Bitcoin investment as a way to save money
If you’re planning on putting your available funds in any type of investment, you first have to justify what you want to get out of it. Is your goal to increase your capital or do you want to protect yourself against possible inflation? The answer will dictate the techniques and tools you should use, as well as their risk/reward ratios. The things that you should take into account most when choosing the assets for your portfolio are the number of assets and, of course, the length of time you want to hold the portfolio.
Bitcoin Investment Strategy
There is certainly some division when it comes to experts’ opinions on Bitcoin and cryptocurrency in general. Some call it a bubble which is worth nothing and it could burst at any moment due to its strong volatility and no real purchasing power of goods and services, while others believe that it is the money of the future and its value will increase immensely within the next 5-10 years in relation to fiat money.
So why buy bitcoin now? Because it is a viable investment option as a portion of your portfolio, as simple as that. The dominant cryptocurrency (bitcoin) exists for over 10 years and increased in value by 12000%. And this is not a single case. Crypto assets can provide you with huge returns, however, you should remember the golden rule, the higher the return from your investment the more risk it’s bearing. And of course, you shouldn’t invest all your funds into cryptocurrencies because of their unstable nature and volatility.
Key Facts if You Plan to Invest in Bitcoin
- Since the number of issued coins is limited to 21 million, its price will only go up in the future.
- It is not tied to a single organization that possesses, distributes or controls the currency.
- No need to divulge any of your personal information when trading, any information available to a third-party is fully encrypted.
- Only wallets and exchanges take commissions.
- Transferred money cannot be returned once it has left a person's account. All transactions are irreversible.
- Illegal to hold crypto in some countries.
Key Strategies When Investing in Bitcoin
Experts tend to point out two main strategies when investing in Bitcoin. These are similar to dealing with traditional funds. The approach the investor takes is usually dictated by his ability to “freeze” a certain amount of funds for a specific amount of time and his desire to routinely trade with others.
The most simple and beginner-friendly strategy is called “in-store”. The main gist of it is to buy a cryptocurrency for fiat money and wait for it to grow. The value of Bitcoin has increased drastically over the past few years, so those who bought it in its early stages have made a significant amount by today’s standards. In order to succeed the investor should not be intimidated by large exchange rate fluctuations and should hold his assets until the opportunity arises to convert crypto assets back into fiat currency.
The second most used strategy is trading on a cryptocurrency exchange. While this is a more short-term investment strategy, you should still plan ahead and be thorough in evaluating your abilities. It can seem daunting at first since you have to start small in order to learn from your mistakes and gain experience, but those who are acquainted with binary options trading or foreign exchange trading shouldn’t have any issues. You should also keep in mind that not all exchange principles can be applied when dealing with cryptocurrencies.
While those were the two most used strategies, there is also another option when investing in Bitcoin - blockchain projects with ICO (Initial Coin Offering) campaigns. This means that a company presents the public with a product and asks for funds to finalize it. In return the project issues tokens to investors, which they can trade on an exchange, converting them either into another cryptocurrency or fiat. This exchange can happen straight away after the purchase of tokens or you can wait for the project to develop further and raise more money, which will, in turn, make the tokens more profitable later on.
How to invest in cryptocurrency
Now that we’ve answered why you might want to buy Bitcoin, you should know how to keep those assets safe and secure. Just like with fiat currency, you should have a crypto wallet. It can be a software or a hardware one. One way is to go to crypto exchange to buy bitcoins with a credit card and it will be automatically stored on your wallet that is integrated into the exchange itself. The other way is to download a wallet from a third-party developer. Most of these software wallets will allow you to buy bitcoin to your wallet in a matter of seconds. You would be able to store, transfer and exchange one crypto into the other (depending on the wallet) within your wallet. You can find out more about these cryptocurrency wallets in our other article and find the one that suits you best.