Investing in cryptocurrencies can be daunting, yet an irresistible choice for many. And Bitcoin has undoubtedly been the most popular of all choices. For some who have been investing for a while and have become millionaires, know all the nitty-gritty of it with experience being the best teacher. For those who are new to it, it is wise to do some research before investing. Reading everything and almost anything about bitcoins will help you make important decisions while investing.
In this article, we will highlight some tips to help you make informed and safe decisions regarding your investments in Bitcoin. These tips are from experienced experts and investors in the cryptocurrency industry, so brace yourselves and read on.
1) Research and repeat
This is the first and the wisest step one can take before investing in Bitcoin. Unless you are well aware of the tradeoffs, you will never be able to gain its true benefits. Bitcoin provides an unusual opportunity for money-making, but it requires the same level of caution.
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According to Jacob Elisoff, a crypto fund manager,
If you have any technical bent whatsoever, take 10 minutes to leaf through the original 2008 Satoshi white paper.
Lucas Geiger, the CEO and founder of Wireline, said something similar, that investors must have a robust grip on blockchain and its distributed ledger technology. He added,
If you don’t have a high-level understanding of how blockchain stores secure data (such as coins), then you are investing in the equivalent of tulip bulbs.
2) Take Precautions at every step
With investments, come the real and probably the toughest risks. Everyone owning a Bitcoin must understand that digital assets are still in a phase of development and slow adoption as opposed to securities, bonds, and stock markets. And hence there a difference in their investment patterns too.
To make sure you avoid all glitches, begin with smaller amounts rather than investing the lump sum of your savings. Don’t be fooled by the fluctuating Bitcoin prices. Find your entry price and abide by it. And usually, Bitcoin is a safe bet with pricing and is almost always at par with the projections. It is the timing that can alter the course so, forbear till the right prices of Bitcoin are attained. Even after your bitcoin reaches a tangible price, do not hurry into buying in bulk. Wait for a while after your first small investment and then increase the sum.
3) Diversify your portfolio
Though Bitcoin is known for good gains, media has a tendency to build exaggerated stories around the sums. Therefore, while creating a portfolio of investment, refrain from putting all your money in one currency. You could consider investing in altcoins and other investment options like stocks and bonds. The gist is to stabilize the portfolio against fluctuations. So if one asset was to decline, another could make up with considerable gains.
Typically, if one currency declines by 10%, then another gain by a comparable amount. Oliver Isaacs, a tech entrepreneur, emphasized
Hedge Against Volatility and don’t put all your eggs in one basket. Much like investing in the stock market or FX, you should diversify your funds as a risk management technique.
4) Use Wallets for storing
Wallets are a great place to store your crypto assets as sometimes exchanges might not be the safest place for them. Moreover, there have been drastic consequences of hacking in the history of Bitcoin exchanges.
If you choose an exchange, say Coinbase, make sure you transfer your assets into a reliable wallet online or a mobile wallet. You can even create a hard paper wallet. You can also use cold wallets, which are offline wallets that can be downloaded on your PCs away from the internet.
5) Invest and hold
Volatility is another common phenomenon in Bitcoins, but there are some strategies you can employ to thrive through heavy price fluctuations. One of these strategies is diversification. Another is to buy and hold. This technique has been endorsed by many experts and the legendary investor, Warren Buffett himself. In this strategy, you invest a little sum of money in an asset and forget about it for a while. Resist making short term bets and withdrawing too quickly.
So, while these are a few basic tips that you need to keep in mind while investing in Bitcoins, there is so much more you will uncover once you start investing. So take your time and use your brains when it comes to staking your hard-earned money.