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What is Bitcoin Investing?
The term Bitcoin investing is multi-faceted. At its core, Bitcoin investing is merely purchasing and holding Bitcoin like you would stocks, bonds, or other forms of financial investment. Like other investments, the goal is to buy low and sell high. There are different forms of Bitcoin investing where you can invest your Bitcoin to turn a profit on your Bitcoin.
Both types of investments have risks, including the risk of losing everything you’ve invested. Let’s take a more in-depth look at how to invest in Bitcoin. Is Bitcoin worth investing in? Let’s find out.
How to Invest in Bitcoin – Buying Bitcoin
We will first cover the most common way to invest in Bitcoin, and that’s by purchasing the crypto. The most common way to purchase Bitcoin is by buying it on a Bitcoin exchange. There are dozens of exchanges available globally, each allowing you to buy Bitcoin.
These exchanges allow for buying and selling Bitcoin and altcoins, similar to what you’ll see on a stock exchange. You’ll also be able to check the trading volume of various cryptocurrencies. For example, you could see that 21 million Dogecoin has been exchanged for Bitcoin.
Before you purchase any BTC, you should download and install a digital wallet to your computer or mobile device. This allows you to move your crypto off of whatever trading platform you choose. Make sure that you keep your private key secure and make backups of your wallet regularly. You can learn more about how Bitcoin wallets by reading our guide on setting up a Bitcoin wallet.
After setting up your wallet, you can then purchase your BTC on an exchange. You will often use a credit card for your purchase, but you may be able to transfer funds directly from your bank account. Once you’ve set up your payment method, it’s time to buy some BTC.
Most exchanges will allow you to make a Market or a Limit order. A Market order is one where you’ll purchase BTC at the current market rate when the order is executed. For a Limit order, you set the price you’re willing to pay for a digital asset, and the order will execute when that price can be met. Limit orders can be a bit tricky if you’re trying to buy below market value. It may take a while to execute if it executes at all.
Once you’ve executed an order, you will receive your BTC on the exchange after the required number of confirmations has been completed. At this point, you can opt to leave the crypto on the exchange or send it to your wallet.
An alternative method of buying Bitcoin is using Bitcoin ATMs. A Bitcoin ATM allows you to buy Bitcoin using your credit cards in the same way you’d take money out of your bank account. If you can find an ATM, enter the amount of Bitcoin you’d like to buy and execute the purchase. Note that Bitcoin ATMs charge a premium on top of the price of BTC. For example, if you want to buy 1 BTC at $9,000, the ATM may charge you a 5% premium to make your purchase price $9,450.
Other Forms of Bitcoin Investing
There are a couple of alternatives ways that you can invest in Bitcoin. These methods don’t require the purchase of Bitcoin but using fiat currency or existing Bitcoin to turn a long term profit.
Bitcoin mining is a way to earn Bitcoin without buying it. It is done using computers to verify blocks of transactions on the blockchain. The computers are attempting to solve complex hashing puzzles. The first miner to successfully solve one of these puzzles will earn amounts of Bitcoin.
There is a catch to this. You need specialized equipment to do so. You’ll need to install a Graphics Processing Unit (GPU) or an Application-Specific Integration Circuit (ASIC) on a computer that will be used as a mining rig. Also, you will be using a lot more electricity to power these machines.
Bitcoin mining also becomes more challenging as more Bitcoin is discovered. As such, the cost involved in mining sometimes is not worth the reward. When Bitcoin prices are lower, many miners abandon their operations.
Bitcoin Mining Farms
An alternative to doing your own mining is investing money into a Bitcoin mining farm. These are data centers that are set up to mine for Bitcoin. Typically, you will rent equipment on this farm, and the equipment will mine Bitcoin for you.
This form of mining is flat-fee, and you don’t have to maintain the equipment. Again, the price of Bitcoin determines whether this method of mining is viable. The main advantage of this is that your costs will be flat rather than variable since you don’t have to pay for equipment and electricity.
Online Casino Bankroll Investing
Select Bitcoin online casinos will allow you an option to invest in their operations. This is done through a bankroll investment system. The way it works is that you invest Bitcoin into a community bankroll on the casino, and those funds are used to help operate the online casino.
You are then paid a commission based on the rake taken by the online casino. This commission is based on the percentage of your investment relative to the community bankroll. You will not get rich by this form of investment, but it may be a way to earn some steady amounts of BTC.
You won’t see this offered very often, so when you do, check out the terms of the investment to see if it is for you.
Beware of Bitcoin Investment Scam
When researching Bitcoin, you’ll come across websites that claim that you can invest Bitcoin or other cryptocurrencies and make a massive return on your money. These sites often claim that you can make anywhere from 50% up to 200% on your investment in as little as 30 days.
ALL OF THESE WEBSITES ARE SCAMS!
These forms of “Bitcoin investment sites” are, at best, Ponzi schemes. What happens is that the first people to invest in the schemes may receive some money back, but after a certain period, payouts stop to all investors. Later, the website and its owners vanish along with your funds.
These sites all have a common theme. They promise high returns and often promise that you can request payouts at regular intervals or reinvest your money. This is the perfect example of “if it sounds too good to be true, it usually is.” Avoid these websites like the plague.
Is Bitcoin Investing Safe?
Like most forms of investing, Bitcoin investing can be a bit speculative. Virtual currency is extremely volatile, meaning that it can gain and lose large amounts of money in a short time. Back in 2017, BTC was approaching $20,000 but then dropped down to as low as $5,000 before it began regularly rising. That’s why crypto investors created the acronym HODL, or Hold On for Dear Life when referring to crypto investing.
Despite its volatility, Bitcoin can be a safer investment over traditional investments. You don’t have to worry about hackers accessing your BTC and selling off your assets. Provided you keep your private keys for your wallet safe, nobody will ever be able to access your funds. You can’t make that claim for stock accounts or even your bank account.
Central banks or the federal reserve do not control Bitcoin, meaning that the government has little impact on Bitcoin’s value. That cannot be said for fiat currency. Also, the performance of stocks, bonds, and other financial markets has little influence on Bitcoin’s price. You can’t say that about the NYSE or NASDAQ.
All investments have risks, so we cannot predict the value of Bitcoin over traditional investments. However, virtual currency has a greater upside than most investments. Where stocks and bonds are considered successful when you see single-digit growth, Bitcoin has the potential to net considerable profits in a short amount of time.
How Much Should I Invest In Bitcoin?
Many potential investors want to know how much to invest in Bitcoin. Should they go all-in on the currency or take a more conservative approach. Is Bitcoin worth investing in? Absolutely, but it should not be your only investment medium.
For example, if you have $5,000 to invest, think about your investment strategy. Are you looking to build consistent long term wealth, or are you looking to gamble a bit more to make huge profits? For those looking to build long-term wealth, you want to stick with a strategy of investing about 20 to 25% of your money into Bitcoin.
More aggressive investors can consider investing 50% of their money into Bitcoin. Now, if you’re an experienced investor and already have a portfolio established, how much you want to invest is based on how much you’re willing to lose. Like all investments, there’s always the risk of total loss. So how much you’re willing to lose is how much you’re willing to invest in Bitcoin.
When asking “is Bitcoin worth investing in,” it all boils down to your risk tolerance. Are you able to handle the swings associated with BTC investing? If so, then Bitcoin investing may be for you. If not, then you will want to invest in a less volatile investment tool.