Is Bitcoin investing the right fit for you? Well, some might say that cryptocurrencies are more than just an investment opportunity; they’re a lifestyle choice. But let’s be real, they’re also an attractive way to begin your investment journey.
Believe it or not, nearly half of all cryptocurrency owners in the United States, Latin America, and the Asia-Pacific region acquired their digital assets for the first time in 2021.
In addition, 79% of people who claimed to own crypto stated that they decided to buy it because of its long-term investment potential.
This may explain the Bitcoin (BTC) hype in recent years.
However, if you ever bump into the words “easy” and “Bitcoin investing”, you should always be extra careful about what that means.
Though it’s true that Bitcoin and other digital currencies bring many advantages to people’s daily lives, investing in them is a topic that requires a lot of research and responsibility.
Do you want to know more about investing in BTC and decide for yourself if it’s the right option for you?
In this post, you’ll learn the basics of Bitcoin investing, its pros and cons, and how to start your journey. Let’s dive in!
What Is Bitcoin Investing?
The main goal of Bitcoin investing is to take advantage of the fluctuations in its price, hoping it will become worth more over time. The idea sounds simple: it involves buying Bitcoin when the price is low and selling it for a higher value.
Investing in Bitcoin is similar to investing in stocks or commodities. There are, however, a few key differences.
Unlike those traditional investments, Bitcoin is not backed by a tangible asset, like gold or silver, which is part of the reason why it’s more volatile and unpredictable. We’ll talk more about that in a moment.
For this reason, some people like to add Bitcoin to their investment portfolio to have a variety of assets and take advantage of the cryptocurrency market’s growth.
It’s worth mentioning that the price of Bitcoin depends on market demand. That is, when there are more people buying Bitcoin, its value will increase (and when demand decreases, the price goes down).
Why Is Bitcoin Investing so Popular?
There are a few reasons why Bitcoin investing has become as popular as it has over the past five or so years.
As the world’s first cryptocurrency, Bitcoin (BTC) has been around since 2009, and it’s had years to gain more and more attention as a promising medium of exchange. Its unique features have captivated many investors, making it a hot topic in the financial world.
Many of the reasons behind its appeal come from Bitcoin’s unique characteristics, including its decentralized nature, ease of use, and security. On top of that, one of the selling points of Bitcoin investing is its long-term opportunities for capital appreciation.
But any guarantees that Bitcoin—or any other cryptocurrency—will grow over time should be taken with a grain of salt. To see the full picture, you should always study cryptocurrencies before you buy them.
Having said that, let’s get into the real benefits of Bitcoin investing!
Advantages of Bitcoin Investing
Accessibility
No matter who you are or where you’re from, it’s possible to buy BTC. You simply need to have an Internet connection and the financial resources.
You don’t even need a minimum amount to invest, a financial background, or a broker certificate. But, of course, simply buying Bitcoin is not the same thing as actually getting a return on that investment.
While the process of acquiring the cryptocurrency is simple, successful Bitcoin investing demands strategies and knowledge about the market.
Decentralized Security
What makes Bitcoin different from regular money is that it’s decentralized. No single company or government controls the cryptocurrency, and as a result no one can steal or freeze your assets. With BTC, users are in full control of their funds and investments at all times.
A network of computers all around the world helps keep track of every transaction and makes sure everything is secure through something called the blockchain.
The blockchain is like a public ledger that shows all the transactions ever made with Bitcoin. This digital record helps prevent fraud and keeps the system honest.
Catch on: What is Blockchain? How does it work?
Transparency and Privacy
Investing in Bitcoin offers an intriguing blend of transparency and privacy. All the transactions are recorded on the blockchain and anyone can see them, which provides a high level of transparency and trust.
This transparency is a major advantage for users, because they can track their investments and keep an eye on the market. Being informed helps them make smarter decisions about their money.
At the same time, your personal data and financial details remain private.
Low, Instantaneous Transaction Fees
Bitcoin also offers some appealing advantages when compared with traditional bank transfers, which may take several days to complete and come with high fees.
The speed of Bitcoin transactions, which take only a few minutes or less to be processed, make them much more convenient and efficient than traditional bank transfers. It’s like sending an email — once you hit the “send” button, the recipient gets it almost instantly.
Besides being instantaneous, Bitcoin transactions often come with lower fees, making them cost-effective for both large and small trades. These fees are also not subject to the volatile fluctuations of fiat currencies.
Does it all sound too good to be true? Well, then it’s time to talk about the volatility of Bitcoin and what it means for your investment prospects.
The Volatility of Bitcoin (and Other Cryptocurrencies)
As you might have guessed at this point, Bitcoin is highly volatile. This means that it’s subject to sudden and sometimes massive price swings. Due to immature markets and investor speculation, the crypto has fluctuated a great deal since it was introduced in 2009.
Investing at the wrong time, and without the proper knowledge, may lead you to be in the red for a while before you break even. In other words, there’s no guarantee that you will see any returns.
In theory, you could always expect a return by selling your Bitcoin before the price collapses, but it’s nearly impossible to predict when that will happen. BTC’s value can fall 50% over the course of a few days, which is exactly what happened in March 2020 because of the pandemic.
Depending on your perspective, this extreme volatility can actually be seen as a good thing. But since this is an introductory guide for people who are thinking about investing in Bitcoin, you should be well aware of the risks that come with such an unpredictable investment.
Learn more: What is the safest way to buy Bitcoin?
How Do You Start Investing in Bitcoin?
Now that you know the basics, advantages, and risks of investing in Bitcoin, let’s get into some tips on how to start! After all, you may want to see how the market works for yourself.
1. Sign up for a Crypto Exchange
The first step to start Bitcoin investing is to open your account and join the best crypto exchange, an online platform that allows you to buy and sell the cryptocurrency.
The most complete platforms should also offer many other cryptocurrencies besides Bitcoin, and allow you to not only trade but also store, make remittances to other countries, and make purchases using your crypto.
Opening your account should be quick and easy, and once it’s up and running, you’ll be able to make trades.
2. Get your Bitcoin Wallet
The next step is to get a Bitcoin wallet in your account. This wallet works as a virtual pocket where you store and access your cryptocurrencies. There are three types of crypto wallets: cold, hot, and warm.
Hot Wallets
Hot wallets are software that can store your crypto directly on mobile or desktop devices. They’re always connected to the internet and can be accessed by entering a username and password. They also typically require two-factor authentication, such as biometrics or a security code.
Cold Wallets
Cold wallets are hardware devices that keep your data offline, and they work as virtual safes for your cryptocurrencies. They’re more secure since there’s no 24/7 connection to the internet.
Warm Wallets
Warm wallets blend the advantages of hot and cold wallets, combining utility with security. While warm wallets are connected to the internet, the software can also be downloaded onto your devices.
When it comes to your security, it’s crucial to pick a platform that takes extra measures to protect your assets. At Bitso, for example, you’re covered with a combination of hot, cold, and warm wallets to keep your assets safe.
Bitso follows strict standards regulated by the Gibraltar Financial Services Commission, and even provides insurance for some cryptocurrencies. Your peace of mind is Bitso’s top priority!
3. Buy Bitcoin Fractions
Now you’re all set to buy Bitcoin. But here comes the big question: how much BTC should you get?
Of course, you don’t need to buy a single unit of Bitcoin to start your wallet, considering it would take thousands of dollars to manage that.
Find out more: How much is 1 Bitcoin in US dollars?
One of the benefits of Bitcoin and other cryptocurrencies is that they’re traded in fractions. BTC can be split into smaller units called satoshi, a name given in honor of the cryptocurrency’s creator.
Because of satoshi, it’s possible to start investing in Bitcoin even if you don’t have a lot of money available. You can make a deposit and transfer funds from your bank to your cryptocurrency account instantly.
4. Manage Your Bitcoin Investments
After buying your Bitcoin fractions, it’s time for you to decide how to manage your crypto investments. In other words, what will be your strategy?
Your Bitcoin exchange will provide you with everything you need to buy and sell the cryptocurrency. After investing in Bitcoin, you have lots of different options. You can hold your coins for a long-term investment in the hopes that they’ll rise in value, or you can take riskier, potentially more lucrative approaches to trading.
And remember: you can always use your crypto to make online transactions depending on your needs, like sending money abroad or making online purchases.
Is It Worth Investing in Bitcoin?
Whether it’s a smart decision to invest in BTC depends on several factors, including your available assets and your risk tolerance. It’s a question that each individual must assess for themselves by considering many different aspects of the investment and gauging the pros and cons of the venture.
Just like exploring any other type of investment, Bitcoin investing requires you to be comfortable with risk, know the time horizon you expect to hold the investment, and understand how diverse your portfolio is.
As we’ve hopefully made very clear, the value of cryptocurrencies like BTC can be highly unpredictable.
Just because you can trade a particular asset, doesn’t mean it’s the best move for you. It’s essential to choose wisely and evaluate your own situation before making any investment decisions. Consider your goals and determine what you want to accomplish with your Bitcoin investing.
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