Bitcoin is redefining its presence in the global financial markets with renewed momentum.
Since November of this year, Bitcoin’s price has repeatedly reached new all-time highs, approaching the $20,000 threshold. Compared to the beginning of the year, Bitcoin has surged by over 170%, and since the March low, it has soared by an astounding 400%, significantly outperforming many traditional investment assets.
There is no doubt that Bitcoin has become one of the most promising alternative investments available today. For many investors, in a climate where global benchmark interest rates are near, at, or even below zero, the opportunity cost of not allocating a portion of one’s portfolio to Bitcoin is increasing. Understanding, learning about, and even investing in Bitcoin is becoming a necessity for a growing number of people.
According to the latest Bitcoin Investor Study Report published by Grayscale Investments, interest in Bitcoin is on the rise. More than half of U.S. investors expressed interest in investing in Bitcoin in 2020. Among those who have already invested, 83% made cryptocurrency investments in the past year.
What about interest among domestic investors? OKEx Research recently conducted a random survey to gauge awareness and investment interest in Bitcoin among some investors. The results showed that nearly 80% of respondents had heard of Bitcoin, and 15% were very interested in investing.
Although this survey had a limited sample size, it reflects a growing public curiosity about Bitcoin. However, for the majority of investors, Bitcoin remains a novel and complex asset. Knowing how to properly understand and invest in it is not straightforward. To help, OKEx Research has compiled and answered the top 10 questions that respondents most wanted to know about Bitcoin.
What Is Bitcoin and Is It Legal?
On November 1, 2008, an individual or group under the pseudonym Satoshi Nakamoto published the Bitcoin whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System. The goal was to enable online payments to be sent directly from one party to another without going through a financial institution. Bitcoin officially came into existence on January 3, 2009.
Unlike traditional currencies, Bitcoin is not issued by any central monetary authority. It is generated through extensive computational work based on a specific algorithm. The Bitcoin network uses a distributed database—made up of numerous nodes in a peer-to-peer network—to confirm and record all transactions. Cryptographic design ensures the security of every aspect of the currency’s circulation. Its decentralized nature and built-in algorithm prevent any single entity from manipulating the supply and thereby the value. Ownership and transactions are pseudonymous, providing a degree of privacy.
Although Bitcoin has been surrounded by controversy since its inception, a growing number of countries have moved to regulate it. For example, as early as April 2017, Japan’s Payment Services Act came into effect, recognizing Bitcoin as a legal means of payment.
In China, the People’s Bank of China (PBOC) and four other ministries issued a Notice on Preventing Bitcoin Risks in 2013. The notice clarified that Bitcoin is a “specific virtual commodity.” This means that individuals are permitted to hold Bitcoin at their own risk.
Furthermore, Article 127 of China’s Civil Code, effective January 1, 2021, provides principled protection for data and online virtual property. This is widely interpreted to mean that although Bitcoin is not considered legal tender, the law will recognize its status as property in terms of ownership and inheritance.
How Is Bitcoin Priced and What Does It Compare To?
Similar to foreign exchange, gold, stocks, or insurance, Bitcoin is a means of investment. However, the Bitcoin market operates 24/7, and its price is highly volatile, which also means it carries relatively high investment risks.
A report from Fidelity indicates that from January 2015 to September 2020, the average correlation of Bitcoin with other assets was just 0.11. This suggests that Bitcoin’s returns have almost no statistical relationship with traditional asset classes.
In certain aspects, however, Bitcoin does share similarities with other investments. For instance, like gold, Bitcoin has a fixed total supply (21 million coins), its issuance rate is cut in half approximately every four years, and it is considered a hedge against inflation. In terms of how it is traded, investors can not only trade Bitcoin spot but also engage in derivatives trading, similar to equities.
Overall, Bitcoin is an alternative investment. More market participants are allocating to it due to its long-term potential. That said, any individual or institution investing in Bitcoin should carefully evaluate its high volatility.
Can Bitcoin Be Used to Pay for Goods and Services?
Since the beginning of trade, humans have exchanged goods directly. As societies grew more complex, money emerged as a medium of exchange—a means of payment and a store of value.
Unlike traditional money, Bitcoin is not issued by a central authority, is highly volatile, and is not legal tender. However, it can still be used as a digital asset for payments. According to data from Coinmap, as of December this year, there are 18,673 merchants worldwide that accept Bitcoin, most of which are located in Europe, North America, Japan, South Korea, and Australia.
Public reports show that in various parts of the world, consumers can use Bitcoin to purchase gold and silver bars (e.g., APMEX, GramGold, JMBullion), real estate (e.g., BitcoinRealEstate), airline tickets (e.g., AlternativeAirlines, CheapAir, Expedia), and game credits (e.g., Satoshi), among other things.
Additionally, Bitcoin has its own network of ATMs where the public can quickly deposit or withdraw cash to buy or sell Bitcoin.
What Is Bitcoin Mining? Is It Creating Value From Nothing?
Bitcoin “mining” is different from traditional mining. It is a reward mechanism within the blockchain network. Blockchain is a distributed database where anyone can participate in data processing. However, maintaining this data requires effort, and participants are incentivized to contribute.
Bitcoin is the reward in this system. Within a given time period, whoever processes transactions the fastest and most accurately—and gets validated by the network—receives a reward in the form of new bitcoins. Since the total supply of Bitcoin is limited, the process of earning it is analogous to digging for gold, hence the term “mining.” Those who participate are called “miners,” and the machines they use are “mining rigs.”
This process is not “creating something from nothing.” A more relatable analogy would be a group of players in a game working together to defeat a boss. The player who deals the most damage and lands the final blow receives the system’s reward. The player invests time and equipment for a chance at that reward.
How Can the Average Person Acquire Bitcoin?
Generally, investors can acquire Bitcoin through primary or secondary markets. The primary market refers to earning Bitcoin through mining. However, this requires significant upfront investment in hardware, ongoing maintenance costs, and technical know-how. As a result, most people acquire Bitcoin through secondary market trading.
In secondary markets, there are three common ways to get Bitcoin:
- Registering an account on a digital asset trading platform. It’s important to note that due to high volatility, investors should fully understand the risks and choose secure, reliable, top-tier platforms.
- Using popular online payment platforms. For example, PayPal now allows users to buy, hold, and sell Bitcoin directly within its platform.
- Using a Bitcoin ATM to buy or sell Bitcoin for cash.
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What Backs Bitcoin’s Value?
The value of Bitcoin is supported by its scarcity, utility, and strong network consensus. After the 2008 financial crisis, confidence in centralized fiat currencies like the U.S. dollar wavered. Bitcoin emerged in this context.
Over the past decade, the underlying technology of Bitcoin—blockchain—has gained recognition and provided solutions beyond finance, leading to rapid development. Throughout this period, Bitcoin has accumulated a broad and powerful consensus.
Fundamentally, Bitcoin is scarce (capped at 21 million), easily divisible, and facilitates exchange as a digital currency. These attributes form the core of its value proposition.
How Does Bitcoin’s Market Size Compare to Traditional Investments?
Although Bitcoin is not yet a mainstream investment, its market size is growing at an impressive rate alongside its price and user base. According to data from cryptocurrency market cap tracker CoinMarketCap, as of December 10, Bitcoin’s market capitalization reached $340.5 billion, approximately ¥2.23 trillion. This has surpassed the market cap of Kweichow Moutai, one of the largest stocks in China's A-share market.
Are There Delisting Rules and Financial Reports for Bitcoin?
Cryptocurrency exchanges typically have delisting policies for digital assets. A digital currency might be delisted if it engages in practices like unexpected inflation, price manipulation, or suffers from extremely low trading volume.
Exchanges also have admission policies, reviewing factors like a project's compliance and technical security.
Bitcoin is the most mainstream cryptocurrency. It is listed on almost all major digital asset exchanges, and even PayPal supports its purchase. Barring regulatory bans or exchange failures, it is highly unlikely that any exchange would voluntarily delist Bitcoin.
Since Bitcoin isn’t issued by a centralized entity, it does not have financial reports in the traditional sense. However, thanks to its blockchain foundation, all Bitcoin transaction data is transparent, immutable, and publicly verifiable in real-time. Investors can use blockchain explorers to view metrics like the number of active addresses, on-chain transaction count, and transaction volume.
Are There Bitcoin Derivatives with Different Risk-Reward Profiles?
The main Bitcoin derivatives currently available are contract trading and funds. Contract trading includes perpetual swaps, futures contracts, and options. These often involve leverage, amplifying both potential returns and risks compared to spot trading. Bitcoin-based funds (like ETFs or trust products) resemble stock funds, generally offering lower risk and return profiles compared to direct derivatives trading.
How Does Bitcoin Compare to China’s Digital Yuan?
The Digital Yuan, or DCEP (Digital Currency Electronic Payment), is a digital version of the renminbi issued by the People’s Bank of China. It is positioned as M0—cash in circulation—the most liquid form of money. Although both are called digital currencies, there are significant differences between the Digital Yuan and Bitcoin:
- Monetary Characteristics: Both are digital and use account松耦合 (loose coupling), meaning transactions can occur without being tightly bound to a traditional bank account. The key difference is that Bitcoin is fully decentralized and has a fixed supply, while the Digital Yuan is not. Furthermore, according to China's 2013 notice, Bitcoin is defined as a virtual commodity, not a currency, whereas the Digital Yuan is legal tender and classified as M0.
- Debt Perspective: The Digital Yuan is issued by the PBOC, backed by government credit, and has unlimited legal tender status. Bitcoin has neither. Both lack credit risk, but for different reasons: the Digital Yuan due to state backing, and Bitcoin because it is a non-credit-based asset by design.
- Operational Structure: The Digital Yuan uses a two-tier operational system. The central bank issues the currency to commercial banks, which then distribute it to the public. Commercial banks must hold 100% reserves with the PBOC. Bitcoin operates on a distributed public ledger maintained by its network.
- User Experience: Neither the Digital Yuan nor Bitcoin pays interest. Key differences for users include: the Digital Yuan supports offline payments, while Bitcoin requires an internet connection; the Digital Yuan has built-in limits for transaction time and amount, targeting small-scale retail use, whereas Bitcoin has no such inherent limits; the Digital Yuan offers controlled anonymity to balance privacy and law enforcement needs, while Bitcoin is pseudonymous and can be used for illicit activities like money laundering; finally, Bitcoin's value is highly volatile, whereas the Digital Yuan's value is stable, pegged to the renminbi.
Frequently Asked Questions
Is investing in Bitcoin safe?
Like any investment, Bitcoin carries risk. Its price is highly volatile, meaning values can go down significantly as well as up. Security also depends on using reputable platforms and securely storing your Bitcoin. It's crucial to only invest what you can afford to lose and to conduct thorough research.
What is the best way to store Bitcoin?
Bitcoin can be stored in digital wallets. These come in various forms: custodial wallets (held by an exchange), software wallets (apps on your phone or computer), and hardware wallets (physical devices that store keys offline, considered very secure). For significant amounts, using a non-custodial hardware wallet is often recommended for enhanced security.
Can Bitcoin be converted back to cash?
Yes, Bitcoin can be sold on exchanges, through peer-to-peer platforms, or at Bitcoin ATMs, converting it back into local fiat currency, which can then be withdrawn to a bank account.
How does blockchain technology work?
Blockchain is a distributed, immutable digital ledger. Transactions are grouped into "blocks," which are cryptographically chained together in chronological order. This chain is replicated across many computers, making it extremely difficult to alter past records, ensuring transparency and security.
Will Bitcoin be replaced by other cryptocurrencies?
While numerous other cryptocurrencies exist, Bitcoin maintains the first-mover advantage, the largest market capitalization, the strongest brand recognition, and the most robust security network. It is often seen as "digital gold." While competition exists, it remains the dominant cryptocurrency.
How do I start investing in Bitcoin?
To start, you need to choose a reputable cryptocurrency exchange, complete their registration and verification processes, deposit funds (fiat or crypto), and then you can place buy orders for Bitcoin. Always start with a small amount to learn the process before committing more capital. To begin your journey, 👉 learn how to start trading securely.