Bitcoin, a secure, global, and the digital currency has been making news for its seemingly unstoppable rise in the stock market for quite a while. The price of this cryptocurrency has been consistently going up this year. It has gone from being priced at less than $1000 per one bitcoin at the start of the year to currently passing $17,000 per coin. Such outsized returns made Bitcoin attractive and at a point, you might have probably thought of not missing out one of the best investing opportunities of the last decade, so you want to invest in.
Thinking of investing in Bitcoin?
As the price of the Bitcoin continues to rise, investing in bitcoin may seem profitable, but know that it takes time and effort to understand how Bitcoin works. Most importantly, should you put your money into it? This post will outline some things you NEED to know before you invest in Bitcoin.
Bitcoin was created to work as peer-to-peer electronic cash. It’s not actual, physical money. Bitcoin with a capital “B” refers to Bitcoin the network or Bitcoin the payment system; bitcoin with a lowercase “b” refers to bitcoin as a currency.
When is a good time to buy Bitcoin?
There is no “best” time to buy Bitcoin. The only good advice is to adopt few incredibly simple principles before buying a Bitcoin – Figure your strategy, Buy and hold, buy the dips, and dollar-cost averaging.
Figure out your Strategy:
Bitcoin prices may be constantly going up, but they are also very volatile. The volatility creates risk and scares away the investors who aren’t willing to lose all the money they put into it. So, the hard part of investing in Bitcoin is figuring out what you want your strategy to be. There are a few different ways to approach it, and you will need to tailor your approach to whatever suits you best as well as what you think will yield the highest returns.
Buy-and-Hold (or HODL)
The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value. Because with more exposure to Bitcoin and its return, the demand for Bitcoin is increasing but its production is limited. High demand, low supply leads to price rise! Meaning, if you think Bitcoin is a winner, so you hold Bitcoin.
The cryptocurrency jargon “HODL” was originally a typo which appeared on the Bitcoin talk forum for the first time in 2013. He misspelled the term when he wanted to convey the fact that he was holding his BTC despite the serious fall that had just happened. Since then, it has caught on as an explanation for someone’s long-term investment strategy.
Another best possible investment is buying an asset when the price drops down while having a good insight for a rebound in the nearest future, a phenomenon called “buying the dip.”
The best method for investing in something so volatile as Bitcoin is a well-known method called Dollar Cost Averaging. Dollar-cost averaging (DCA) is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high.
For example, let’s say you want to invest $100 into bitcoin every week. Should the price of the digital currency fall, your $100 will simply buy you more bitcoin. If the price rises, your weekly investment will buy you less bitcoin. By taking this approach, you can “average out” the cost you pay for bitcoin over time. In other words, by using dollar-cost averaging, you are managing the risk of buying or selling at a less-than-ideal time.
No one knows the exact time which is appropriate for buying cryptocurrency as volatile as Bitcoin. There are many different ways to approach your acquisition of Bitcoin, and it all depends on how much money you want to put in and what your risk tolerance is, rather than the time when the purchase is to be made.