Many people know about Bitcoin’s volatility. However, they still want to invest in this virtual currency due to the potential returns. Historically, Bitcoin’s price has increased and plummeted severally. While this makes Bitcoin a risky asset for some investors, others take advantage of this volatility.
Digital platforms like Bit Index AI enable individuals and businesses to trade this cryptocurrency. You can find Bit Index AI if you’re interested in trading Bitcoin. Experienced traders use such platforms to speculate on Bitcoin’s price. But if this is the time you’re considering investing in Bitcoin, you need help deciding where to start. And that’s where this guide comes in.
Understand Bitcoin
You can only invest in something you know. Otherwise, you’ll lose your money. Therefore, start by understanding Bitcoin. Bitcoin is a payment system and a digital asset. A group of people or individuals under the name Satoshi Nakamoto created it in 2008 and introduced it in 2009 as a payment method. However, it became widely known as a digital asset in 2017 after its price surged.
Currently, Bitcoin is the leading cryptocurrency with the most significant market capitalization. Its popularity has seen more businesses start accepting it as payment. Also, some countries have started recognizing it as a legal tender.
You can pay for goods and services online with Bitcoin. Also, you can hold it as an investment if you expect its value to increase. Since some governments and big businesses now accept Bitcoin, some people see it as a good investment option. And the straightforward way to invest in Bitcoin is to purchase and hold it for the long term. Alternatively, you can invest indirectly in a Bitcoin-based company.
Monitor Bitcoin’s Volatility
When investing in Bitcoin, you should know it’s volatile. The price of this digital currency is usually unstable. For instance, the price might surge today and drop tomorrow. While this volatility might make some investors shy away from Bitcoin, others see it as a money-making opportunity.
You can take advantage of Bitcoin’s volatility by day trading, which involves buying Bitcoin at a low value and selling when it surges. However, have some knowledge of technical analysis to do this successfully. Alternatively, you can use a digital platform that provides regular insights to trade Bitcoin.
Focus on the Future Potential
Like with most investments, think long-term when investing in Bitcoin. Yes, Bitcoin price is volatile now, but that doesn’t mean it will continue being like that in the future. Many experts believe that Bitcoin’s value will surge as more people start using and accepting it.
That’s because the total supply of Bitcoin can’t exceed 21 million units, according to its protocol. As demand for Bitcoin increases, so does its price. Also, more businesses are beginning to accept Bitcoin payments.
All these factors could see the price of Bitcoin rise in the future. Therefore, be optimistic when starting your Bitcoin investment.
Manage Bitcoin Investment Risks
Like any other investment, Bitcoin comes with risks. First, the price can crash, leaving you with losses. Second, there’s the security risk where somebody can steal your Bitcoin if you don’t store it safely. However, you can mitigate these risks by doing the following:
- Only invest an amount you’re comfortable with losing: Don’t invest all your life savings in Bitcoin since its price is volatile.
- Diversify your investment: Don’t put all your eggs in one basket. For instance, you can invest in other digital currencies like Ethereum and Litecoin.
- Store your Bitcoin securely: Use a digital wallet that’s difficult to hack. Also, ensure you keep your keys private to avoid losing your Bitcoin.
Investing in Bitcoin can be an excellent way to earn a passive income. However, you should monitor its volatility and manage the risks before investing. Also, only invest an amount you’re comfortable with losing.