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If I buy half a bitcoin at $500 and the value of a bitcoin goes up to $1000, does that mean I earn 1 bitcoin or do I have to buy a full bitcoin to get the price increase? How does it work? Please give me some examples.

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  • I accidentally flagged this as primarily opinion based, sorry.
    – Pieter Wuille
    Nov 28, 2017 at 18:12

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If you have 0.1 BTC and the Bitcoin price is $10,000, it is worth $1000. If the Bitcoin price becomes $20,000 you will still have 0.1 BTC but it will be worth $2000.

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I'm not sure when you say "If I buy half a bitcoin at $500" whether you mean you paid $500, or whether you mean the price of one bitcoin was $500 and you paid $250 for half a bitcoin.

If you buy half a bitcoin for $500, that means the value of one bitcoin is already $1000. The price can not increase from $1000 to $1000.

If you buy half a bitcoin when the price is $500, you paid $250, which means if the price increases to $1000 then you can sell your half a bitcoin for $500.

I think you should rephrase your question. Or maybe this is fundamentally an arithmetic question, rather than specific to Bitcoin.

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1 kg tomato is $10,000 today. If you buy 1/2 kg tomato today, you would have paid $5000 today to buy that.

If 1 kg tomato becomes $20,000 tomorrow. What you have in hand is still 1/2 kg of tomato. but you can sell that 1/2 kg of tomato for $10,000.

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Bitcoin is like any other investment, you will profit/lose the percentage Bitcoin changes on your capital investment.

If you invest 100$ into Bitcoin and Bitcoin increases 10%, you will earn 10% on the $100.

If you invest $10 into Bitcoin and it drops %50, you will lose %50 of your initial investment.

With there only being 21 million Bitcoin possible to be mined, only a select few will have full bitcoins in the future.

Edit:

The earnings/loses will only occur when you cash out. BTC also has associated fees, so when depositing say $200, the amount of BTC received will not be exactly worth $200.

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  • It's important to realize that you only see the profit if you sell your bitcoins. If you keep them, the price going up and down only notionally affects your investment; look at this question and the answers for more details.
    – Hannah Vernon ♦
    Nov 28, 2017 at 17:52
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    My apologies I have should have mentioned your investment will grow, that it wouldn't be an immediate return. I will edit it in.
    – DjangoBlockchain
    Nov 28, 2017 at 17:58
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Technically you don't earn anything until you sell it. So just consider it like any other commodity:

Start off with 0 bitcoin and $500

Buy 0.5 bitcoins for $500.

You now own 0.5 bitcoin, and $0. You've exchanged one item, dollars, for another, bitcoin.

Bitcoin price goes up relative to the dollar.

You now own 0.5 bitcoin, and $0. The amount of bitcoin hasn't changed, merely the value relative to another item.

Sell 0.5 bitcoin for $1,000.

You now own 0 bitcoin, and $1,000. You're trading bitcoin for cash, so the relative value determines what you can sell it for, and since that value has changed you can exchange it for more than originally purchased. However, the amount of bitcoin hasn't changed. Just its value.

So while the price of bitcoin fluctuates, it doesn't really mean anything until you trade it for goods or cash. Once you do that, depending on the sell price, you may have increased or decreased in wealth depending on whether the value of the dollar has also changed. It's an exchange.

You don't gain or lose bitcoin when its value changes. It simply becomes more or less valuable, and the amount you hold remains the same.

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