Disclaimer: Any information in this guide should not be taken as financial or investment advice. It is for informative purposes only. Always make a habit to do your own research (DYOR) before investing in bitcoins or any other cryptocurrencies.
As of 2020, around 85% of Bitcoin’s 21 million total supply has been created through mining. With this in mind, we can assume that roughly 18 million bitcoins are left in existence. The value of Bitcoin is rising as the demand surge also increases in parallel to a supply reduction.
Defining Bitcoin as the oldest and most dominant cryptocurrency in the market, it is also branded as one of the most successful digital currencies ever created. This explains why buying, selling, and storing bitcoin is one of the most sought after cryptocurrency investments.
Many investment advisors and millionaire investors have recommended putting bitcoin in investment portfolios. If you are a new crypto investor or an already high-rolling professional one, this guide will provide you substantial info when investing in bitcoin and cryptos.
Main Bitcoin Investment Approaches
From a financial perspective, there are two different methods to make a profit: investing and trading. Investing is a long-term strategy as investors seek larger returns over an extended period of time, while trading involves short-term strategies for more frequent profits.
Shifting to cryptocurrency jargon, investing is equivalent to HODLing. Coined by a frustrated (or often described as drunk) Bitcointalk user during the falling BTC price phenomena of 2013, HODL means you buy and hold BTC or other cryptocurrencies for months or even years’ time.
Why HODL? Investors who believe that the BTC price or any other altcoin will significantly increase its value over the long-term prefer to do this strategy. If you still need more time to study how the market works and does not want to ride out short-term losses, better HODL.
Otherwise, if you want to take advantage of the daily, monthly, or quarterly gains within the crypto market, you can opt to do trading. Crypto trading requires huge efforts and is time-sensitive due to the probability of high fluctuations in the market.
Why trade? If you have the time to keep on monitoring the market movement and is ready to embrace the volatility of the market, trading might work for you. If you are also confident with your technical analysis ability and if you have the capital to leverage instant ROI, then trade by all means!
Is Bitcoin a Good Investment?
Financial experts have been suggesting that the more effective way of becoming rich is to invest your money, not just save it. As you consider investing in Bitcoin, you may have existing investment assets like stocks or real estate.
Investing in BTC is similar to investing in stocks, with the main difference being that the crypto market is more volatile in nature with price swings going back and forth. While global stock markets only open during sessions, crypto has a 24-hour trading time across exchanges.
Considering this, you may still have doubts if Bitcoin is really a good investment. Since its inception in 2009, the Bitcoin value has expanded. We may not be talking about the actual price reflected in the market, but the monetary value in terms of real-life usage has proliferated.
Records show that more than 15,000 businesses worldwide accept bitcoins, contributing to more than 10,000 bitcoin transactions happening in different locations per hour. With the original intent to become electronic cash, Bitcoin is slowly making its way into the mainstream.
Based on recent studies, the cryptocurrency market is expected to have a CAGR of 60% from 2020 to 2025. This evidently shows that cryptocurrency is the new age of financial innovation and while practicing due diligence, having bitcoin as part of your portfolio will not hurt you.
Moreover, what makes Bitcoin an ideal investment is its innate nature of being global and independent as it is based on the blockchain. There is a low inflation rate as well since it is not affected by any country’s financial situation or stability.
Notably, American multinational bank institution JPMorgan has expressed its positive views regarding the crypto market. “[It] continues to mature, and cryptocurrency trading participation by institutional investors is now significant.”
And if dominant players in the international financial system are becoming more open for crypto investments, it encourages average investors and traders to do the same. Therefore, setting a decent amount to purchase Bitcoin may result in favorable ROI when strategically done.
Read Also: Is It Safe to Use Bitcoin?
How to Start Investing in Bitcoin
If you have prior experience in stocks, you can easily adjust when investing in bitcoin and other cryptocurrencies. Before deciding to buy different types of cryptocurrencies, there are several steps you must do to get you started. We will walk you through it.
Step One: Get a Bitcoin Wallet
It is important to keep in mind that your digital assets, may it be Bitcoin or any other cryptos, must be kept secured in a reliable crypto wallet. There are many kinds of crypto wallets released in the market — cold wallets (offline access) or hot wallets (requires internet).
When choosing your Bitcoin wallet, the first thing you have to consider is the security of the wallet. You must have the private key at your own hands as this key provides access to your assets. Non-custodial wallets are wallets that give sole control of private keys to wallet owners.
Once you have chosen a crypto wallet, you have to set up your account through registration. A similar process for account registration involves asking for your name, email address, and mobile number and completing multiple verification procedures to confirm user identity.
Make sure to backup your mnemonic phrase and set up a strong and unique password to your Bitcoin wallet. Save your phrase where you can access it securely and come up with a multi-character password to protect yourself from any risks.
Step Two: Join a Bitcoin Exchange
There are over 150 crypto exchanges you can choose from. These crypto exchanges can vary in reputation, reliability, security, processing fees, exchange rates, and the number of supported trading pairs. Your location can also affect which exchange you should go for.
While most of these platforms offer wallets for their users, ensuring wallet security is not their priority. This is the reason why we do not recommend crypto users to use any exchange wallet, especially in the case that you want to hold a large value of crypto holdings.
Instead of using a custodial-based wallet within exchanges, set up your own crypto wallet and directly transfer any amount of BTC or other cryptocurrencies you are purchasing. In this case, you can ensure that you have your assets secured and monitored at your own hands.
When choosing a Bitcoin exchange, check the history of the exchange. Your main concern should be how long it has been running in business and how many cases of lost or hacked assets there have been in the platform. Choose an exchange that you can trust.
Make sure that the exchange you will be joining will require you to submit KYC requirements to confirm your identity. This may seem like a waste of your time but this shows that the exchange values security on its platform. Without any KYC, higher risks for fraud and scams can happen.
Step Three: Place Your Order
Once you have your Bitcoin wallet and Bitcoin exchange ready, the next thing to do is place your order to buy your bitcoins. To successfully do this, you have to use a traditional payment method such as credit card, bank transfer, or debit card.
You don’t need to have a lot of money to start investing in Bitcoin. Though, it is important to keep in mind that investing a small amount of money on platforms may not be beneficial as they will charge you with transaction fees upon buying or transferring cryptos.
Choose a sufficient amount of capital that you can use, possibly around $50 as a minimum. Many investors aim to buy low and sell high to maximize their profits. Depending on your preferred fiat currency, you can proceed to buy bitcoins at your own risk.
Once you have purchased your bitcoins from the exchange, you can then proceed to transfer your bitcoins to your own personal crypto-wallet by using your wallet address on the platform. Do these transactions using a secure network connection to ensure safety.
Ways to Enhance Bitcoin Trading Strategies
We will not recommend any specific Bitcoin trading strategy for you. Instead, we will give you some insight into what you have to know to establish and execute an effective one. This is because the crypto market is known to be very erratic, with changes happening every second.
There is no shortcut to learning how to trade. You may experience some trials and errors before you master the actual process. To become a smart and capable cryptocurrency trader, it is important to know the technical indicators in the market.
Because Bitcoin is more volatile than other tradeable assets, relative strength index (RSI) and support and resistance zones are some of the indicators you should familiarize with. These can help you make better predictions, resulting in more profitable gains.
RSI is classified as a momentum indicator. This evaluates the strength of Bitcoin’s recent price performance within a period of time. Most traders opt for a 14-day RSI, but this can be customized. An asset is considered overbought if the RSI is higher than 70. Conversely, you can say that it is oversold if the RSI is below 30.
Identifying the support and resistance zones in a trading chart is also critical for a trader. When you draw the horizontal lines, you can take a look at candlestick patterns and determine the bullish or bearish indicators. This can make a huge difference for you to win or lose trades.
You can read and learn more in-depth discussion about technical analysis and other crypto market indicators, but to focus specifically on Bitcoin trading, study and implement these in your trading strategies.
Risk Awareness for Every Bitcoin Investor
If you have finally joined the crypto bandwagon and started trading, then you must have already heard many FUDs. Nevertheless, you can show better judgment by being aware of the actual potential risks you may face upon investing in cryptos.
Crypto exchanges can be tricky.
Many of them have been subject to hacks and unauthorized withdrawals. Cryptocurrencies worth billions of dollars have been mishandled through the years. That is why users must be vigilant on which exchange they will choose. Look for a better one if you have doubts about its security.
Crypto prices can be driven by emotions.
Traders who experience FOMO intend to panic buy or sell cryptos at the wrong time. During a bull market, optimism, impatience, and excitement are there while during a bear market, regret, panic, and despair come out. Aim to make calculated decisions not based on emotions.
Never buy what you can’t afford to lose.
Investing in crypto may be harmful to your finances if not done moderately. Do not borrow any money to invest and do not invest more than you can afford to lose. This is to avoid any emotional turmoil whenever the investment odds are not in your favor.
Timing should be your ally.
Finding the right time to buy or sell is a crucial factor in crypto trading. This can help you set the suitable amount you want to invest in initially. The closer we are from the market’s all-time high, the least you want to buy and invest.
Diversify your portfolio.
Allocating funds on various assets aside from Bitcoin and other altcoins in your portfolio is a smart tactic. As we all know, each crypto’s movement is very volatile. To reduce any huge losses, allot certain percentages to your assets to amplify chances of yield.
Keep an eye out for market trends.
The circulating supply, market demand, trading volume, regulatory measures, and news and current affairs can influence the current and future BTC market trends. BTC markets shift more frequently than real-world markets so keep up by staying on track.
Do not fall for scammers.
A common mistake for beginner crypto investors is doing the “pump and dump” strategy. Certain individuals on social media target those that are fairly new to the game by promising unrealistic returns. Avoid these situations to ensure the security of your digital currencies.