Now more than ever, many are beginning to consider Bitcoin as an investment option. Some have suggested the blockchain market size will reach as much as $57 million in the next few years. It’s statistics like these which are pushing so many people to diversify their portfolios and add cryptocurrencies like Bitcoin. If you’re one of the many considering Bitcoin as an investment option, though, it’s important to know both what you should and what you shouldn’t do when it comes to an investment like this one. It may help to start with a better understanding of Bitcoin as a whole, though.
What Is Bitcoin?
Bitcoin is one of the many cryptocurrencies available today. It was originally created in 2008, but it wasn’t actually used until 2009. The creation of this currency, though, remains something of a mystery. The person who created it isn’t actually known. Instead, the only name known is Satoshi Nakamoto, and it’s been pretty unclear as to whether that’s a single individual or an entire group of people.
As a cryptocurrency, Bitcoin is a digital asset. It may help to think of it like digital money. It can allow you to buy goods or services (usually online). You can even transfer it to almost anyone online.
Bitcoin isn’t issued by any government or other entity, though. It’s completely decentralised, which means no one really helps to stabilise its value. The price is incredibly volatile, shifting greatly from one moment to the next. Some people see serious returns on this investment while many others don’t make any money at all. There are no intermediaries either, so if you lose your Bitcoin, there’s no real way to get it back. Instead, the coins can be stolen or even abandoned in the system, and there’s just no way to get them back.
Making The Investment
If you do think Bitcoin might be the next good way to make a solid investment for your portfolio, it’s not a difficult system to master. You’ll simply sign up for a wallet, purchase some Bitcoin, and start watching the market as you would with any other asset. There are a few ways to get yourself in trouble, though, once you’ve made an investment. How can you avoid these problems? These tips can help.
- Don’t over-invest. Consider Bitcoin as an investment option, not an all-in proposition.
Many people ask “How much Bitcoin should I own,” and there’s no right or wrong answer to that question. “How much Bitcoin should I own” has to be a personal decision. It’s possible to purchase even a fraction of a Bitcoin, so you can invest as little or as much as you’d like in this market. Since the market is volatile, though, owning Bitcoin should be part of a balanced investment portfolio. Buying and holding Bitcoin can reduce the risk of becoming a victim to a volatile market. You’ll have to decide your risk and loss tolerance. So, how much Bitcoin should you buy? Investing in small amounts and seeing how it goes will serve you well in the long run.
- Don’t be unclear on whether your Bitcoin is a currency or an investment.
Wondering what to do after buying Bitcoin? You’re not alone. For most, once you have an invested wallet full of Bitcoin, you’re often left wondering what to do next. You’ll ask yourself questions like, should I sell my Bitcoin, how do I grow my Bitcoin, should I hold Bitcoin or sell, etc? The first thing to decide is whether you’re looking at Bitcoin as a currency, investment, or both. Cryptocurrency is an effective online currency exchange, but some buyers purchase Bitcoins with the intent of creating an invested wallet full of the currency like they would in the stock market. Others look at it as a retirement plan. Since the market is constantly shifting, and there is no regulation, investors can end up losing everything in their invested wallet. While Bitcoin could pay off, the best way to approach this investment is with caution. If you’re asking- should I sell my Bitcoin, you’re probably looking at it as more of an investment. If that’s the case, you’ll likely want to hold onto it for the long term.
- Don’t discount the financial loss potential.
With Bitcoin, as with any investment, there’s always the potential for financial loss. With other investments, you can sell small amounts to mitigate that loss. Learn how to sell small amounts of Bitcoins for the same reasons. If you learn how to sell small amounts of Bitcoins, you can temper your investment. Since you can sell any fraction of Bitcoin when you’re asking yourself “should I hold Bitcoin or sell it”, you should watch the market and decide when to divest. When you’re in the midst of this, remember that this is another time you should ask- Should I hold Bitcoin or sell? This decision can be based on market conditions and overall health of your investment portfolio. At that point, ask yourself: “how do I hold Bitcoin and still make a profit?”. If there’s no clear answer, you’ll know what to do. The reality, though, is that the answer lies in your ability to tolerate the ups and downs of the market. Buying and holding Bitcoin is a strategy to avoid losing money as long as you only hold until you’re comfortable with the return from selling. Buying and holding Bitcoin can also be a way to grow your Bitcoin investment. If you aren’t looking at it as a currency and want to focus on increasing profits, you’ll likely want to hang on to it and see how the market develops. Don’t make buy/sell decisions on a daily basis. Since the market is so volatile, it’s easy to get scared and divest quickly. You could be doing yourself a disservice if the value spikes up the next day. Discipline yourself not to watch it daily and look at it on a longer-term basis.
- Don’t tell everyone about your investment.
You likely don’t broadcast your bank balances or talk about your other investments, right? You won’t want to do that with Bitcoin either. Talking about your balance puts you at great personal risk, so avoid having that discussion. Bitcoin is an electronic investment that can be hacked and stolen or lost at any point in time, and you greatly encourage those who would do your investment harm if they know you have it. It’s best to keep your investment to yourself.
- Make sure you understand the technology behind trading and holding.
Bitcoin is a bit unique in that you’ll need a wallet account to hold onto your investment and you may need to interact with multiple trading platforms to really make the most of your cryptocurrency assets. Make sure you know as much as you can about the technology before you ever get started. Invest in a wallet that’s right for you – you’ll never want to hold Bitcoin on an exchange. Be sure you keep your passwords to yourself and ensure you know what they are at all times. Moreover, make certain you back up your wallet on a regular basis. Finally, know the policy of every exchange you work on, as it can be dangerous to make big trades if you’re not familiar with the exchange and the rules surrounding it.
As you can see, there are many factors to consider when investing in Bitcoin. It’s easy to get excited and make rash decisions. A better strategy is to take your time and learn all you can about cryptocurrency. Evaluate the ways to use it and invest it. Remember its shortcomings and risks while considering the ways to make your investment grow. Don’t fall into the typical get rich quick schemes or pie in the sky ideas that could cause you to lose your investment altogether. Remember to keep your portfolio diversified so that you can tolerate a dip in the market. Following these simple guidelines and recommendations will help keep you level-headed as you navigate the world of cryptocurrency.