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We have heard a lot about Bitcoin in the news lately and how several major retailers such as Overstock are going to implement it into its payment acceptance system. According to Business Insider, Overstock had roughly $130,000 worth of Bitcoin payments on the first day.
The acceptance of Bitcoin will most likely have some sort of domino effect on the rest of the market–or at least force the CEO’s of other major companies to at least think about accepting cryptocurrencies such a Bitcoin. We could be seeing an entirely different payment landscape on major retailer sites by the time the 2014 Christmas buying season kicks off in October. All of this discussion about Bitcoin and its possible acceptance worldwide could have a dramatic effect on its price.
At the time of this writing, the Bitcoin payment processor of choice by Overstock, Coinbase has a price of $812.00 per Bitcoin. The problem is the price of Bitcoin could be very low or extremely high (depending on who you ask) and this causes people to think they can make money speculating on the price of it.
Is Bitcoin the only cryptocurrency out there? No, not by a long shot. There are several other coins out there known as “alt-coins” that are traded on various exchanges just like Bitcoin. The price of the alt-coins is usually based on how much one is worth compared to one Bitcoin. If you look at the website Coinchoose.com, you can see just how many alt-coins are out there and how much they trade for compared to the price of one Bitcoin.
Speculators have decided that some alt-coins are more valuable than others, therefore worth a higher percentage of a Bitcoin. The coins that have the greater value are usually ones that have smaller amounts of coins in digital circulation (but not always). When you are dealing with such a new speculative market such as cryptocurrency, the price of each coin could change dramatically based on almost nothing. Bitcoin is pretty much the only coin that you can at least find a few places to spend it online. The vast majority of the alt-coins are mostly speculation since there is currently no where to spend them.
Does this mean the price of alt-coins can’t skyrocket just as Bitcoin has? Absolutely not! There is no reason that alt-coins such as Dogecoin (DOGE), BBQcoin (BQC) or even Devcoin (DVC) can’t explode in popularity at any moment. Devcoin in particular could see a massive jump in price as awareness of the coin growns. According to a popular alt-coin trading site called Vircurex.com the current price of Devcoin is about 0.00000055 of a Bitcoin. That might not sound like much but, the price being so low means that it could easily double or triple in price in a matter or days or weeks (and has several times in the past).
Basically, from a spectators point-of-view it really doesn’t matter what a cryptocurrency is, or if it has any real world utility. The only thing they are really interested in is if the coin can make them money or not. I imagine that some of these coins will be here today and gone tomorrow but that is the risk of digital currency speculation. There is a tremendous potential for an upside on your investment in some alt-coins, but there is also the possibility of losing a great deal of money.
How does one purchase alt-coins?
You can purchase alt-coins from one of several exchanges that trade them by trading your Bitcoin for other alt-coins. Once the price of the alt-coin you have traded for goes up, you simply trade it back for Bitcoin and then collect your profits by selling the Bitcoin. Sound simple? It might sound simple in practicality but the execution of what amounts to alt-coin daytrading could prove to be far more difficult.
In America one of the easiest ways to do this is to purchase Bitcoins on Coinbase.com, transfer them over to your account on one of the trading sites and then deciding which ones of the alt-coins you want to trade for. I am not recommending that anyone use Coinbase because if you look around there are many disgruntled customers, I simply stating that if you live in America there is no easier way to purchase Bitcoins. If you go with Coinbase you have to be willing to link your bank account to them and that might be a bridge too far for some people to stomach. I haven’t had any major issues with them as of yet and most of my smaller variety transactions have gone pretty smoothly.
The meat of the potatoes
The trading on various currencies has arrived and is no doubt here to stay. People are making money at this, but also losing money just as anyone does who bets their money. I am not currently doing any betting, but enjoy looking in from the sidelines. I see how the market has gone from one coin (Bitcoin) to now dozens of them with new ones arriving all of the time. The majority of them will probably not make it, but they are all interesting nonetheless.
Cash Cow Couple’s Take: Interesting, almost fascinating, but a speculative gamble nonetheless. Cryptocurrencies are not a sound investment. Enjoy learning about them, but don’t put your nest egg in Bitcoin or any imitator.
Have any readers gambled on these currencies?
Author Bio: Zimmy is a founder of Money and Potatoes. Check out their awesome and entertaining information there.