Bitcoin hits all-time high 1:10
(CNN) -
Bitcoin is making headlines again in 2020. The cryptocurrency hit a new all-time high, surpassing its 2017 mark. Here's what you need to know about crypto and how it works.
What is bitcoin?
Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto.
Transactions are made without intermediaries, that is, without banks!
Bitcoin can be used to book hotels on Expedia, buy furniture on Overstock, and buy Xbox games.
But much of the reason bitcoin is talked about so much is about getting rich through exchange.
The cryptocurrency surged 9% to a new all-time high of roughly $ 19,860 on Monday.
Which surpassed the previous record of $ 19,783 in December 2017.
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How does bitcoin work?
Here's how it works: Bitcoins can be used to buy goods anonymously.
Also, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation.
Small businesses may like it because there are no credit card charges.
Some people simply buy bitcoins as an investment, hoping that they will increase in value.
Giant payment companies Square and PayPal now allow their customers to buy and sell bitcoins.
The money management company Fidelity launched a bitcoin fund for wealthy investors.
Bitcoin futures contracts are even listed on the Chicago Mercantile Exchange.
Prominent investment managers Paul Tudor Jones, Stanley Druckenmiller and Mike Novogratz are also bullish on bitcoin.
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How to buy bitcoins?
There are three ways:
Buy from an exchange
Many markets called "bitcoin exchanges" allow people to buy or sell bitcoins using different currencies.
But security can be a concern: Bitcoins worth tens of millions of dollars were stolen from Bitfinex when it was hacked in 2016.
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Transfers
People can send bitcoins to each other using mobile apps or their computers.
It is similar to sending cash digitally.
Mining
People compete to "mine" bitcoins using computers to solve complex math puzzles.
This is how bitcoins are created.
Bitcoin wallet: how does it work?
Bitcoins are stored in a "digital wallet", which exists in the cloud or on the user's computer.
The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods, or save money.
Unlike bank accounts, bitcoin wallets are not insured by the Federal Deposit Insurance Corporation.
Cloud wallet - Servers have been hacked.
Businesses have fled with customers' bitcoins.
Wallet on computer: you can accidentally delete them.
Viruses could destroy them.
The anonymity of bitcoin
Although every bitcoin transaction is recorded in a public record, the names of the buyers and sellers are never revealed, only their wallet IDs.
While that keeps bitcoin users' transactions private, it also allows them to buy or sell anything without easily being tracked.
This is why it has become the currency of choice for people buying drugs or other illicit activities online.
2020 was a good year for bitcoin
This has been a wild year for bitcoin, which has soared more than 175% since the end of 2019. Prices fell below $ 4,000 in March.
Just when markets around the world crashed due to the covid-19 economic crisis.
But bitcoin has rallied strongly in recent months as the dollar weakens.
Crucially, the cryptocurrency has become popular in the traditional market.
LOOK: Hackers steal US $ 40 million in bitcoins in a massive security breach
In other words, the days when this cryptocurrency was considered just a marginal investment are over.
Bitcoin got its legitimacy.
“This recovery is driven by smart and institutional money.
And it's not just based on retail overspeculation, "Guy Hirsch, US managing director at eToro, a brokerage and trading firm, said in an email to CNN Business.
"Many more people and asset managers are buying it now."
The bitcoins that are currently in circulation are now worth more than $ 365 billion.
Bitcoin also received a recent boost, after a top strategist at BlackRock, the world's largest asset management company, suggested that cryptocurrency could one day replace gold as a safe-haven currency of choice.
The epic rise of bitcoin has also triggered even more drastic spikes in smaller cryptocurrencies like Ethereum, XRP, Litecoin, and Stellar of late.
That can continue.
The fact that 'bitcoin hits a new all-time high ... will likely spur a wave of retail investment pushing bitcoin much higher in no time,' Denis Vinokourov, head of research at leading digital asset broker Bequant, said at a email to CNN Business.
"However, this entry is unlikely to be limited to bitcoins alone," he added.
"Ease of access to other assets is much easier than during the last bull run."
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