Tuesday, July 27, 2021

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    What is bitcoin and how does it work?

    How much is a bitcoin worth?

    One of the main debates is whether bitcoin has the characteristics of traditional money and whether it can be a legal tender such as the dollar, the euro or the peso. Detractors say no, because its price varies a lot: one day it can go up 30%, but the next it can go down 20%. In April, the cryptocurrency reached a record of 63,410.3 dollars per bitcoin (1.3 million pesos approximately), and by that time, its price had risen 800% in 12 months. Since then, the price has fallen 50%, to about $33,000.

    Despite the doubts, bitcoin increasingly has more uses for the sale of products and services, which in turn encourages greater adoption. This causes its value to rise. But for something to be money, it must fulfill three things, explains Javier Molina, analyst and spokesman for eToro: that it be a store of value, that it be a unit of measurement and that it is a means of exchange. At the moment it only meets the last one, but the high variation of its price makes it difficult for it to become a stable and reliable currency in the short term.

    In the long run, the situation may change. In 2020, for the first time there were cases of real use of bitcoin by companies: Tesla, in addition to investing in the currency, announced that its cars can be bought with bitcoins. Mastercard and Pay Pal also pointed out that they will allow you to buy and pay in this cryptocurrency on their platforms.

    “All of a sudden the whole traditional market moved into the crypto market, and big companies and people said, ‘You have to move here.’ If you look, now there are fewer and fewer people selling their bitcoins. The supply is shrinking, and that’s why it’s going up in price,” says Hinz.

    Another difference between bitcoin and other currencies that function as course money, such as the dollar, is that the supply is limited, molina says. The limit of bitcoins is 21 million, which will safeguard its value in the future and limit the variation of its price, since this, with the supply capped, will depend solely on demand, adds Hinz.

    Being a new currency, there are still many fears around it, so any news, good or bad, has a serious effect on its price. Specialists agree that in the short term high volatility will continue, but in the long term, when bitcoin matures in the market, the variations will be less and less. With this, it can become ‘real money’.

    What can I buy with bitcoins?

    At the moment, you can’t buy anything with bitcoins. As with any other currency, it depends on whoever offers the service or product you want to buy accepts them. And yet, many companies (and many people) don’t accept it.

    But more and more companies do. At the moment, these are some of the places where bitcoins are accepted as payment in Mexico: the Veterans of the Revolution Elementary School, in Nuevo León; Alin’s Bar and Cine Tonalá in Mexico City.

    In this link, you can check where they accept bitcoins.

    So you can buy bitcoins in Mexico

    Bitcoin is not a physical currency, there is no issuer like a bank that people can turn to to get it. Still possible ‘mine them’, although it is a very complex process, but if you are only looking to invest in this cryptocurrency, the easiest way is through investment platforms.

    Among the most popular platforms are Binance, Bitso or eToro. And it is not always necessary to shell out thousands of dollars: there are instruments that replicate the movement of bitcoin, but for only a fraction of its price. As adoption grows, so does people’s interest in investing in this cryptocurrency, but just like any other asset, specialists recommend researching what you are going to invest in, knowing its risks and not betting all the wealth on it. “It’s not to put all the fortune, but it’s a part,” molina says.

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