Bitcoin is for all practical purposes, a secure, global, and digital currency for a digital world. Of course, investors are flocking to see what bitcoin is going to do next. Bitcoin is literally at any person’s fingertips who uses the internet. Investing in bitcoin may make a new investor nervous or ever scared to try. Take some time to learn about what bitcoin is and the mechanics of investing in bitcoin.
What is Bitcoin?
Bitcoin is a digital form of currency. You can receive the physical bitcoin and it may be worth hundreds or thousands of dollars. However, most of bitcoin investments are found online.
The bitcoin is valuable because it is scarce. It is scarce because it is at a different level of investment than most people invest with their money. Bitcoin is a currency.
Types of Investing in Bitcoin
Buying a bitcoin and holding onto it with the hope that the value will increase. This is actually called hodling in the bitcoin world. If you plan to do this there are some pointers to keep in mind.
- Do not invest more than you are willing to lose.
- After buying Bitcoins, make sure to move them into your own bitcoin wallet (a wallet is like your own personal folder with your own password and safeguards), and never leave them on an exchange. If we’re talking about substantial amounts, my personal recommendation is to use a hardware wallet. If you can’t afford a hardware wallet, try a paper wallet.
- Buy only bitcoins form reputable exchanges.
- Use Dollar cost averaging (DCA) – This means that you don’t buy all of your Bitcoins in one trade but instead buy a fixed amount every month, week or even day throughout the year. This way you average the price over the course of a whole year.
Trading bitcoins is different than buying and holding bitcoins. When you are trading bitcoins, it means that you are actively trying to buy Bitcoins at a low price and sell them back at a higher price in relatively short time intervals.
This usually takes practice and knowledge to know what you are doing in the bitcoin investment world.
There are two types of mining bitcoins. One is involved if you are able to access your energy for a lesser price than the market value and the other mining involves cloud mining. The advice is to steer free of cloud mining. There are two reasons:
- Cloud mining usually involves a scam.
- Cloud mining are almost always bad investments.
Bitcoin doublers who promise to grow or double your bitcoin are almost always a part of a scam. What these sites usually do is they take money from people around the web with the promise to give them good returns. They will then start off by paying these returns through money they get from new sign ups and create a big buzz around the site.
Usually they will also have some sort of referral program so that users can bring in their friends. This will go on for around 3-4 months until one day the website will just go off line and the money will be gone. No more payments will be made, and a lot of people will get mad because they just realized they have been scammed.
There are a variety of ways to convert your bitcoin back into cash. If you’re looking for physical cash, you can find buyers through Paxful or HodlHodl. If you’re just looking to convert Bitcoin into fiat currency (i.e. USD, EUR, Etc.) there a variety of Bitcoin exchange available. If you have questions, ask your banker or a trusted financial advisor. Education is key to any high-risk investment and bitcoin is no different.
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