Should You Buy Bitcoin? 5 Tips For Success
Are you craving some excitement in your investment portfolio? Although profits can never be guaranteed in any investment, if you are thinking of investing in Bitcoin, thrills and spills are definitely to be expected.
As with any high-risk-high-reward venture, the risk of buying Bitcoin is offset by the potential to make large profits.
If you are thinking of starting out with Bitcoin investments, it can be hard to know how to begin. Below, we give 5 tips for anyone asking the best way to buy bitcoin.
International trade has changed, and so have the mechanisms that facilitate it. We have moved towards a digital economy, and in doing so have created a need for a secure, global and digital currency. The most popular solution to date is cryptocurrency, of which bitcoin is the leading asset.
Cryptocurrency gets its name from using the method of cryptography to validate payments. This is a method of securing data by jumbling text and numbers so that it can only be decoded by the rightful owner.
While this process has existed for many years, it has only been popularised in the recent digital age. Only in the past decade or so, payments via cryptocurrency has become viable for domestic or cross-border transactions.
Cryptocurrencies use a highly secure hash function that encrypts wallets and payments. Data is turned into a string of passwords so that it is only possible for someone with the correct key to unlock.
1. STORE YOUR BITCOIN IN WALLETS
A cryptocurrency wallet is a place that allows you to move and store your digital currency. Wallets can hold many different cryptocurrencies, including Bitcoin. Each wallet has a number of unique wallet addresses, which you can use to send and receive payments.
Wallets are important because they offer a secure way to store your Bitcoin. With so many cybercriminals setting their sights on Bitcoin, it makes sense to use the most secure method of storing them. Once you buy any cryptocurrency, move it back to your wallet as keeping it in exchanges means that you are trusting your funds with the security of the exchange you use.
There are at least two types of cryptocurrency wallets. Online wallets are known as hot wallets. These are convenient but less secure. For increased security, you should store your Bitcoin in offline wallets, known as cold wallets.
2. ACCEPT THE VOLATILITY
Bitcoin and cryptocurrencies are known for their volatility. They can fluctuate massively and, as an investor, you must be ready for this mentally. Many traditional investors avoid Bitcoin for this very reason, mainly because it is so hard to predict.
To make this profitable, it pays to diversify across other cryptocurrencies and investment assets. Add it to a strict management strategy and have a long term goal, and you should turn it into a profitable venture.
With this volatility and inability to predict markets comes the notion that inevitably, you will miss out on a lot of trades. The fear of missing out (FOMO) is one that new investors must learn to control.
One mistake to make is to invest in Bitcoin ‘because everyone else is doing it’. A good investor does not blindly follow the herd and should form their own opinion as to whether the timing is right to invest. One way to reduce the impact of timing is to adopt a technique called ‘Dollar Cost Averaging’ (DCA), which simply means set up recurring purchases of Bitcoin (e.g. $100 every week). This is a disciplined investment approach that allows investors to, in the long run, ‘average out’ their costs and smoothen their return on investment.
3. SET PROFIT TARGETS
With this unpredictable nature comes the need for a plan. That plan needs to include clear profit and loss targets, so you know when to buy and sell. The most extreme daily movements in Bitcoin can be around 30%.
Do not fall in love with your investments and be ready to let go. Exit when you are in profit and leave on a high. A stop-loss will make it easier to minimise losses.
4. KNOW WHERE TO BUY BITCOIN
Once you have set up a wallet, you can start to buy Bitcoin and other cryptocurrencies from an exchange. This is the best way to buy Bitcoin, but you need to do your research. Some can be quite limited in their functions while others may be less trustworthy or not as secure.
You will need to provide some sort of identification when setting up accounts, usually a photo ID as well as completing a ‘liveness detection’ from a webcam or mobile phone. This follows Know-Your-Customer regulations in most developed countries. If a site does not ask for these, then it is typically a warning sign that they are not regulated and provides limited security for your funds.
Most exchanges allow a variety of payment options. In Australia, the easiest and most popular payment method is via PayID. At Coinstash.com.au, there are many articles written on how to make a PayID deposits. These deposits are typically instant which is a big bonus for potential investors.
5. START SMALL
Digital currency is still in its adolescence and is just developing. As such, you need to proceed and invest with extreme caution, even if you think you have read every article and book on the subject and feel confident.
Risk is part of every investment, but it can become even greater when investing in crypto.
Start with a small amount and decide on an entry price. Wait for prices to come down before investing, and do not go chasing investments. Once prices get to this level, invest in small bits at a time, and do not put all your money in at once.
Finally, like any investment, you must only invest what you are willing to lose. Do not go above your financial means, and keep watching the markets every day to see what has risen and what is falling.
START WATCHING THE MARKETS
In summary, set up a wallet, get on an exchange, set an entry price, and watch the markets before you buy Bitcoin. Alternatively, simplify the whole process by joining us and signing up at Coinstash. We can provide all the help you need 7 days a week to really assist you with investing in cryptocurrencies!