Crypto Bitcoin Profits - 18 Frequently Asked Questions & Myths Debunked
1. What are Bitcoin and cryptocurrency?
2. Who supports/backs Bitcoin and cryptocurrency?
3. Are Bitcoin and other cryptocurrencies used by criminals? Can the government shut it down?
4. How are the prices of Bitcoin and other cryptocurrencies determined?
5. Is there a physical coin called Bitcoin?
6. Is Bitcoin or cryptocurrency legal tender?
7. Are Bitcoin and other cryptocurrencies completely anonymous?
8. How much money do I need to get started, do I need to purchase at least one coin at a time?
9. Where is my money going when I buy Bitcoin or other cryptocurrencies?
10. Are Bitcoin and other cryptocurrencies a Pyramid Scheme/Ponzi Scheme?
11. How is Bitcoin or cryptocurrency stolen?
12. How do Bitcoin and other cryptocurrencies generate revenue?
13. Are Bitcoin and other cryptocurrencies a bubble?
14. I hear wild speculations that Bitcoin will reach $1 million or that it will crash and be worthless. What is most likely?
15. Do you have to report Bitcoins and other cryptocurrencies to federal taxation?
16. Should I invest in Bitcoin and cryptocurrencies as part of my retirement savings?
17. How do banks view Bitcoin & cryptocurrencies?
18. How many people are trading Bitcoin and cryptocurrencies & when is the market “open?”
19. Am I too late to the Bitcoin and cryptocurrency industry?
1. What are Bitcoin and cryptocurrency?
Bitcoin and cryptocurrency is software that forms a decentralized, peer-to-peer payment system with no central authority like the Federal Reserve or U.S. Treasury. While it can be used as digital currency, most investors are using it as a speculative investment in the hope of turning a profit.
2. Who supports/backs Bitcoin and cryptocurrency?
The blockchain is a software system often described as an immutable digital “ledger.” It resides on thousands of computers, all over the world, maintained by ordinary people called miners who upload bundles of transactions, or “blocks,” to the chain, maintained on all those computers.
The blockchain is technology that has become popular among banks and other big financial institutions, who want to use it to settle payments on their back-end systems.
3. Are Bitcoin and cryptocurrencies used by criminals? Can the government shut it down?
Criminals in the underground trade have used Bitcoin and other cryptocurrencies just like they have used paper money. Bitcoin is accepted by over 160,000 global merchants, and adoption continues to grow daily.
The following countries have shut down Bitcoin or have attempted to:
Bolivia: Back in June 2014, the Bolivian central bank officially banned any currency or coins that weren't regulated by the government including Bitcoin. Bolivia's central bank also prohibited its citizens from denominating prices in any currency that its national institutions hadn't previously approved.
Ecuador: In July 2014, the country's National Assembly of Ecuador banned Bitcoin and other digital currencies while laying the framework for the creation of a new, state-run currency. In other words, the government has the permission to make payments in electronic money, but other digital currencies, like bitcoin, are banned.
Kyrgyzstan: In July 2014, the National Bank of the Kyrgyz Republic made it crystal clear that using bitcoin, or any digital currency, as a form of payment is illegal. The only legal tender in Kyrgyzstan is the som, the country's national currency.
Bangladesh: Bangladesh also followed suit in September 2014. The Bangladeshi central bank cited Bitcoin's lack of a central payment system as the reason behind the ban, which it believes would allow people to be "financially harmed." Long story short -- if you're caught trading in bitcoin in Bangladesh, it could lead to legal trouble under the Foreign Currency Control Act of 1947 and the Money Laundering Control Act of 2012.
Nepal: The Nepalese government banned bitcoin on account of not being able to track its transactions, and it has gone so far as to arrest individuals suspected of trading Bitcoin.
Morocco: The newest ban, coming as of November 2017, was in Morocco, which ironically came just days after domestic digital services provider MTDS announced that it would accept Bitcoin as payment for the first time. Like the other countries before it, Morocco's central bank cited "a hidden payment system that is not backed by any financial institution" as its reasoning for banning bitcoin and other digital currencies.
The United States & Other Countries: Bitcoin is of interest to law enforcement agencies, tax authorities, legal regulators, all of which are trying to understand how the cryptocurrency fits into existing frameworks as these countries see tremendous benefits to tax it as income.
4. How are the price of Bitcoin and other cryptocurrencies determined?
Prices fluctuate based on supply and demand just like any other stock in the stock market.
5. Is there a physical coin called Bitcoin?
No. You can’t touch a bitcoin because it’s software. You may have seen images of gold coins with a “Ƀ” on them. Those are souvenirs that can’t be converted into actual bitcoin. The pictures of the physical coins that you see are used for illustrative purposes such as in news stories only.
6. Is Bitcoin or cryptocurrency legal tender?
“Legal tender” means the laws of a state or nation require any creditor to accept the currency toward payment of a debt. In the United States, for instance, merchants must accept the U.S. dollar, which makes it legal tender. The U.S. government allows transactions in bitcoin but doesn’t require every nail salon, car dealership or restaurant to accept it where they have to accept paper dollars. Meanwhile, Japan and Australia, among other countries, have officially recognized bitcoin as a legal currency.
7. Are Bitcoin and other cryptocurrencies completely anonymous?
No, The Bitcoin address is unique and every transaction is recorded on a public ledger known as the blockchain. Therefore, with a little legwork, it is possible to determine who was behind the Bitcoin transaction.
8. How much money do I need to get started, do I need to purchase one coin at a time?
No, you can purchase fractions of a coin as bitcoin is divisible down to 8 decimal points, or 0.00000001 bitcoin. That’s the equivalent of one one-hundred-millionth of a coin. That unit is known as a Satoshi, in honor of the pseudonymous founder of bitcoin. If one bitcoin is worth $15,000, the value of a Satoshi would be .015 cents.
9. Where is my money going when I buy cryptocurrency or bitcoin?
When you buy bitcoin or any other cryptocurrency, somebody is selling it to you — so most of the money goes to the seller. Exchanges also charge fees for conducting transactions, and miners earn transaction fees for their role in maintaining the network.
10. Bitcoin Is A Pyramid Scheme/Ponzi Scheme?
Pyramid schemes are zero-sum games where the founders and early investors profit from the money they put into the scheme by the late adopters. With Bitcoin everyone can profit no matter when they made their first initial investment. Bitcoin is a decentralized network; there is no CEO, founder or person at the top of a pyramid.
11. How is Bitcoin or cryptocurrency stolen?
The bitcoin blockchain itself is very secure, but bitcoins can be stolen from an account if thieves can log into your account and send the bitcoin to another account they control. Once bitcoin is transferred, it can’t be recovered.
Thieves typically break into other people’s accounts by stealing login and password information. That makes it extremely important to safeguard your bitcoin and cryptocurrency accounts with two-factor authentication with a mobile phone. You also have a “private key,” which is the third layer of security that you might need at some point if there are questions about who’s logging into your account. This key is typically a string of keyboard characters that should be stored where it can’t be lost or stolen or accessed through the internet.
12. How do Bitcoin and other cryptocurrencies generate revenue?
Miners earn money–paid in bitcoin–for creating bitcoin, which helps cover the cost of time and computer power that the process requires. They also earn small transaction fees from bitcoin users. Bitcoin itself doesn’t generate revenue. It’s best thought of as a commodity, similar to gold, that has a market price but doesn’t generate economic activity, the way a business does. When the value goes up, bitcoin can create profits. But when the value goes down, it can also create losses.
13. Are Bitcoin and other cryptocurrencies a bubble?
Nobody knows for sure. The price surge in recent months has undoubtedly been bubblicious. Many recent buyers want to own bitcoin, not for its inherent value, but simply because they think it will rise in value. That’s speculation, which is what often fuels a bubble. But it’s also possible bitcoin is a genuine innovation that will be around for a long time and help transform money. It’s worth recalling that the creation of the Internet led to the dot-com boom in the late 1990's and the painful crash that followed. But the Internet is still here, and some tech companies that crashed in the early 2000's are now among the most valuable companies in the world.
14. I hear wild speculations that Bitcoin will reach $1 million or that it will crash and be worthless. What is most likely?
Either event is possible, and perhaps both are.
In fact, just recently we had seen bitcoin reach $20,000 before it came crashing down to $6000 and is slowly making its way back up to its former glory with similar cryptocurrencies doing the same thing.
The leading cause of the boom was the sheer volume of people hearing stories that others were buying Bitcoin and other cryptocurrencies becoming rich so with this FOMO (fear of missing out) attitude many new investors entered the market with their life-savings.
Shortly after the boom, many early investors decided to start selling their Bitcoin and cryptocurrencies to earn profits which were just one of many reasons we saw a crash.
With the incredible amount of investors coming on board every second, the exchanges such as Coinbase were having a hard time keeping up. This resulted in temporary network outages that lasted hours and even a couple of days.
Many investors started to panic thinking their life savings were gone (which was never the case) with many financial institutions screaming bitcoin and cryptocurrency is a scam and some countries banning them altogether.
This all resulted in the bitcoin and cryptocurrencies market pulling back 75% of their value where Bitcoin went from $20,000 to $5000 and is slowly starting to make a return to its glory days.
15. Do you have to report Bitcoin and cryptocurrencies to the IRS?
The IRS considers Bitcoin to be the equivalent of property, with profits (or losses) taxed more or less the same as the proceeds from a sale of stock. The IRS recently won a court ruling against Coinbase that requires the exchange to report information on customers who had more than $20,000 in annual transactions from 2013 to 2015. It seems inevitable that the IRS will treat profits and losses from cryptocurrency bets the same as it treats other investment income.
16. Should I invest in Bitcoin and cryptocurrencies as part of my retirement savings?
Can you afford to lose it all? If you can’t, then stay out of cryptocurrencies—the volatility and risk is precisely the opposite of what you should be seeking in a robust long-term retirement plan.
That being said bitcoin and cryptocurrency could be highly profitable if appropriately invested. We never recommend investing more than 5% of your life savings.Then again, when you apply what you learn at Crypto Bitcoin Profits, you don't need to invest a lot of money to earn a lot of money.
17. How do banks view bitcoin & cryptocurrencies?
Banks are not fans. JPMorgan is hostile toward bitcoin. Citigroup is suspicious. Goldman Sachs is curious. Nearly all large banks have brokerage arms that are members of the futures exchanges where bitcoin futures are now being traded. These futures contracts finally bring bitcoin to Wall Street. But it’s going to take time to build the trust of Wall Street brokers. Until then, volume and liquidity will be low, with most trading happening among retail traders rather than institutional ones.
18. How many people are trading Bitcoin & cryptocurrencies & when is the market “open?”
Bitcoin never sleeps — it trades 365, 24/7. But there’s no way to determine how many people are trading at any given time on the hundreds of exchanges worldwide. We do know this: Initially, most bitcoin trading was done in the west, but now the lion’s share is done in China (and traded versus the Chinese yuan). Large price swings often happen when it’s dark in America. As bitcoin popularity surges, however, so do the number of U.S. dollar-denominated accounts being opened.
19. Am I too late to enter the Bitcoin & Cryptocurrency markets?
No, in the five years, I have been witness to no less than 20 major events that should have toppled Bitcoin.
From major hacking incidents to countries banning Bitcoins, to developers not agreeing on the direction of Bitcoin, to Mt. Gox and Cryptsy shutting down to the Silk Road founder Ross Williams Albright's arrest.
Yes, during each of these events the price of Bitcoin did, in fact, take a tumble, but it always came right back up.
Bitcoin is in a stronger position than ever both regarding market capitalization and Real World Adoption as early as 2012 you can find commentators saying it was too late to invest in Bitcoin and yet the price just keeps on rising.
Yes, Bitcoin like all other evolving technologies, will indeed have their ups and downs but Bitcoin transactions keep increasing and it shows no end in sight.
Bitcoin continues to grow both as a digital asset and in its real-world applications. Increased globalization and the need to transfer money across borders will only lead to a rise in adoption of Bitcoin.
The number of cross-border transfers continues to grow year-on-year and now represent almost 1% of the world's GDP. Bitcoin's total market cap now stands at $400 billion.
The near but not anonymous element of Bitcoin is another factor that continues to drive growth. This is particularly important in countries where governments heavily regulate the fiat currency like China. Bitcoin has now become a brand in and of itself.