Investing in Bitcoin is something to think about if you’re looking to diversify your portfolio. Bitcoin is known to be extremely volatile, which means that the price can swing up or down quite quickly. Bitcoin has seen its value increase exponentially since its inception in 2009 and many people are starting to take note of this investment opportunity. There are many trading bots like this trading bot in the bitcoin market that can help you in bitcoin trading.
Related Post: Guideline for Investing in Bitcoin
The first thing to consider when thinking about investing in Bitcoin is how much risk you are willing to take on. Bitcoin might not be right for you if you need stability in your investments or would panic easily if prices dropped suddenly. If Bitcoin makes up only 1% of your entire portfolio, then it will probably not affect your other assets very much, but even so, Bitcoin may not be the best choice for your portfolio.
Investing in Bitcoin is not for the faint of heart and you should be prepared to experience high fluctuations in Bitcoin value. Bitcoin has seen its value rise by as much as 30% in a single day and drops as much as 20% the next day. Even if Bitcoin does well this year, you can’t be sure it will repeat its success next year or even that same month (it does tend to increase more often than decrease).
If Bitcoin makes up 1% of your entire portfolio, then you should expect to see about a 1% gain overall (at least) because Bitcoin appreciates quite quickly; however, it also drops down just as fast. You should consider diversifying your investments between cash and other cryptocurrencies like Ethereum, Bitcoin Cash, and Litecoin to limit your exposure.
If Bitcoin is a part of your portfolio, it’s important to keep up with the news related to Bitcoin and other cryptocurrencies. There’s always the possibility that Bitcoin might go away one day or be replaced by another more popular currency like Ethereum, but as of this time, Bitcoin seems pretty secure and continues to gain in popularity and legitimacy as more and more people see value in it.
You can also build a Bitcoin investment strategy around dollar-cost averaging. This means you invest an equal amount at regular intervals over the course of several months or years. Let’s say you want to invest $100 every month for 10 months. Instead of putting all $1,000 into Bitcoin right away (and possibly overpaying), you would invest $100 each month, allowing Bitcoin time to go up and down in price. Bitcoin tends to appreciate more during the winter than it does in spring or summer (when Bitcoin Cash seems better).
You’ll also want to consider Bitcoin mining costs. Bitcoin is not an infinitely available resource; Bitcoin has a limited supply that will stop increasing at 21 million Bitcoin sometime in 2140. Mining Bitcoin involves complicated maths problems and consumes energy, so there’s a cost involved with creating new Bitcoin which goes towards verifying and protecting transactions on the blockchain (solving equations and adding blocks of data). Miners who do this work receive payment for their successes in the form of Bitcoin. The profit margin may be significant – but don’t forget, Bitcoin must be mined at a profit, so the cost of Bitcoin mining must be taken into account when determining whether Bitcoin is profitable or not.
If you’re just starting to get involved with Bitcoin, then it’s best to buy Bitcoin from an exchange rather than from another person. You can look for exchanges through the Bitcoin website, but there are also plenty of other resources where you can find a list of reputable Bitcoin exchanges in your country. It’s important that you use a trusted and reputable exchange otherwise you risk getting scammed by someone trying to sell Bitcoins they don’t actually have. Exchanges also take time because they need to make sure everything is verified and legitimate before allowing purchases through their site. In the US, Coinbase is usually considered one of the easiest Bitcoin exchanges to use by Bitcoin beginners.
There are several Bitcoin wallet options that will help you store your Bitcoin safely and securely for a small fee paid to that Bitcoin wallet’s company. Some of these wallets can be stored on your personal computer/laptop while others can be stored right on the exchange where you buy Bitcoin from– wherever you choose, make sure it’s a reputable site if you go this route. You should also consider creating multiple Bitcoin wallets in case one gets hacked or stolen (you wouldn’t want all your Bitcoin lost at once). To create a safe Bitcoin wallet, check out services like BitGo, which offers added security features beyond what other Bitcoin companies offer.