How to invest in bitcoin? A good and safe investment – a beginner’s guide
Investing in cryptocurrencies brings large profits if you do it the right way and without too much risk. Plenty of people have gotten rich off bitcoin, the price of which has increased to several dozen thousand dollars since 2017. The exchange rate obviously fluctuates all the time: there is no way to predict in which direction it will go tomorrow or day after that, let alone in longer periods of time. That is why the most reasonable investments don’t exceed a certain threshold beyond which potential losses would cause too much damage to the investor.
- How much does bitcoin cost?
- Is it safe to invest in bitcoin?
- How to safely invest in bitcoin?
- Only invest as much as you can afford to lose
- Don’t invest everything in bitcoin
- How to invest in bitcoin to make a profit?
- Investing in bitcoin: 3 methods
- What is the difference between cryptocurrencies and traditional money?
- More than just bitcoin!
- The decentralized nature of cryptocurrencies
- Investing in bitcoin: a cryptocurrency wallet
How much does bitcoin cost?
Bitcoin is one of the most famous cryptocurrencies in the world. Its price fluctuations show clearly enough how unstable the Cryptocurrency market is. Despite financial experts trying to predict to a certain degree the value of the cryptocurrency in less or more distant future, these are still just prognoses, based on pretty much uncertain premises. Investing in bitcoin is therefore risky, although not more than in many other types of investments. To give a better picture of how unstable the BTC exchange rate is, let’s remember that in the second half of 2017 it reached a value of 15 thousand USD.
The beginning of the coronavirus pandemic turned out to be catastrophic for the Cryptocurrency market in general, not just for the owners of bitcoin, which back then only cost 7,200 USD. As the pandemic progressed, the value of BTC dropped down to 5,200 USD. It wasn’t until the end of 2020 when the price raised to 33 thousand USD. There is no way to predict how much bitcoin will cost in a year or two. It all depends on the society’s interest in this cryptocurrency. There is a possibility it will be growing gradually. How to invest in bitcoin? We’ll explain below.
Is it safe to invest in bitcoin?
This is the question that everyone will inevitably ask themselves once they realize how unpredictable the exchange rate is. If the bitcoin value is indeed so volatile, is it really worth it to invest in cryptocurrencies? Maybe it’s better to put your money in different types of assets?
Despite its undeniable volatility that is characteristic to this market, one can relatively safely get regular financial profits from cryptocurrency trading, like on the BitBay website. One just has to follow a few basic rules. Below we will suggest how to exercise caution at an exchange, what not to do when making transactions and what to pay attention to when choosing a Trading platform. We will explain what’s the difference between a digital currency based on the blockchain technology and a fiat one, as well as list the most characteristic features of bitcoin. We will also reveal a few tricks that will allow you to protect yourself from potential losses and increase your chances of profit.
How to safely invest in bitcoin?
In order to minimize the risk of losing funds, follow the three basic principles of safe Investing in bitcoin. Ever since the creation of Bitcoin, there have been numerous cases of denied access to the account, i.e. in the event of the exchange’s bankruptcy or logins and passwords getting stolen. More than one investor has lost more than half of their assets by playing all the way. When acting under emotions, it is easy to lose self-control, and once a transaction has been made, it is done and can’t be undone. Which makes it a good idea to learn the below principles before making any binding steps.
Only invest as much as you can afford to lose
Are you wondering how to invest in bitcoin? You don’t know how many bitcoins to buy? The first principle of safe investing is: only invest in bitcoin as much as you can afford to lose. Experienced investors know firsthand that fortune isn’t always on your side and that it’s better not to risk ruining your budget. No matter how secure an investment in bitcoin seems. Of course you can bet more than common sense would dictate, but this will have nothing to do with safe investing. The risk doesn’t just involve sudden changes to the Bitcoin value – it’s also about the possibility of state governments intervening in the Cryptocurrency market.
There are plenty of countries where digital assets aren’t a legal, legitimate currency and aren’t controlled by pretty much any legal regulations. This situation might change any time – you may never know: if it’s for better or for worse for the investors. Another threat are Cyberattacks by hackers. Whereas it is possible to protect oneself from them, there is no way to completely rule out the risk of virtual theft of bitcoins or personal data.
Don’t invest everything in bitcoin
Bitcoin is sometimes called gold 2.0, and the success stories of some investors incline dozens of thousands of others to buy this currency. The huge chances of profits don’t justify risky moves, though. An experienced investor doesn’t place their entire capital in a single product. Just as it is dangerous to keep all your savings in one bank, investing only in bitcoin also increases the risk of severe financial losses. To maximize the profits, it’s a good idea to also buy other cryptocurrencies based on the blockchain technology.
How to invest in bitcoin to make a profit?
It helps to think long-term in investing. The bitcoin exchange rate, as well as that of other cryptocurrencies, is subject to frequent and unpredictable fluctuations, which makes it easy to give in to emotions and make a decision that will turn out to be wrong. Plenty of people who invested in bitcoin back in 2009 got scared less than 4 years later by the sudden drop in value of this currency and wiped their accounts clean, not gaining anything and losing a lot. In the following years, the value of BTC increased, and so those who weathered the crisis achieved a spectacular Financial success. Which is why I believe that it’s not worth it to base your decisions on what is currently happening on the market.
Investing in bitcoin: 3 methods
There are Three methods of investing in BTC. There is no way to say conclusively which of them is the best – each has its downsides and upsides. The below list will help you choose the method that best suits your needs, circumstances and expectations.
Invest in bitcoin on an exchange
Are you wondering how to invest in bitcoin? If you’re looking for the simplest possible way, invest in bitcoin on an exchange. Buying a digital currency is no problem at all – you just need to have an account, which in case of certain services comes with necessity of providing personal data. After finalizing a transaction, you will come into possession of a specific amount of bitcoins. It’s up to you how you use them. You may use them as a payment method, although taking into account the minuscule number of businesses that accept BTC, you might probably have a hard time spending your money.
Bitcoin, as well as other cryptocurrencies, such as Ethereum, is above all an investment product. People buy it to sooner or later sell it. If you’re already using an exchange, see if it’s a quality service, how many Internet users it brings together and what are the reviews for it online. Every exchange should have professional security measures in place to protect the funds and personal data of the users from potential theft.
Invest in bitcoin through CFDs
Thanks to the rapid growth of the Cryptocurrency market, CFD type contracts have entered everyday use. They are included in the offers of the biggest financial institutions in the world, such as CME or CBOE. For individual investors, the most convenient option are contracts for difference. The profit from such investment is equal to the difference between the cryptocurrency price on the day of concluding the contract and the price on the day it is terminated.
CFDs make it possible to invest with leverage, although it is worth noting that when it comes to cryptocurrencies, it is several times lower than with other financial instruments, which is directly related to the volatility of this market. Contracts concluded with leverage ensure much higher profits than investments on an exchange. On the other hand, they come with huge risk and might weaken the budget.
Invest in bitcoin: binary options
The third method of Investing in bitcoin are binary options. It’s a very simple method that doesn’t require much effort. Not many people use it, because compared to the previous two methods it doesn’t really provide spectacular successes. Still, it allows to make some money – of course the amount of winnings depends on the amount bet. The investor only has two options to choose from: to bet on either a rise or a drop in the exchange rate within a specific period of time. In the event of a correct prediction, a specific amount of BTC is won that depends on the amount invested. If the prediction turns out to be wrong, the invested amount is lost.
What is the difference between cryptocurrencies and traditional money?
While we’re at it, it is also a good time to touch upon the topic of the differences between cryptocurrencies, especially bitcoin, and fiduciary (FIAT) currencies. A fiat currency forms a part of the financial circuit thanks to the citizens’ trust towards the governments, which hold a monopoly on issuing them. The value of a FIAT currency depends on the demand, which is largely influenced by the government. By enforcing taxes on citizens, they obligate them to use a particular currency. It is the applicable payment method on the territory of a particular country.
On the other hand, bitcoin as well as other cryptocurrencies, although they were originally created with an intent to replace traditional money, are used definitely more often as a subject of investments. Although bitcoin can be used to buy different types of products and services, it is only with a small number of businesses that accept payments in BTC. The ability to pay in crypto doesn’t change the fact that it isn’t really profitable, though. Buying a tea at a bar, for example, would require having to pay a commission, and the funds would only end up in the account of the establishment owner after a few days.
Still, there are online websites of companies that accept payments in cryptocurrencies only. What is interesting, there’s a growing number of businesses in other countries that are open to payments made in BTC. Investing in bitcoin is therefore becoming profitable. Either way, it is more profitable today, with a growing number of people using BTC, than just a few years ago.
More than just bitcoin!
Just like USD isn’t the only fiat currency, the same way bitcoin doesn’t exhaust the Wide array of the cryptocurrencies available today. There are new altcoins being made all the time. On top of Bitcoin, there are also such networks as Ethereum, Litecoin, Dash, Monero or Ripple. As is easy to guess, each of them was created to fill some gaps on the market. Nearly each of them has something to offer that others don’t have. Bitcoin, despite taking its place at the top, is therefore not the only investment product of this type.
Plenty of investors have made a lot of money on other cryptocurrencies. Some of them turn out to be more convenient to use in terms of transfer speed, not to mention they don’t require paying a commission. The transfer time is without a doubt an important criterion that has to be taken into account if a cryptocurrency is to be used as a payment method.
The decentralized nature of cryptocurrencies
Cryptocurrencies also differ from FIAT currencies by being decentralized. Traditional money is issued by the central bank. The issuing of cryptocurrencies is based on different principles: the so-called miners that we have described in other articles before “mine” new “coins” out of the system’s resources. This activity is referred to as mining, as it is similar to digging for gold. These days nearly all countries in the world prohibit digging valuable minerals from the ground, as from the legal point of view they belong to the state. Cryptocurrencies, on the other hand, can be mined by anyone – all you need is Internet access. The topic of mining has been discussed on our website several times before – those interested are welcome to read our other articles.
Investing in bitcoin: a cryptocurrency wallet
Before using an exchange, it’s a good idea to get a good quality hardware wallet where you will be able to store your bitcoins. There are certain websites where it’s better not to keep your money in the account – due to the risk of bitcoins getting stolen. It is recommended to transfer the funds to the account right before making a transaction. The leading wallet manufacturers are Trezor and Ledger.
Yo can choose a different type of wallet for your money. The choice includes a desktop wallet, a browser wallet, a mobile app wallet… Even a regular piece of paper might be a cryptocurrency wallet. However, a hardware wallet ensures Higher security and is especially recommended for those who store large amounts of BTC. It is certainly a better “cache” for bitcoins than any other exchange. The Ledger and Trezor products are being used by a growing number of users.
Investing in bitcoin or in other cryptocurrencies might be the first step on the road to Financial success. The BTC exchange rate is subject to significant fluctuations, which allows you to come into possession of a significant sum if you buy and sell this currency in the right time. All kinds of investors are mostly attracted to exchanges: all you have to do is set up an account, enter your data and make a few right decisions to be able to profit on selling bitcoins. You shouldn’t give in to sudden emotions – bitcoin will gain in value one moment and then lose in another. During drastic price drops it is better to remain patient than to sell the bitcoins.
Now you know how to invest in bitcoin to make profits. Good luck!