational materials on cryptocurrencies to help investors enhance their knowledge.

Explore eToro Academy

Do not invest if you are not ready to lose all your investments. It is highly risky, and you should not expect protection if something goes wrong.

With the rising interest in crypto assets, it is important to keep the existing risks in mind and consider them when making financial decisions. Increasing awareness and education can help investors make more informed choices in this dynamic market.

Now that crypto assets have become part of mainstream financial discussions, it is crucial to stay informed and understand how they can impact the economy and financial strategies not only for individual investors but also for entire countries.