You have probably heard about cryptocurrencies in general because there are increasingly more investors who are interested in its potential to reap a profit for them. The good news is that one particular cryptocurrency is now very much in demand – that is Bitcoin. So it may be a sound financial strategy to find out how you could invest in it soon.
The Value Of Bitcoin
Even beginners in cryptocurrency trading are aware that some cryptocurrencies may seem to be more valuable than others. This is based on market demand, meaning that if more people seem to want to invest in these then the price will go up. This holds true for Bitcoin as well.
One reason that Bitcoin seems so valuable is that there is a finite number of Bitcoins available. The total number of Bitcoins that have been created is 21 million. Since it is almost impossible for more to be “mined” or created, that explains why the trading price hovers at a high level. If somehow someone manages to “mine” more of the cryptocurrency, that may lower the price. But that’s not very likely to happen anytime soon.
Steps for Investing in Bitcoin
The key to becoming a successful Bitcoin investor is preparation. That means you have to find out first the following:
- “Why are you interested in acquiring Bitcoin?” This will explain your mindset towards the investment. The best answer you can give to this is that “I want to make a profit later on when I sell it”. The wrong answer is “I want to buy Bitcoin just like everyone else does.” You have to be clear about this. You shouldn’t want to buy cryptocurrency just to be like one of the crowd since that may mean you don’t know what you’re getting into.
- “Are you aware of the risk?” It is understood that cryptocurrencies in general are highly volatile investments. This is because you can easily lose your investment if you buy at a high price but cannot sell it easily at an even higher price. So you need to be aware of your personal capacity for absorbing risk.
- “How much space is there within your portfolio?” It is unwise to invest solely in Bitcoin, as a wise investor. Ideally, the cryptocurrency should just form a manageable percentage of your investment portfolio. That way, if the crypto market turns against you, your other investments will be safe.
- “How is the market performing lately?” It pays to study market changes to see how volatile or stable the market price of Bitcoin has been over time. Like with any investment, the Bitcoin price is subject to highs and lows too. By studying the market you can make an educated bet on when you can sell your Bitcoin stash.
- “What can you do if your Bitcoin investment loses market value?” It pays to be ready in case you have purchased Bitcoin then the market price suddenly falls. This means you either hold on to your investment until the market improves or sell at a loss. Ideally, the market will turn in your favor and then you can sell at a profit later on.
Buying Bitcoin the Safe Way
Once you have prepared yourself adequately, it may be time to start buying Bitcoin. Here are the steps so you can buy the cryptocurrency with minimal risk:
- Canvass cryptocurrency exchanges online. Like with any investment, you probably shouldn’t buy at the first crypto exchange you encounter. It really pays to explore the various crypto exchanges first. You should take notice of certain aspects to these exchanges. Look out for red flags like high investment fees and “too-good-to-be-true” promos that may promise a definite range of return in exchange for your investment. No one can ever 100% predict the profit potential of Bitcoin.
- Check the process by which you can pay for your Bitcoin purchase. Do they have an array of online payment partners such as PayPal or Skrill? You need to determine which of these online payment platforms are secure and what their fees are. Ideally, you can pay for your Bitcoin with either fiat currencies or actual Bitcoins. Find out if you have to pay taxes too.
- Make sure you do not patronize fake crypto exchanges or fake crypto wallets as well. One way to check if you are dealing with a fake crypto exchange is to search for a list of fake crypto exchanges published at reputable websites. The same goes for fake crypto wallets. Fake crypto exchanges and fake crypto wallets are created by scammers who want to fool the public into giving them money but will later disappear.
- Avoid phishing emails. You might be tempted to give your vital financial details by replying to these emails if you’re not careful. If you are not sure if the company that sent the emails is legitimate, just delete the email and don’t follow the embedded instructions.
- Ask around. You may know people who are more experienced than you at crypto investing. Listen to their stories of how they invested in Bitcoin in particular since you might pick up some valuable tips about the process. Be particularly interested in the successful ones because they can direct you in the safe ways they used to buy their own Bitcoins.
Always be aware of what is currently happening in the market. This is important especially if you notice a sudden peak or drop in the market price. Some individuals or groups may “manipulate” the market price so that they can profit by a huge margin when traders panic and start buying or selling cryptocurrencies.
Since you will be using a crypto exchange to invest, pay close attention to the price of Bitcoin shortly before, during, and after you buy. Simply put, this means you have to take ownership of your cryptocurrency so that you won’t be caught by surprise over time.