The Cryptocurrency Market Is Flat, but That Doesn’t Mean It's Safe to Open Your Savings Account Anytime You See A Bull Run (Yet)
The cryptocurrency market is a lot messier than it looks and it will take some time for mainstream investors to realize it. For those who are already invested, this article can help you understand what the cryptocurrency investing strategies are that might be worth sticking with long term, but don't forget how much risk you can take.
1. Why Buy When Not Really Needed? The reason most people believe buying bitcoin at current prices makes sense is because they think it will grow in value and become more valuable. This is a bit of an over-optimism. Even though there is little evidence to suggest that bitcoin will ever overtake gold as the world’s leading reserve currency, it does seem a lot of money is being paid daily in exchange for a virtual asset that will keep increasing in value. No other investment has been invented to be infinitely scalable, even though people still argue about what that means. But in a general sense, the price growth should be a good indication of what bitcoin could potentially do in the future. If we consider bitcoin as a hedge against inflation and real world currency movements, the question becomes do we buy now and lose money or wait until the market eventually goes back to normal. Either way, getting into bitcoin early shows significant potential upside and also prevents you from losing money. So why not wait a little longer, especially if you have invested, to see whether it will go up or down. 2. Make Some Choices
The fact that bitcoin is basically unregulated makes it harder to make any big investment decisions about your portfolio without having to go through SEC filings every time you look around the place. There may be no regulation around when it comes to trading cryptocurrencies, but there will probably still be regulations on how to conduct investment trades. Since these would apply to individual investors as well as large institutional firms like Apple and Google, making some investments in bitcoin can result in greater scrutiny, possibly fines or even prison sentences. We'll discuss the same in our guide to investing in bitcoin in just a moment. 3. Don't Forget About Volatility
Despite all its hype, volatility is one area where bitcoin could easily fall by 20% or more every year. In 2019 alone alone, the cryptocurrency reached more than $40,000 before dropping off significantly to less than $20,000. On paper, that's pretty huge numbers so you shouldn't underestimate the impact of such swings. The last rally in 2018 led up to a spike in the price and after a short correction, the price went straight lower. With no warning and no clear path back up, the chance of another crash increases all day and leads to significant losses. This is true for both retail and institutional investors. So while your strategy should allow you to ride out the ups and downs, it's important to note that it is a volatile game and you need to stay flexible and adaptable. Also watch out for sharp moves on the price because they could signal a major downturn. 4. Risk Of Loss
One of the biggest things we've discussed is volatility and keeping your options open. However, bitcoin has so few physical assets to trade that you won't face massive market pullback if you're not careful. While many currencies have high yields, bitcoins offer absolutely nothing in terms of returns. The only thing you can really gain access to is your own private keys and that's why it's so vulnerable to hackers. Furthermore, a quick loss of 10% or even 5% could cause serious concern on the valuation and ultimately show how fragile the crypto markets are compared to mainstream financial markets. Therefore, the risk associated with losing money is a bit higher than other risky bets. 5. How Long Will It Take Bitcoins To Reach Their Highest Levels In History?
Before people started using bitcoin as legal tender, their first exposure was during the 2008 Great Depression. During that crisis, the stock market crashed more often than anyone could handle so bitcoin became the unofficial store of wealth for the masses. At its peak in November 2017, BTC had risen to nearly $18,000 and a slight selloff was enough to put the coin back below $12,000. By December, the crypto market fell drastically and by January the top coins were around $20,000 again but it was still nowhere near close to what the market was back then. Then a week later in February, a lot more people started using bitcoin and with very little notice. Despite the drop off and crash in May, the price of bitcoin continues its upward trend today. As evidenced by recent predictions about Bitcoin reaching new records every couple weeks, even months after the initial sell-offs, the rise in price is still extremely visible and sustainable. 6. What Are My Options? Even though bitcoin is heavily unregulated, there are ways to get involved. Here's a list of some of them: 1. Stocks While you can start with owning some bitcoin through exchanges like Gemini, Coinbase, Kraken, Bittrex, etc., there are a number of different ways to achieve the same thing in various forms. If you want to purchase bitcoin directly, you can use popular wallets like Ledger Nano S, Trezor, Samsung Galaxy S, etc. or simply invest a credit card in bitcoin. As long as the exchange allows, you can buy bitcoin in bitcoin, in btc, in ETH, etc. You can check how much your money changes hands in each option. 2. Other Digital Currencies To make your dollar-store safe while dealing with volatility, buying bitcoin via bank accounts can prove to be a better idea. Most major banks offer bitcoin ATMs and some offer debit cards for customers. These offers also come with fees and costs as well. Banks like Barclays, HSBC, Credit Suisse, Lloyds Banking Group, Standard Chartered Bank, HSBC, Santander, etc. offer digital wallet services like applets for iPhone, Android, iOS, Amazon, Google, Netflix, Apple, eBay, PayPal, etc. Moreover, some of these banks allow users to hold bitcoin from anywhere in the world through their mobile phones. And while it might seem counterintuitive, purchasing bitcoin from these places also comes with the risk of fraud.
0 Comments