It’s safe to assume that most us will have heard of Bitcoin, but not of all us will fully understand it. Depending on the platform you visit, you may find that the information on offer is cumbersome and confusing. While there can be a learning curve with Bitcoin, the basics are easy to follow. For the most part, Bitcoin operates as a currency, but is made from bits of data as opposed to metal or paper.
The difference between Bitcoin and fiat money is that Bitcoin is not controlled by a central bank. This is where the value can come in, as producing more fiat money often leads to inflation. Bitcoin sidesteps this by there only being a certain amount available.
While Bitcoin can be very profitable, like any investment, it can be a risk, especially if we don’t have a strategy in place.
The Difference Between Investing and Trading
If you’re new to Bitcoin and the way it yields profit, then it can be easy to become confused as to whether we should be investing in Bitcoin, or merely trading.
Those how trade in Bitcoin often only trade with short-term positions. Although these positions can last a few months, it’s more often the case that these positions only trade for a couple of hours. This can be attributed to the price-sensitive approach traders take, ensuring that positions are abandoned as soon as it’s recognised that no profit will be made.
Investing in Bitcoin is a much different undertaking, as it is more long-term and will often be employed with a multiple of goals.
In either event you will effectively be investing but knowing the different routes you’re able to take means less confusion later on.
Making an Investment
As Bitcoin is not a fiat currency, it’s not susceptible to the same risks as that of conventional currency. This can give new investors the impression that investing in the cryptocurrency is a sure-fire win. While a profit can be made, it still needs to be handled in the right way.
The purchasing of Bitcoin can be compared to the buying of shares, in that you’re buying a commodity in the hope of returning a profit. The only difference is that you will need to be studying the market closely to ensure that you’re yielding the best returns.
This is often done via the use of a Bitcoin ticker which shows a real time analysis of Bitcoin allowing you to make a more well-informed decision as to whether you should keep hold of your Bitcoin or sell for a profit.
Use a Reputable Platform
Just as we wouldn’t visit our bank using a link sent in an email, the same should apply to your Bitcoin account. There are many exchanges available to investors when it comes to the selling of Bitcoin, so you should ensure that you’re only using a platform that is of good repute. For more information check out this guide to Top Cryptocurrency Exchanges 2018
Ensure You Transfer Funds to Your Digital Wallet as Soon as Possible
The subject of finding a reputable exchange has already been touched upon, but investing in Bitcoin is all about damage limitation, so we shouldn’t automatically assume that nothing will happen to the exchange in the future.
We’ve seen even the biggest of companies fall foul to those with sinister motives, so we need to ensure that we’re covering all our bases when it comes to keeping our Bitcoin safe. Of course, there will be times when our Bitcoin has to be held within an exchange but transferring them to a secure online wallet will ensure that we don’t fall foul of criminals.
Large Investments Means More Security
While there will be some who will be just be testing the water in relation to buying and selling Bitcoin, others may be more experienced and looking to make larger investment and yield greater returns. While there is nothing wrong with this, those looking to take the next step need to ensure that their security measures are fit for purpose.
One of the best ways to secure large amounts of cryptocurrency is via the use of cold storage, which in layman’s terms means storing Bitcoin on a physical device. As the device is only connected to the Internet when in use, it provides investors with an additional layer of security, a necessity for those dealing with large volumes of Bitcoin.
If you’ve had some good results when investing in Bitcoin, it makes sense that we continue this trend. While there is no harm in reinvesting, other than the initial risk, we shouldn’t invest in Bitcoin solely, especially if we’re looking to secure our financial future. Smart investors will look at a series of commodities and share to invest to help them diversify their portfolio. This is simply done to minimise risk should a certain investment fail to provide any profit.
There are plenty of ways to make money when investing in Bitcoin, but you shouldn’t assume it will make you a millionaire overnight. There can be a lot of information to take in before really understanding the market and how it fluctuates, so investing too much too soon could mean that you’re unlikely to see any benefits in relation to the initial investment.
However, investing with a clear strategy and strict budget will means that you’re investing in Bitcoin in the right way, without placing yourself in financial hardship.