how rich you would be if you'd bought $1,000 worth bitcoin a year ago
Here's how rich you would be if you'd bought $1,000 worth bitcoin a year ago 23 / 23
Money logo
Money
Lucinda Shen
2 days ago
SHARE
SHARE
TWEET
SHARE
EMAIL
Interstate 10 passes through west Texas. The FBI is investigating a ‘potential assault’ but the local sheriff believes Rogelio Martinez’s death nearby may have another explanation.
A lonely road, a dead border officer. Trump cried murder — but was it?
Slide 1 of 15: Bitcoin is a digital non-aligned currency, which is not tied to any financial institution. Users can "mine" the currency and spend it independently by “lending computing power to verify other users' transactions.”
Slide 2 of 15: The system, which is based on mathematical proof, was created to produce a currency that is transferable electronically instantly, with very low transaction fees. The transactions in bitcoins are verified by network nodes and recorded in blockchain, a public distributed ledger.
Slide 3 of 15: The transfers are faster and without high processing fees. It isn’t inflationary since there is a cap on the supply of Bitcoins (21 million), which limits how much the currency can devalue through inflation. The bitcoin network is always working at full capacity regardless of the time and date. Apart from international money transfer, it is also used for investment purposes.
Slide 4 of 15: The peer-to-peer electronic cash system was created in 2008 by Satoshi Nakamoto, who left the project in 2010. He hasn’t revealed much about himself and his anonymity has often raised concerns over the open-source nature of Bitcoin.
Slide 5 of 15: The legality of your bitcoin depends on what you are doing with it, who you are and where you live. Regulators and law enforcers are still trying to figure out how this digital currency works as it is not issued or regulated by any central bank. Countries that have legally accepted bitcoins are – U.S., Australia, Canada and the European Union. Meanwhile, Iceland, Ecuador and Bolivia have completely banned bitcoins.
Slide 6 of 15: Bitcoins can be bought from online exchanges using credit cards or dollars, euros and other currencies or directly from individuals via marketplaces. You can accept bitcoins as payment for goods or services.
Slide 7 of 15: The money isn’t printed at all in bitcoin, instead computers across the world ‘mine’ for coins by competing. Wondering who the miners are? They are the special users with computing power who verify and secure the transactions. In return, they receive some bitcoin as a reward.
Slide 8 of 15: Bitcoin can be stored either on your desktop, mobile, web or hardware using a software called ‘bitcoin wallet.’
Slide 9 of 15: The best way to sell bitcoins is either online or in person. There are three ways to sell bitcoins online: direct trades, exchange trades and peer-to-peer trading marketplaces. In person, bitcoin can be sold by scanning a QR code on the other person’s phone and accepting the cash-in-hand.
Slide 10 of 15: Bitcoin is the most well-known digital currency, and several companies accept it as legitimate payment. Here are some of the companies who accept bitcoins as currency: Microsoft, Dell, WordPress.com, Subway, Bloomberg.com and Reddit.
Slide 11 of 15: The first bitcoin transaction, which took place on May 2010 between Laszlo Hanyecz and Santoshi, was made for a pizza worth $25, for which 10,000 bitcoins were spent.
Slide 12 of 15: All the transactions are stored permanently on the network and the balance/transactions details of any Bitcoin address is public. However, the identity of the user isn’t disclosed.
Slide 13 of 15: The Bitcoin transactions cannot be reversed, they can only be refunded by the person receiving the funds.
Slide 14 of 15: The bitcoins have unique keys with them and in case they are lost with the wallet, they are removed from circulation forever.
Slide 15 of 15: As per reports, in 2013, FBI shut down the Silk Road online drug marketplace and seized all the bitcoins of the owner. FBI now controls more than 144,000 bitcoins.
Slide 1 of 15: Bitcoin is a digital non-aligned currency, which is not tied to any financial institution. Users can "mine" the currency and spend it independently by “lending computing power to verify other users' transactions.”
1/15 SLIDES © Thomas Trutschel/Photothek via Getty Images
What is it?
Bitcoin is a non-aligned digital currency, which is not tied to any financial institution. The currency is not physical and is stored in a public ledger on the Cloud. A public ‘key,’ serving the role similar to a bank account number, is the address through which bitcoin transactions are made.
Slideshow: Everything you need to know about Bitcoin
For an asset often named in tandem with drug trafficking and the dark web just a few years ago, it’s hard to imagine that optimism surrounding Bitcoin’s potential legitimacy could take the asset to more than $11,000 in value as of Wednesday.
And yet, here we are, with the price of Bitcoin up more than 900% in the past 12 months. Bitcoin’s early use as a way to buy and sell illegal goods via the now defunct online black market Silk Road was once a defining feature of the cryptocurrency. Now it’s just a rebellious phase of the Bitcoin’s growth story.
Recent interest in Bitcoin from institutional investors has certainly given its narrative a different tinge. Earlier this year, the world’s largest futures exchange, the Chicago Mercantile Exchange, said it would offer Bitcoin futures due to demand from its clients. Bitcoin investors took it as a good sign. The introduction of futures would in theory increase the number of institutional investors in the Bitcoin world — thereby increasing the market’s liquidity and stability. Meanwhile, the Nasdaq and Cantor Fitzgerald are also reportedly planning their own Bitcoin futures exchanges.
So what if an investor had gotten in on the Bitcoin bet before the CME decided to offer Bitcoin futures? Well, if you had decided to go onto a Bitcoin exchange and buy some $100 worth of Bitcoin a year ago, it would be worth about $1,382 today, with Bitcoin prices resting at about $10,255 (Bitcoin exchanges such as Coinbase allow users to buy a fraction of a Bitcoin).
With $1,000, that stake would have grown to $13,820 in the course of 12 months. Invest the cost of a luxury vehicle, about $75,000, and that stake would be worth about $1 million today.
Don’t get too excited though. Bitcoin’s emerging popularity has also been brought to the attention of the Internal Revenue Service. So if investors cashed out their Bitcoins after holding it for a year, they’d be subject to a capital gains tax, which is typically around 15%. So if investors cashed out a Bitcoin investment that was initially worth $100 but appreciated to $13,820 in a year, their tax could be around $1,923. But a short-term Bitcoin investor, who spent or sold their Bitcoin within a year of first buying it, they’d be taxed at the ordinary income tax rate, which can be as high as 39.6%. Capital gains taxes max out at a lower 20%.