Should You Invest In Bitcoin To Give You More Purchasing Power?
Given the increase in interest in crytocurrencies, and the rise in ICOs (Initial Coin Offerings) to raise startup funds, we thought it was time for an article on Bitcoin. Economists were rather sceptical when Bitcoin first came to market. First of all, the cryptocurrency wasn’t backed by any physical assets, and it wasn’t regulated by a bank.
Many financial experts suggested that Bitcoin wouldn’t last for very long, and it would be merely remembered as a token. However, roll on to the present day and it’s clear that economists underestimated the mindset of today’s millennials. It is this specific demographic that have invested in Bitcoin the most. This is partly because millennials have a high affinity to technology.
A brief history
It was in 2008 when Satoshi Nakamoto published a paper about Bitcoin. It’s price back then was 0 USD up until in 2011 when the foundation of the BTC payment service provider BitPay was formed. According to an infographic published by FXCM, Bitcoin’s price jumped from an initial £7 to £27 in the span of one month from BitPay’s conception. Like any other stock or investment, Bitcoin had its fair share of ups and downs, with its biggest decline coming on September 11, 2013 at the height of the first BTC bubble. But the cryptocurrency has recovered remarkably since then and today, its market value is at a whopping £3,370.
2017 has been a huge year for Bitcoin as its price skyrocketed to the £770 mark with no signs of slowing down. It is quite an attractive investment with some of the most biggest and most influential companies now accepting Bitcoin as a legitimate form of payment. Microsoft, Whole Foods, Lionsgate Films, Gamestop, and Bloomberg are just some of the businesses that adopted Bitcoin payments. With behemoths trusting this cryptocurrency, a lot of private investors are now considering diversifying their portfolios with the controversial, albeit revolutionary Bitcoin.
The usual form of investing in Bitcoin is buying the cryptocurrency in the hope that the price will increase over time. This is what most people have done over the past few years. Bitcoin investors bought several assets during the cryptocurrency’s infancy and some sold when the price exploded.
There are a lot of successful Bitcoin investors who made it big because they believed in the cryptocurrency early on. One of the investors who became a millionaire because of Bitcoin is Charlie Shrem, who was at University in 2011 when he first learned about Bitcoin. Back then, he bought 500 coins at £2 each instead of mining them. When the prices settled at around £15, he bought thousands more. Because of his investments, he was able to buy a company called Bit Instant, which allowed users to buy Bitcoins from over 500,000 stores. His business was a success, transacting over £10 million in Bitcoins. Today, Shrem’s net worth is estimated at approximately £34 million.
Former marine Jered Kenna is also a millionaire and business owner now thanks to Bitcoin. He made his debut buying Bitcoins at £0.15 per coin and later on, he traded them for £200 each. He is now the Founder and Chief Executive Officer of Tradehill and Money & Tech, an investor company specialising in startups. He also owns 20Mission, a “Hacker Hotel” within the Mission District of San Francisco as well as 20mission Brewing in Medellin, Colombia.
Roger Ver, who is mostly known for his stint in the California State Assembly in 2000, is also a Bitcoin millionaire. When he first learned about Bitcoin, he gave up his day job and started reading about the cryptocurrency. He is known as “Bitcoin Jesus” for his effective investment point of view and work towards helping popularise Bitcoin.
Ver was also one of the earliest investors in Bit Instant, BitPay, Ripple, and Blockchain. His investments mean that he is now enjoying the fruits of his labour with his estimated net worth in the region of £40 million.
A few strategies for holding Bitcoins
Don’t invest more than you are able to lose. This goes not only for Bitcoin but for other forms of investments as well. Sure, Bitcoin may be priced in the thousands right now but do remember that it is still a risky investment. If you review Bitcoin’s price movements, you will realise that they are extremely volatile.
After purchasing Bitcoins, don’t forget to transfer them into your personal, digital wallet and never leave them at the exchange. In addition, make sure to only buy Bitcoins from exchanges that have positive reviews. Bitcoin transactions may be secure but the people who are selling them may not be always honest when it comes to the trading process. That being said, you should purchase Bitcoins through “GBP-cost averaging”. This means that you must never buy all of your Bitcoins in one trade but instead, a fixed amount every month or week. This way, you will be able to average the price over the course of the entire year.
Trading in Bitcoins
Bitcoin trading is similar to Forex. This means that you are actively buying Bitcoins at a low price and then selling them back at a higher price in a short amount of time. Like any other form of trading, this requires knowledge and practice. That’s because the market for Bitcoin is filled with “major players” who are simply waiting for new investors to come in and throw away their money by investing huge sums in Bitcoin.
Here are the basics of Bitcoin trading:
– Most cryptocurrencies lose their value over time, and this has been proven by Bitcoin’s historical price charts. Take this into consideration when holding Bitcoin for the medium and long-term.
– Risk Management: In order to be a profitable trader, you should not look at the peak prices. Instead, you should look for the small profits that will accumulate into a large one. Manage risk intelligently not only for your Bitcoin assets but other investments as well. For example, don’t invest more than a small percentage of your portfolio in a non-liquid market.
– Have a reason in mind before entering a trade. Start trading only when you know why you’re starting, and then have a good strategy to move forward with. Sometimes, it’s better not to earn and trade at all within a day instead of jumping in and losing a lot of money simply because you call yourself a “day trader”. When fundamental factors are affecting trader sentiment, be careful. There are days where you should just keep your money by not trading.
Investing in Bitcoin mining
Some people invest in hardware to mine Bitcoins instead of trading them with other investors. Over the past several years, Bitcoin mining has been done in large operations, with some private individuals purchasing hundreds of servers as well as video cards. Mining Bitcoins is expensive because you need a lot of computer peripherals as well as money for electricity costs.
If you don’t have thousands of dollars to setup your own mining rooms, you can also invest in some sites that allow you to mine Bitcoins exclusively through them. This is called “Cloud Mining”. Some sites allow you to mine Bitcoins through them but charge high premiums. Veteran investors tend to stay away from them since thy will get more money from trading Bitcoins with other people. Some of these sites, sadly, are complete scams that won’t use your money to mine Bitcoin, so be wary and always do your due diligence.
Investing in scam mining companies
Apart from buying Bitcoins yourself, there’s a questionable option for people to invest in “Bitcoin mining companies”. There are a lot of companies that claim they can double your Bitcoins and give you huge amounts of daily interest on your assets but don’t put your trust in them. These sites are scams or HYIP (high-yield investment programs) that are almost certain to fail.
What these online companies do is take money from individuals from around the world and then promise them that they will become instant millionaires. After that, they will start paying their initial investors from the money that they get from new applicants. They will also have a program that resembles a “referral bonus” where people who invite their friends will get a nice pay cut. Think about pyramiding scams but instead of paying cash, they pay with Bitcoins. The scams tend to go on for some time until one day, the website will go offline and the investors’ money will be vanish. The people who do this kind of scam can be hard to trace especially since all of the transactions are done online.
Remember, any site that promises you something that’s too good to be true is most likely a scam. There’s no such thing as a free lunch, and everyone works hard to be good at Bitcoin investing.
Should you invest in Bitcoin?
Like any other investment, Bitcoin has its pros and cons. It’s not just a matter of whether you should invest but also “how” you must invest. The best way to find out if you should invest in Bitcoin is to learn your end goal. Are you willing to invest for the short or long-term? Both ways can give you a lot of purchasing power to acquire businesses just like Shrem, Kenna, and Ver. However, if you’re not willing to spend a considerable amount of time learning the trade, just like what Ver did when he was just starting out, you will most certainly fail. There are a lot of free resources out there for Bitcoin investors and if you’re interested in investing in the cryptocurrency, make sure to do extensive research to give yourself a head start before making the jump.