What is Bitcoin?
Bitcoin is the pioneer digital currency. It is an electronic form of money that authenticates transactions using cryptography, which is the science of encoding and decoding information.
Why Invest in Bitcoin?
Although BTC has generally been a newer financial asset, it has continuously offered great returns to investors over the time, despite its volatilities. Also, a fixed total number of coins and its supply ensures a perfect and a secure way of storing wealth, while also appreciating over a given period of time i.e. its price or value increasing over the time.
This appreciation in its value is due to the fact that an increasing number of individuals and companies as institutional investors such as the investment banks and other entities are beginning to adopt it.
Over the recent years, the world has witnessed a greater interest and inclination of institutional investors and trading corporations, especially during the last year.
Experts and analysts around the world are seeing bitcoin as a hedge against the inflation in the investment portfolios. Also, as mentioned earlier, analysts also believe that bitcoin has an incredible potential of growing exponentially in price in the future years due to its increased adoption.
Understanding How to Invest in Bitcoin
Essentially there are two ways to begin investing in the leading crypto in the world, Bitcoin. Firstly, an account can be created with a suitable cryptocurrency exchange which can be selected from a wide range of exchanges throughout the world. Secondly, you can also purchase it from any investment platform which is offering digital currencies as an option.
Recently, a few other ways have also been introduced to invest in cryptocurrencies, of which online cryptocurrency trading using automated bots is gaining increased popularity.
The investor just needs to purchase the bitcoin and then leave it to the bot to conduct the trading at the highs and lows according to its algorithm, allowing you to make profits through AI. One of the best platforms for auto trading is Bitcoin Evolution, which is an advanced bitcoin auto trader.
In the early stages of the cryptocurrencies, their trade was relatively unsecure on the exchanges, as these exchanges were not regulated. However, now all the crypto exchanges are regulated and in compliance with the laws. Some of the most popular exchanges in the United States are as follows;
Besides this way, beginners can also purchase BTC via several financial platforms and applications such as Cash App, and PayPal, which are the most popular ones. Although these applications do not provide as wide range of digital currencies as many are offered on the exchanges, however, they do offer the most significant and well performing ones such as Ether or Bitcoin. And if you are just looking to invest in bitcoin then this option won’t be a problem for you.
One thing that comes with financial investments is the underlying risks associated with them. Given that you have decided to invest in bitcoin, the following 5 points will help you minimize the risks associated with investing in bitcoin, improving your returns on investment in bitcoin:
1. Go for a Bitcoin Wallet
Keeping a handsome amount of crypto investments inside a digital wallet can prove to be a smart idea if you are looking to buy BTC from exchanges or are going to hold big sums of it.
2. Choose the Amounts to Invest Carefully
Although this advice is applicable to all sorts of financial investments, it is relevant here as well. BTC has shown great volatilities over the passage of time, for example the $3,000 sharp decline in BTC’s prices during November last year. This teaches us to carefully analyze the market and invest amounts accordingly as any volatility might cause the value of investments to decline sharply in the shorter run.
3. Have a Long Term Plan
Considering the fluctuation and volatility, the better idea is to have a long term plan prepared beforehand while investing in BTC. Analyzed during the last ten years, BTC has performed really well, therefore, the best strategy for investing in BTC would be to buy it and hold it for a longer time.
4. Remain updated on the Stock Market
During 2020, BTC showed a significant correlation with the S&P 500, mainly as the recent economic environment has driven investors in the direction of more abstract investments. Therefore, keeping an eye on the stock market can prove to be helpful in maintaining the crypto over the time and anticipate any trends beforehand, in order to minimize losses.
5. Expect Taxation – Keep Records
It is important to keep a record of all your financial transactions as bitcoin is taxable in the United States. In the U.S., a person has to pay the capital gains tax when they are selling the crypto either at a profit or if they are simply spending it.
A Final Word
To predict where Bitcoin will stand in the next year is hard. Even the experts in the markets are not 100% certain about it.
Analysts and experts have been skeptical about BTC’s ability to operate at scale. Therefore, chances are that bitcoin or any other digital currency for that matter will likely not become a proper national currency as well in the near future.
Considering that aren’t much fundamental when it comes to BTC, other than the fact that its supply is limited and an increasing number of holders and developers are emerging in the network, it’s tough to completely subscribe to such positive predictions.
Has no real fundamentals besides a limited supply and a growing network of developers, users and holders, it’s hard to fully subscribe to such optimistic forecasts. However, in recent years the cryptocurrency market has been performing well up to mark and expectations and no cues have been pointing towards the market bubble is going to burst any time soon.