Learn Bitcoin Investment Ways, Tips, And Risk Involved

Learn Bitcoin Investment Ways, Tips, And Risk Involved

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The post Learn Bitcoin Investment Ways, Tips, And Risk Involved appeared first on Coinpedia – Fintech & Cryptocurreny News Media| Crypto Guide

Bitcoin itself is a cryptographic monetary unit. Not everyone understands what it actually is, especially since many refer to it in different forms such as an electronic coin or a payment instrument.

We are here to help you get a better understanding of the nature of this coint and the effectiveness of its investment. 

Most bitcoin owners don’t have a physical coin in their possession though it does exist.

The particularity of this coin, however, is that you can use it only once because once you “cash it in”, your unique code depicted on the coin no longer works.

Bitcoin has been around since 2009 and unlike standard money which are tied to physical banks and governmental agencies, this one functions independently.

Because this monetary unit has been around for over 10 years now, we can be certain that this is not another internet scam, but a separate branch of the financial sphere and this branch is evolving quickly.

Initially worth less than 1 cent, the price of bitcoin has gone up tens of thousands of dollars. This means that those who invested in it years ago can now probably be millionaires if they haven’t forgotten their account password that is.

This spike in value is what makes investing in bitcoin so attractive. There are two main ways to get such a coin though – to mine it or to buy it.

The latter is easier as mining can take a long time and requires very sophisticated hardware that an average person does not have just sitting around at home. 

Is it worth investing in bitcoin?

Bitcoin is not a pyramid scheme. Because Bitcoin will grow and you will be able to make your money even more. Yes, at the beginning of the journey there will not be such frenzied growth, but then you will be surprised by the profit.

Bitcoin is a most well-known cryptocurrency, and at the same time, it is one of the first cryptocurrencies for which a certain release limit was initially set.

Such a restriction on the supply of bitcoins ensures the demand for a monetary unit, which as a result increases in price.

Benefits of Bitcoin Investment

From a technical point of view, bitcoin is a kind of digital algorithm. To create it, powerful hardware is required. In the economic sense, bitcoin is a currency limited in volume.

Transactions with it always go unnoticed and also disappear without a trace. This type of money does not have a central bank.

The advantage of investing in bitcoin include listed below.

  • Low commissions. Bitcoin transfer fees are low compared to other cryptocurrencies which makes it king of the current cryptocurrency market.
  • High liquidity. It is fairly easy to trade bitcoins into cash any time. This makes bitcoin an attractive investment because you are able to withdraw funds nearly any time you need them.
  • Low inflation risk. The value of this currently only seems to rise over time and while there may be drops now and then, they are not as significant as its price increase.
  • Fast transfers. Bank transfers can take days (3-4 business days on average) while with bitcoin, transferring funds can be done fairly quickly in comparison which makes investing in cryptocurrencies advantageous. Sure, there are quicker options out there, like PayPal which transfers within seconds but it is a financial technology company which has also significantly changed the way we process money online in the modern world. Compared to your standard banking methods, bitcoin transfers are still a good option even if they take a whole hour.
  • Partial anonymity. You can spend all the money you want, however you want it and no government will come after you for these transactions as they are anonymous or rather pseudonymous as they are made under a name that you create which can be different from your actual name. You don’t really have to enter any significant personal details when registering. However, it’s vital to remember that while your persona may be hidden, the actions of your account are not. They are labeled under a list of random symbols yet they can be easily traced back to one particular account by nearly anyone. 
  • Easy start. A Bitcoin wallet is very easy to create, there is no need to even enter any personal information for this.
  • Secure. The reliability of the system is superior to any other system, mostly because bitcoin cannot be forged. As for personal security, it is recommended that every user investing in bitcoin install a class-a security solution to protect against Internet threats before accessing financial information and conducting transactions.
  • Tax-free. Taxes are not levied on transactions to start investing in bitcoin, because the cryptocurrency is not official.

The price of Bitcoin

Another significant benefit of such an investment is the price of bitcoin. At the end of August 2017, the established market value of bitcoin was almost $5,000 per bitcoin. For comparison, in 2010, the price was only $0.08.

While it keeps rising over the years, there have been significant drops that you should be aware of.

Two weeks after the peak of $5k, the bitcoin price dropped to about $3,000. Those who invested real money in bitcoin in mid-August and did not exit the market before the fall lost about 40% of their investments.

However, if they stayed, they got to enjoy the continued price increase with its worth at $50k in 2021.

Due to its status as the most popular digital currency in the world, bitcoin itself has become a standard, as well as well-known currency exchanges on Wall Street, in London, and Japan.

At the same time, the bitcoin exchange rate drops when problems arise in the financial markets. 

Potential risks of Bitcoin investments

Let’s consider the disadvantages of cryptocurrency. Each of the mentioned advantages easily turns into disadvantages. 

  • Partial legality. For example, the anonymity of operations gives complete freedom to conduct illegal operations, and this is what causes the problem with legitimizing the system. Due to the lack of legality, the system is not widely used.
  • Unpredictability. Bitcoin is subject to strong fluctuations in the exchange rate, since the price of the cryptocurrency directly depends on its rate. In addition, in force majeure situations, there are no guarantees in the system. When investing in cryptocurrencies you need to consider how easy it is to affect the price of this currency through the media and fake or even true news. 
  • Attempts to ban cryptocurrencies. It is prohibited in many states. In some countries, the State only partially recognizes it. For example, China has completely banned it. Because bitcoin appeared quite recently and became the first cryptocurrency, countries are not ready to trust their money to this system; they believe that this currency is not stable, and it is unclear what it may eventually lead to. 
  • High volatility. The Bitcoin exchange rate can rise or fall sharply. The reason is the news affecting investing in bitcoin, as well as the reaction of Internet users to them. Therefore, investment risks remain.
  • Insufficient prevalence. Not many users know about Bitcoin and its main features. Usually, it is known by those who work in the IT field, as well as economists and brokers.
  • Possible hacks. While the encryption system is getting better and better every year, there are still risks that someone can hack it like any computer nowadays. For example, since the transactions of any given account can be tracked by nearly anyone, there is a way to get identified and linked with your online account. As soon as someone knows what you spend your bitcoins on at a particular time, they can quickly trace it back to the accounts which had such transactions within the same time frame. Just like that – your anonymity is cracked.

Most of the disadvantages can be easily solved, however. All it takes is a strong password on your end, its careful storage and patience for the system.

While there are fluctuations going on rather frequently, the overall tendency is definitely positive for investing.

Most of the problem is either insignificant, or can be solved by simple methods, or should soon disappear by itself with the development of technology.

How to start investing in Bitcoin in 2021

You should know where to start investing in bitcoin with something small and grow to something big. There are a few simple steps to get started.

A user creates a wallet, for operations gets a bitcoin address. There may be more than one address, as it is used for transactions. Multiple Bitcoin addresses can be used to increase anonymity.

  • Create an online wallet. A distinctive feature is the ability to use it on mobile devices.
  • Make an offline wallet. A program for storing BTC investments on a PC is installed. If you delete or lose access, you will not be able to use Bitcoins, the wallet will not be restored.
  • Be careful and trust only verified wallets. There are a lot of scammers. So, the reviews on the bitcoin farm are not too good, users recommend immediately deleting it, transferring money to others. Almost any bitcoin forum contains such reviews.
  • Cryptocurrency is not legally recognized, and the Central Bank does not define it as a means of payment. But any token or coin can be exchanged for classic fiat money: dollars, rubles, euros. At the same time, blockchain technology itself can greatly change the economy as a whole. For example, in modern conditions, when paying in a store with a card, four links participate in the economic chain: the sender of the payment, the issuing bank of the card, the payment system, and the recipient of the payment. The use of cryptocurrencies on the blockchain, the expert believes, will help reduce this chain to three elements.
  • When paying with cryptocurrency, a new block is formed in the blockchain system. It is distributed between all nodes of the network that verify its validity. A valid block is added to the main network, and after that the translation already takes place. Thus, there are three entities in this chain: a seller, a buyer, and an abstract entity – the main network in which valid blocks are stored. It is impossible to cheat in such a system, and due to this, it is assumed that the exchange will take place much faster and easier. However, the bandwidth does not allow this to be provided, but in the future, it can be developed.

To start investing in bitcoin you mostly need to get some bitcoin for yourself. There are three main ways to acquire or invest in them:

  • direct purchase, 
  • indirect investment,
  • mining, 
  • hosting. 

Direct purchase of Bitcoin

The initial method to purchase cryptocurrencies means to purchase them on a special market.

Many platforms sell bitcoins, but it is important to choose one with authority, fame, and stability to guarantee security of your investment in bitcoin.

Provided that your purpose is to start investing in cryptocurrency and often use it for numerous transactions, then it is preferable to keep the purchased tokens on the platform, this makes it much easier to join them, the expert claims.

These bitcoin exchanges now know even offline representatives, but it is best to stick with a reputable one regardless of an offline presence in your city. 

This is the simplest method of getting bitcoin, but it is also the least profitable and most expensive. The price of bitcoin has gone through the roof so direct purchases are expensive and tie you closely to the current price. 

Mining Bitcoin

Instead of buying already existing bitcoins, you can try creating your own through mining

To mine effectively, however, you need to invest a large sum of money into the technology used for this process.

Another factor is guaranteeing a stable and constant connection to electricity and while this may seem basic in today’s world, you’d be surprised to know just how much fluctuation in the volts there are in your sockets.

Keeping electricity stable may prove to be rather difficult. 

Indirect investments

If an investor does do not want to cooperate with crypto markets and take on the responsibility for saving cryptocurrencies on cold wallets, then he has the opportunity to invest in tools linked with electronic money, explained Nikita Soshnikov, director of the Alfacash cryptocurrency exchange service.

Among the advantages of this approach, he attributed a lower risk of asset devaluation and reduction of instability, but this also reduces promising earnings.

Using hosting services

This is a completely new round of investing in Bitcoin, because of this direction, is actively developing and super profitable.

You do not need to spend money on your equipment, you do not need a territory and pay for electricity.

Such companies base their facilities in economically advantageous regions and use professional equipment, which significantly reduces the cost of cryptocurrencies.

In short, this is an affordable, reliable and promising option not just to buy a crypt once and forget about it, but to constantly and daily increase your wallet.

Most crypto hosting services guarantee high operational speed, profitable pricing to guarantee high returns and full privacy of your actions.

Introducing themselves as a reliable bitcoin mining partner, they help users scale quickly and easily in a proper environment with cost-effective usage. 

The use of hosting services for mining bitcoin is developing quickly nowadays but it is still relatively new which makes it a great option for investors who want to diversify their portfolios.

It is the most hassle-free choice with a high return of investment. 

The future of Bitcoin in the era of cryptocurrency

Nobody can really predict the future of Bitcoin or anything for that matter and one can look at the past for answer about investing in bitcoin. Bitcoin (BTC) is, first of all, the most popular cryptocurrency in the world.

Second of all, over the years it has taken up from 30% to 50% of the whole cryptocurrency market. Therefore, you can see just how high in demand it has been and this remains so to this day. 

But is it worth investing in bitcoin? We think so. Cryptocurrency is developing rapidly and apart from new coins; this monetary system is becoming more and more integrated into our accustomed lives.

More and more services are not accepting BTC as a payment option and more and more governments are bound to legalize it as well.

Moreover, if you look at those who invested one, two or three years ago, you will see that their profits skyrocketed. The longer they wanted to trade in the inside of their electronic wallet, the more they got. 

There are more than just a few reasons to start investing in bitcoin. It is an effective passive income that gives you anonymity and privacy.

You decide what to do with your savings and can easily cash them any time you need. Cryptocurrencies respond to the key demands of the modern generation. These include:

  • lack of regulation;
  • not subject to governments;
  • controlled inflation (in the case of bitcoin);
  • possible anonymity.

The only caveat is that you need to carefully and deliberately choose where and how to start putting that extra cash into this sphere.

We believe that the option of using hosting services to mine bitcoin currently looks the most balanced in terms of investments, payback, and security.

All you need to do is choose a hosting provider. With it, you save not only money but also time.

No longer do you need to research, choose and buy proper equipment. You do not need to worry about any instability of the electric sockets.

You can keep the place where you live clutter free and in line with the current minimalist tendencies while still profiting from the latest cryptocurrency fluctuations.

Hosting providers take full responsibility for providing a stable network, all power you need and even cooling opportunities when necessary. 

Unlike mining BTC yourself, you do not need to invest so much of your time into becoming a professional of the IT industry.

Just imagine how stressed you’d be if any power outages were to hit. A stress-free mining experience is another benefit of going with hosting providers. 

Unlike direct purchases of BTC, with hosting providers you are actually creating your own coins instead of paying someone else to do it.

Talk about being the creator of your own destiny. It’s like taking care of your garden without actually doing any of the dirty work but still ending up with the best vegetables around. 

While this may seem very similar to indirect investments, it is surely a lot more profitable.

The percentage of profits that you may get from indirect investment is usually very small while you get to decide how to spend all the profits in mining through a hosting provider.

The final choice is up to you but our point of view is that using hosting services for mining for BTC is the simplest, stress-free and high-return option of the ones available for investing in bitcoin. 

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