How to Invest in Bitcoin – 2018’s Definitive BTC Investing Guide
- Bitcoin outperformed the U.S. stock market in 2017
- Because of the (assumed) future growth potential of cryptocurrency, more people are looking at how to invest in Bitcoin than at any point previously
- 80% of people new to the cryptocurrency market make significant loses. This being the case, it is imperative to implement the right kind of Bitcoin investment strategy
BTC Investing – Is it as Simple as it Sounds?
The mainstream media loves to dismiss Bitcoin and cryptocurrency as mere ‘air money.’ Regardless, though of what the truth might hold for Bitcoin, the facts on the ground are simple.
In August 2010, Bitcoin was priced at $0,07. Just eight years later in 2018, Bitcoin is priced at over $6,000. Representing a better investment than Apple Inc. stock over the same period, it is, therefore, easy to understand why more people than ever are looking at how to invest in Bitcoin.
Bitcoin Investing Basics
With the Bitcoin price looking unstoppable from a long-term perspective, early 2018 saw an explosion of new investors using credit cards to fund coin purchases.
Sadly, the Bitcoin price has pulled back by $14,000 since January. This being the case, it is imperative for investors to understand that BTC investing is far from easy.
Buying Bitcoin as Prices are Rising is Always Risky
In the long-term, Bitcoin follows what is called a long-term parabolic growth pattern.
- Bitcoin (according to historical market data) experiences rapid gains followed by incremental shedding of value
- In the long-term, gains are significant, however, in the short-term, investors entering the market at the wrong moment can stand to lose everything
- Losses are often exasperated by the fact that new investors often panic sell digital assets, as soon as prices start pulling back
Because of the inherent volatility of the cryptocurrency market, the most successful long-term BTC investing strategy sees many investors ’HODL’ coins. – This meaning that rather than trade assets, investors buy currencies like Bitcoin and hold for a fixed amount of time.
How to Know How Long to HODL
According to a November 2017 Lend EDU survey, many investors adopting a HODL Bitcoin investment strategy, don’t plan to sell until the Bitcoin price reaches $196,165,79. This being the case, new to market investors would (arguably) be wise to buy Bitcoin low at $6,000 – $10,000, with a view to only selling if and when prices reach $180,000,00.
If Lend EDU’s survey data is accurate, it would be wise for people using a HODL Bitcoin investment strategy, to sell coins prior to prices reaching $196,000. This is because when long-term investors start selling en masse (like many investors did when Bitcoin reached $20,000), selling itself rapidly drives down coin market prices.
Alternative BTC Investing Strategies
One problem with HODL as an investment strategy rests with the fact that new to market investors often have limited investment capital available.
For many people, buying Bitcoin at $6,000 isn’t feasible. It is still possible, though, to enter the cryptocurrency market on a budget and incrementally build a significant cryptocurrency portfolio.
FOMO Based Bitcoin Investing
Fear of Missing Out (FOMO) refers to the psychological phenomenon which sees thousands of new to market investors rush to buy Bitcoin just as prices are peaking.
- FOMO investing is higher risk than a HODL Bitcoin investment strategy
- A FOMO investment strategy requires investors to anticipate Bitcoin price rallies, buy Bitcoin early and sell just as other new investors are rushing to enter the market as prices are peaking
- In November and December 2017, buying Bitcoin at $5,000 and selling at $20,000, netted many smart FOMO investors upwards of $15,000
Why FOMO is High Risk
FOMO is a high-risk Bitcoin investment strategy for one simple reason. Namely, that it requires investors to be able to predict significant Bitcoin booms and busts in advance.
How to Mitigate Risk Associated with FOMO Investing
The easiest way to mitigate FOMO-based trading risks is always to sell Bitcoin before the cryptocurrency retests previous all-time highs.
- Historically, the Bitcoin price does always retest former all-time highs at some point
- While prices often rise higher, planning to sell at a fixed price like $20,000, guarantees that investors will exit the market in profit
- Historical data shows that Bitcoin often pulls back by up to 50% after a sudden surge in value
- Smart FOMO investors can wait for a price pull-back and reenter the market using profits made by selling coins before prices correct.
Bitcoin Investment Strategy Scams to Avoid
It goes without saying that there is no 100% foolproof Bitcoin investment strategy. Cryptocurrency exchange hacks, government regulation, and a host of other variables inject uncertainty into the cryptocurrency markets on a daily basis. There are, however, some BTC investing strategies which should be avoided at all costs.
- As a rule, any scheme which promises to pay out steady returns after an initial one-time Bitcoin investment is a scam
- Despite assurances that investors can earn Bitcoin on a daily basis by renting Bitcoin mining equipment online, contract-based mining is rarely (if ever) profitable
- Purchasing Bitcoin mining equipment is not a scam in itself. However, high-end ASIC mining rigs can cost up to $15,000, perform poorly in the long-term, and consume vast amounts of electricity
How to Stay Safe When Investing in Bitcoin
Bitcoin has performed phenomenally well over the past decade. It is a simple matter of fact, however, that Bitcoin could correct all the way back to just $1 in value at some point. Because of this, it is imperative that investors never invest more than they can afford to lose. Meanwhile, no investor should enter the market without first deciding on a trading or investment strategy and committing fully to this strategy no matter what.