When’s the Right Time to Invest in Bitcoin?

When’s the Right Time to Invest in Bitcoin?

Bitcoin has been around since 2009, but it didn’t become popular until 2013. That was when the price suddenly shot up from $13 to about $1,100. This surge in popularity led to many people looking at Bitcoin as an investment opportunity.

It’s a good idea, considering that you can use Bitcoin to make money. Let’s dive into whether you should invest in Bitcoin.

Bitcoin Explained

Bitcoin is a cryptocurrency. It’s not tied to any physical asset. Bitcoin exists only as data stored on computers around the world.

Though Bitcoin is a digital currency, you can use it to purchase real-world goods and services. For example, sellers in the Facebook marketplace will sometimes accept Bitcoin as payment.

Is Bitcoin Money?

Money is anything that serves as a medium of exchange and facilitates trade. An example would be the US dollar.

As an asset class, Bitcoin would be closer to gold than traditional fiat currencies (such as USD). Since central banks do not issue Bitcoin and there are no legal tender laws attached to it, it does not qualify as legal tender. This limits its ability to function in markets where only legal tender is accepted.

However, governments around the world have recognized Bitcoin for various applications, including taxation purposes and capital controls. Because of this, it qualifies under some definitions of money despite not being legal tender.

How Does Bitcoin Make You Money?

You can use Bitcoin to invest in other cryptocurrencies, trade it for other tokens, or purchase assets like real estate. You can also exchange it for fiat currency.

Bitcoin Benefits

Bitcoin is a peer-to-peer network with no central authority or bank. This means that no government or bank can control your money.

It’s a decentralized, open-source currency. This means that anyone with an internet connection has access to the code base and can build their own applications on top of it.

Besides this, there are other benefits you should know about.

Anonymity

You can trade Bitcoin without revealing your identity. So, if you’re struggling to get a bank account, Bitcoin might be the solution for you.

Bitcoin is pseudonymous. That means transactions aren’t linked to real-world identities. If a user publishes the address of their wallet, anyone can see the balance and all transactions on that address. However, your real name and identity are always hidden.

Some exchanges require users to provide personal information to buy coins. These exchanges will store some of your data on their servers. Other unregulated exchanges won’t need your personal data.

Accessibility

You can purchase Bitcoin in most countries around the world. Bitcoin is also available for withdrawal from many ATMs. You can find more details about withdrawing Bitcoin from an ATM’s website.

Liquidity

Liquidity refers to a security’s ability to be converted into cash. If a security has high liquidity, then you can sell it at its market price without a hassle.

For example, if you were trying to sell $1 million worth of shares in Apple, you would be able to find buyers with little effort. You’d also be able to trade all your shares without seriously affecting the value of those shares. This means that these are highly liquid assets.

In contrast, if you were trying to sell $1 million worth of real estate, it would be more difficult. You’d probably have to wait a while before being able to sell all your property and collect the money. This means that real estate is not highly liquid.

Bitcoin is a highly liquid asset. You can easily sell it at its market price, and it’s easy to find buyers.

Security

There is no central authority that could shut down or alter transactions on a whim.

Bitcoin is also immutable. Once you send your Bitcoin over to someone else, it’s gone and can’t be reversed unless the recipient sends it back.

There is a record of all transactions on the blockchain for anyone to see and verify for themselves. No one can make fraudulent transactions without being noticed by everyone else in their network.

Bitcoin Disadvantages

The biggest disadvantage of investing in Bitcoin is that it’s not insured. This means that there is no way to recover your investment if the price goes down.

You could sell your Bitcoins at a lower price than you bought them. But doing so would leave you with less money than when you started. Too many traders selling at a loss is what caused the 2021 crypto crash.

Besides potential financial ruin, there are other disadvantages as well.

Privacy

You need to be careful about who you share your private keys with. Anyone with them can steal your Bitcoins. There have also been instances where people have lost their Bitcoin by storing it on a device that was stolen or hacked into.

Local Legislation

Some countries consider Bitcoin a security. You would have to provide financial statements and other information before you trade tokens.

Taxation

You must pay taxes on your Bitcoin income unless you are in a country that exempts it from tax laws.

In the US, capital gains taxes apply to transactions involving Bitcoin. If you buy or sell something using Bitcoin, you owe capital gains tax on any increase in value since you earned the crypto tokens.

Volatility

Volatility is a measure of how much the price of an asset fluctuates. The value of Bitcoin changes from minute to minute. This can make it difficult for investors who want to use the token as an investment vehicle for their retirement savings.

No Standard Regulations

If something goes wrong with your Bitcoin transaction—whether through theft, fraud, or otherwise—you have nobody to turn to for help.

The lack of regulation also means that many cryptocurrency exchanges have become targets for hackers. Because these platforms don’t have strong security protocols in place, they often fall victim to cyberattacks.

There’s also a lot of room for fraudsters to take advantage of people who don’t know what they’re doing. People are known to impersonate cryptocurrency exchanges on social media, offering to help people transfer their funds for a fee. These scammers often take off with the money before anyone can realize what’s happening.

Because Bitcoin has anonymous transactions, there is no way to track these scammers down. The only way for you to protect yourself is by buying from trusted exchanges.

Should You Invest in Bitcoin?

There are no guarantees that the cryptocurrency will continue to exist or increase in value. If you’re thinking about buying Bitcoin, be sure to do your research first. Here are some things to consider.

Growth Potential

The growth trajectory of Bitcoin’s value is impressive. Experts say that the currency has the potential to reach $100,000 per Bitcoin. However, this is purely speculative and may not happen.

No Guarantee

As the market is unregulated, there is no guarantee that you will receive your money back if an exchange goes bankrupt. FTX went bankrupt in November 2022 and many investors lost everything.

Entry

Anyone who wants to buy Bitcoin can do so using traditional methods, such as credit cards or PayPal. There aren’t any special requirements necessary other than having a computer and an internet connection.

Patience

You may not see any returns for the first few months of owning your Bitcoin. You may also see your investment drop in value after a few months, which can be discouraging. If you’re willing to wait, however, you can see significant returns on your investment.

How to Invest in Bitcoin

The first step is to open an account with a cryptocurrency exchange. Coinbase and Gemini are two of the most popular exchanges, but there are many others out there.

Once you have an account set up on a trading platform, you can buy and sell cryptocurrencies using your bank account. You can also invest in Bitcoin through credit or debit cards by linking them with your cryptocurrency exchange account.

If you want to use cash, finding a physical location where people are selling Bitcoins might be difficult. It’s easier to buy Bitcoin through an ATM that accepts cash transactions.

How to Choose a Bitcoin Exchange

The first thing you need to do before opening an account with a cryptocurrency exchange is research. Look at the trading platform’s reputation, security protocols, and fees.

KYC Policies

Make sure the platform has a good reputation and follows Know Your Customer (KYC) practices. These are guidelines that financial institutions follow to ensure they’re not facilitating money laundering. If the exchange doesn’t follow these protocols, it could be a sign that something is wrong.

Exchange Fees

Exchange fees are the costs associated with trading cryptocurrencies. These can be a flat fee, or they can be based on the amount of money you’re exchanging.

Smaller exchanges may not charge any fees at all. Larger ones may charge up to 5% or more per transaction.

Processing Speed

Processing speed refers to how quickly an exchange can execute transactions. Popular exchanges may have slower processing speeds than smaller ones because they handle more transactions per second.

Security

You can check for security by looking at the exchange’s website for HTTPS encryption. This encryption ensures that no one else besides you and the site owner can read the data sent between your computer and their servers.

Fraud Alerts

Fraud alerts tell you whether hackers have compromised your account. An exchange that offers them is concerned about your security and wants you to be aware of any issues that could put your funds at risk.

Customer Support

You need the option to access help if you have issues with your account or transactions. The best exchanges provide multiple options for contacting customer support, such as phone, email, and live chat.

Mobile App Access

Mobile apps make it easier for you to trade on the go. This is essential if you have a job that requires traveling often.

Choosing a Bitcoin Wallet

There are many storage options available for your tokens.

The safest option is a paper wallet. Paper wallets allow you to store your Bitcoins offline and away from hackers. A paper wallet is a piece of paper that contains all the information required to access your Bitcoin wallet.

Hardware wallets are another option. They are small devices that connect to your computer and store your Bitcoins. The Ledger Nano S is one example of a hardware wallet.

The most common Bitcoin wallets are software wallets. You can download these wallets to your computer or mobile device. They allow you to store, send and receive Bitcoins.

Popular software wallets include Exodus and Guarda wallet.

How Many Bitcoins Are Left?

Some estimates say that there are about 2 million Bitcoins available for mining. Once they’re mined, there will be no new Bitcoins created ever again.

This means that if you want any of the last remaining Bitcoins, you need to buy them before they run out. Nobody knows exactly when this event will happen.

Build a Smart Investment Plan

Before you invest in Bitcoin, ensure that you’re using money you won’t need soon. Research the exchange and wallet you choose for your investments. The exchange and wallet providers should be reputable, secure, and transparent.

If you think Bitcoin is too much of a risk, our finance articles can show you other ways to spend your money. Read a few articles so that when future investments come along, you’ll be better prepared for them.

 

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