Is it too late to invest in Bitcoin? In this piece, we’ll equip you with everything you need to know to make that decision. We will take a closer look at Bitcoin as an investment opportunity, its pros, cons, and some essential tips that you could use to get started on your new investment journey.
What is Bitcoin
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution”
as described 2008 by its anonymous creator(s), Satoshi Nakamoto.
At its core, Bitcoin is an online version of cash. Often described as a cryptocurrency or crypto, Bitcoin operates independently of oversight from any central authority, the bank or even the government. Instead, Bitcoin relies on the blockchain, its underlying technology that leverages the power of peer-to-peer networks to provide a distributed and shared ledger that publicly records all transactions.
Since there’s no central source of trust, participants validate the transactions in a “trustless” way. That is, they don’t need to trust the participants for them to trust the output.
Other important points about Bitcoin:
- New Bitcoin is created through a reward system that involves a competitive process called “mining”. It involves validating transactions on the blockchain.
- There will only ever be 21million Bitcoin.
- You don’t have to buy an entire Bitcoin. You can buy a fraction depending on your needs.
- The first purchase by Bitcoin was 12 years ago for two large Papa John’s pizzas. The transaction of 10,000 BTC was worth $41 at that time.
- Many large companies, such as Microsoft, Wikipedia, and AT&T, to name a few, are accepting or have previously accepted Bitcoin as a form of payment.
- Bitcoin is held in digital wallets.
- Bitcoin’s price hit an all-time high in 2021 at $68,990 and currently sits at $29,800 at the time of writing.
Investing in Bitcoin – what to keep in mind?
One certainty is that investing in Bitcoin and crypto is not a ‘get rich quick scheme’ contrary to what you may see on social media or anywhere else. Cryptocurrencies are particularly risky compared to traditional investments; therefore, it would not be wise to jump straight in unprepared. So here are some things you should consider before investing in Bitcoin:
- Bitcoin and cryptocurrencies, in general, are highly volatile; hence you should never invest more than you can afford to lose.
- There are two primary buying methodologies in this sector, and it's important to distinguish them. There is trading whereby traders aim to achieve short-term success. At the same time, investors buy and hold for years, decades, or even longer. Treating Bitcoin as a long-term investment may give you the best chance of making money.
- You could lose all your money with Bitcoin. This could either be due to internal or external reasons. The former could occur if you use your own wallet and lose your private keys. The latter may involve circumstances out of your control, such as hacks.
- Forgetting your password could be grave in crypto. As of last year, $140 billion in Bitcoin has been 'lost' due to forgotten passwords.
- Like any other investment, don't put all your eggs in one basket. Spread your investment to reduce risk.
Is Bitcoin the better investment?
There’s never a straight ‘yes’ or ‘no’ answer to this question. Of course, there are some risks with investing in Bitcoin, but there are also massive benefits.
Therefore, the way forward is to find out if Bitcoin will be a good investment on a personal level. Of course, this will vary from person to person depending on the risk tolerance, financial goals, and investment strategies, to name a few.
The fact remains that Bitcoin is a highly volatile investment whose value solely depends on demand. Making a substantial profit, especially in the short term, could therefore depend on your timing – a difficult strategy to implement. That said, there’s still potential for profit.
Bitcoin vs. other investments
Investing in Bitcoin in 3 steps
Making a Bitcoin investment is almost as simple as making a purchase online. Follow these three simple steps to get started today.
Choose a cryptocurrency exchange
An exchange is where you’ll buy and sell your cryptocurrency, in this case, Bitcoin. There are so many options to choose from so it may be confusing. For a secure and trusted entry into the world of digital assets, you can get started right here at SMART VALOR. After you are done with the sign up process you are halfway there.
Decide on a crypto wallet
Wallets store private keys, which in simple terms can be regarded as your password that’ll give you access to your Bitcoin. A public key, on the other hand, is like an email address that other people can use to send you Bitcoin. Wallets also allow you to send and receive cryptocurrency. Most exchanges will have a free in-built wallet, but other wallets are available from third-party providers. Registering at SMART VALOR will provide you with your own wallet on our platform for storing Bitcoin.
Make your first purchase
Investing in Bitcoin is very easy on our digital asset exchange. Your first Bitcoin purchase is just a few clicks away. As soon as your account is verified, you can use all the features on our platform. You can buy with credit card or bank transfer and start trading and investing immediately.
Pros and cons of Bitcoin investing
Some investing tips
In any investment, it’s wise to start small. In fact, it may be a better idea to regularly invest in small amounts of Bitcoin rather than investing in a large lump sum at one go. This can be a way of mitigating risk. It’ll help you develop the habit and discipline of only investing what you can afford to lose.
Understand your risk tolerance
How much variability in your investment returns are you willing to withstand? Risk tolerance is an important component, especially in Bitcoin and other cryptocurrencies. You need to know and understand your ability to stomach large swings in the value of your Bitcoin investment. Taking too much risk than you can handle may cause you to sell when you’re not supposed to hence incur massive losses.
Diversify your portfolio
As much as we focus on investing in Bitcoin today, it should not be your only asset, but a part of your portfolio. Remember that diversifying your portfolio can protect you from a big financial hit if one of your investments doesn’t perform. So depending on your personal risk attitude, you could decide that high-risk asset classes like cryptocurrencies should make up a certain proportion of your portfolio. And when it comes to diversifying your crypto portfolio, you might consider giving a larger share to Bitcoin, the longest-proven and most trusted of all cryptocurrencies.
Buy and ‘hodl’ Bitcoin
Hodl is an investment philosophy and intentional misspelling of the word ‘Hold’, commonly referred to as ‘Hold On for Dear Life.’ Basically, you restrict yourself from selling Bitcoin even in extreme volatility but instead focus on its long-term value with the belief that it’ll increase.
Bitcoin’s price has soared since being introduced a couple of years back. However, it’s good to understand precisely what you are investing in instead of rushing in due to hype. That said, since Bitcoin experiences large swings in price, there is a potential for huge returns but massive losses as well. Therefore, it is important to be clear about your risk tolerance and financial needs. And of course, there is the basic rule of diversifying your portfolio.
Make the SMART choice today, learn more about the mindset of investors and start your Bitcoin journey.