Bitcoin has taken the world of finance and investing by storm. This is to the delight of many, and the displeasure of even more. Bitcoin is a hot topic that has led to a lot of interest from first-time investors, and some big names too. When a new product or service comes into the market it can grab everyone’s attention, which is exactly what this cryptocurrency, and the many offshoots it has spawned, has done. The question you might have is how to invest in bitcoin.
The answer is a lot simpler than many think. The numbers and technical aspects behind this decentralized currency are nothing to worry yourself about unless you want to get into the coding functions, for investing, it is actually quite easy. Investing in bitcoin and cryptocurrencies can be a good way to diversify your portfolio or get ahead of the potential curve when it comes to long-term projections. Being a savvy investor starts with arming yourself with knowledge, and this article will give you some of the tools you need to successfully transition into bitcoin investing.
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1. Choosing Your Platform
The first thing you want to know is where to buy, store, or trade bitcoins and cryptos. This is the most common question people ask because bitcoin is not the same as buying a stock, not yet at least. Crypto platforms operate in a slightly similar manner to stockbroker apps and accounts. You have a selection of cryptos you can fund, known as wallets, or trade them like options trading. The best platforms offer low or no fees and commissions, and like this trading platform, they can offer features like automated trading. Your platform choice is the first step in buying, selling, investing, and trading bitcoins.
2. Trading or Long-Term Investing
Your next choice after finding a platform is figuring out what you want to do. As mentioned, you have the option to save your cryptos and invest or you can trade them. Investing long-term is something that many people do with stocks because there is more value to be had when you hold them for years at a time. Mutual funds and ETFs work in this way, and many high-upside cryptos like bitcoin, litecoin, and ethereum are similar because of their market cap potential. Trading is also an option you have and trading is a short-term, liquidity-based way to earn returns on your cryptos. The long-term valued cryptos, like bitcoin, still offer traders a good deal of possibilities because it is the largest crypto on the market. Before investing, you should think about whether you want to sit on your investment’s long-term or trade for quicker gains.
3. Diversifying Past Bitcoin
There are a lot of cryptos on the market. The biggest ones by market cap are just the start. Most people know about the big three already mentioned in the previous section, but it goes beyond that. There are other coins like XRP, IOTA, Chainlink, Cardano, and Stellar which make up a big bulk of the market that are relatively unknown to new investors and those unfamiliar with cryptos. Beyond that, there are up to 5000 altcoins on the market as well, which offer their own potential. Knowing what cryptocurrencies are out there past bitcoin can help you round out your wallets and investments to give you a better chance at finding good trades and value potential. Once you familiarize yourself with your platform and bitcoin, you can start to see what else is available out there for investment.
4. Legality of Cryptocurrency
A very common concern for many investors looking to get into cryptocurrency is the legality of the whole thing. Bitcoin became incredibly popular because of news stories and financial reports which led people to get involved, and others to question if it was permitted. The answer is not completely straight forward. In many countries, it is entirely legal to purchase, sell, and hold cryptocurrencies. They may not be treated as legal tender, but they can be owned, while other countries are very against these investments because of the potential volatility, security risks, and lack of centralized owners. It is highly advised to check with your local customs on where your government and financial institutions stand with regards to cryptos. One problem that people have is that they cannot use their credit cards or bank accounts to buy them, which is a matter of checking if they are legal in your country.
5. Security Risk for Investing
The risk of legality is a big barrier for a lot of people who feel it is a volatile investment, and they are right. The thing with cryptos is that they are as risky to trade and own as any stock through a bank and brokerage account. You are taking a speculative chance that you will make money, it is not a guarantee of success, no matter who claims they got rich off of it. Understanding that cryptos have a risk when it comes to security because of its nature as a digital investment held in a (secured) wallet is important to remember, as well as the fact that they are not backed by many banks. It goes without saying but never give out your personal information or wallet key to anyone you do not trust.
6. Be Smart With Smart Bitcoin Investing
Investing is a system of probability, statistics, and strategy, which applies to cryptos too. There are a lot of databases to check the charts and graphs, projections, and values of cryptos just like stocks. Using these tools to help you invest smartly is good, but investing is not just throwing money into a cryptocurrency and expecting money to appear overnight. Build a strategy where you can start small and work your way up when you understand how to trade, the margins of error, and trends to look for in the charts.
Investing in bitcoin is not the boogeyman that many in the financial world, and outsiders of it, would like you to believe. Bitcoin is a great investment plan for traders and long-term holders, but it is not a guarantee of future success. Like with any investment, you need to approach it with a level head, realistic goals, and a good attitude, and these tips will help you enter the world of cryptocurrency with some knowledge under your belt.