Ten years ago, investment meant finding the best savings account and perhaps investing in some stocks and shares. But today’s digital technology makes it possible for anyone to start commodity trading in their own right. But just because you can, does it mean you should? What is the latest craze in gold and bitcoin all about, and could it be for you?
Alongside the increased ease that technology brings to online trading, the overall state of the global economy has made alternative strategies like online commodity trading platforms such as Lear Capital, or real investment trusts more attractive than ever. With interest rates at an all-time low, there is a real demand for new ways of doing things to realise a better return on investment.
What is bitcoin?
This is not such an easy question to answer as you might think, and is one that has caused lively debate that continues to rage today as to whether it should be considered a currency or a commodity. With vocal support to both sides of the argument, perhaps the best answer is that we should look at it as being a bit of both.
The idea behind Bitcoin when it was introduced in 2008 was for it to act like a virtual currency that you can use to buy goods, in much the same way as you make electronic payments from your bank. However, the parallels do not end there. Also like a currency, Bitcoin has its own exchange rate and can be traded for other currencies.
However we choose to define it, the point with bitcoin is that it displays constant variation in price and therefore provides an opportunity for investors to make money, either through long-term investment or short-term speculation.
How to trade
To buy bitcoin, you will need to create an online bitcoin wallet. You can do this by either installing the bitcoin client, which is the software that powers the currency, or using an online cloud-based wallet. The latter is the simplest and most popular way of getting started.
There are then three trading methods at your disposal:
1. Direct trade with another person, through an intermediary.
2. Trading with an online exchange, as you might with any other currency.
3. Peer-to-peer trading marketplaces where you can use your bitcoins to obtain discounted goods from others who want to obtain bitcoins. The marketplace brings the two groups together for their mutual benefit.
Advance with caution
Bitcoin trading certainly ticks the boxes if you are looking for an alternative investment that is quick and easy to trade. But remember, there is always a correlation between risk and return, and it makes sense to take professional independent advice before leaping into any type of new investment strategy.