Creating an Effective Bitcoin Investment Strategy
Are you thinking about hopping on the Bitcoin freight train? With cryptocurrencies getting more and more popular each day, it’s shouldn’t come as a surprise why so many people want to test the waters and see what the hype is all about. The thing is, Bitcoin isn’t all hype. It has come so far over the years, and now many digital coins are being accepted as a form of payment in thousands of establishments across the globe. Still, you should learn how to create a solid Bitcoin investment strategy to increase your chances of success.
Why is Bitcoin Popular Among New Investors?
This year, Bitcoin and cryptocurrency, in general, have skyrocketed in popularity. It’s amazing to think that back in January, Bitcoin is valued at $800. But right now, a single bitcoin is equivalent to a whopping $17,000 and the year isn’t even over! This means if you invested in Bitcoin in January, you have grown your money by 20 times. This level of growth is virtually unheard of in the realm of traditional investing. In digital currencies, however, it’s truly possible to double your money overnight.
As you can see, the rewards are high in investing in cryptocurrency. But this also means that the risks are equally as high. While it’s possible to double your money almost in an instant, you could also lose it just as quickly. Such is the volatile nature of the cryptocurrency market. It’s not uncommon to see a particular coin rise in value by over 200% and then plummet back down all of a sudden. If you miss the ride up, you’ll surely get hurt in the fall.
How to Minimize Risks?
The most important thing to keep in mind is that once you put your money in digital coins, you should accept the risks that come with it. The risks are considerably higher compared to investing in stocks, but the rewards are also higher. As a general rule, it’s recommended to invest in digital coins that have real-world applications. In most cases, these are the coins that rank in the top 10 to 15 in market cap. Bitcoin, for instance, ranks number one, and it has proven to be useful in the real world.
You can think of Bitcoin as digital gold. It is an excellent choice for a long-term store of value, but it’s not what you’d use for day to day transactions. For this reason, a huge chunk of your money should go into a Bitcoin investment strategy and a smaller portion of the other coins you want to invest in.
If you choose, you can try day trading. Since it’s common for many coins to rise in value by 10% or more, it’s easy to see how much money you could make daily. But again, the risks are always there. Never trade more than you could afford to lose. It’s a safer choice to hold on to your coins for the long term and wait until their value increases.