A Beginner’s Guide To Bitcoin Investment
Bitcoin could make waves again soon, especially if the stock market continues to take a hit. So, here’s a beginners guide to investing in it.
1) Start By Thoroughly Mastering Secure Storage
As in all complex pursuits, Bitcoin investing demands that you learn how to walk before you consider running. You’ll want to start by learning the basic trading mechanics of the cryptocurrency. From there, you’ll be ready to segue into researching the various Bitcoin exchanges currently in use. Your goal here should be to find a platform that is both easy to use and secure.
Coinbase is an excellent choice for novice investors. It has a clean, intuitive interface. It also trades in a lot of other appealing cryptocurrencies, including Ethereum, Litecoin, and Bitcoin Cash.
Asset protection is a key part of any wise investment strategy. Do not go deep into Bitcoin investing until you can assure yourself that you have strong, trustworthy methods to defend your digital assets from scams and cyber attacks.
Fortunately, most of the better Bitcoin wallets in use today are built with security as their top priority. Ledger Nano S has earned a world-leading reputation for security. TREZOR is also a popular choice. Its greatest advantage is generating private wallet keys offline, which adds another layer of protection to your assets.
2) Watch The Market Cap
Inexperienced crypto-traders tend to over-apply investment wisdom from other assets. This can lead them to pay too much attention to coin price when making buying and selling decisions. The current price of a cryptocurrency always needs to be balanced against the supply in circulation. Before you buy a cryptocurrency, evaluate your purchase as a percentage of total market cap, not just as a standalone asset. Later demand for a cryptocurrency is going to be dictated by how close it is to its market cap. It’s one of the best UK alternative investments.
3) The Diminishing Returns Of Bitcoin Mining
Increasing overall interest in the cryptocurrency market has greatly expanded Bitcoin mining as an industry. When Bitcoin was still in its infancy, the industry was small enough that a single home computer dedicated to mining could generate significant profits. This is no longer the case in 2018. To mine profitably today, whole data centers need to be dedicated to the process. A specialized mining center is a sizable industrial site stuffed to the gills with purpose-built mining hardware. Setting up such an operation can easily cost millions of dollars. For the small-scale investor, focusing on Bitcoins that are already in circulation is far more realistic.
4) Consider The Value Of Diversification
Investors who fall under the spell of Bitcoin risk becoming infatuated with a single cryptocurrency. Never forget that there are literally thousands of other cryptocurrencies out there! Investing in others can be a useful way to offset your risk. As with traditional stocks, you need a plan for managing the amount of risk you expose yourself to when you invest in cryptocurrencies. Spreading your money around is a good idea. Make some investments in the smaller, younger altcoins that are currently matching or even exceeding the performance of Bitcoin.
5) Trade With Clear Profit Goals
The novelty of the Bitcoin market sometimes makes it less clear than it could be. Identifying the right times to buy and sell can be tricky. Bitcoin value is probably going to be more volatile and less predictable than that of any sort of investment asset you’ve traded in the past. This makes it especially important to enter short-term Bitcoin trades with very firm profit and loss targets.
The quickest route to failure when you start trading Bitcoin is to fall in love with your investment and lose the ability to detect a bad position. You can keep your losses to a minimum by setting stop losses and exit points in advance. As a general rule, you should be prepared for daily value movements of up to three percent when you make Bitcoin trades.