10 Things to Know before Investing in Bitcoin
Lately, Bitcoin (BTC) has been noteworthy in the world of finance, because it has fallen roughly 68% from its all-time high of $68,000 on November 10th, 2021, to the $20-21,000 level currently. However, Bitcoin is still up tremendously from just the spring of 2020, when it traded below $5,300 on 3/17/20—only 27 months ago. Even more impressive, BTC was trading at the $676 level only 6 years ago, in late June of 2016! So it is still up an incredible 30 times in the last 6 years!! There are only a handful of investments in recent history that have returned those numbers. In that same time frame, for example (from 3/17/20 to today), some of the most popular and well know “big winners” have had nowhere even close to Bitcoin’s returns….
Amazon is up 3 times since 3/17/20
Google is up 4 times since 3/17/20
Nvidia is up 5 times since 3/17/20
Microsoft is up 5 times since 3/17/20
Apple is up 6 times since 3/17/20
Tesla is up 19 times since 3/17/20
BITCOIN IS UP 30 TIMES SINCE 3/17/20!
Part of that is because the developed nations of the world are printing too much paper/fiat currency—they are devaluing their currencies in the process. So digital currencies offer an exciting investment opportunity to anyone looking to hedge their dollar exposure, and grow their capital over time.
However, if you’re going to invest in Bitcoin, there are a few things that you need to know about. Let’s take a look at what you should know before you get started.
1. Bitcoin Is a Form of Decentralized Currency
Most people are familiar with currencies such as the euro or the American dollar. These currencies are controlled by central governments and financial institutions. In other words, they are centralized currencies.
Bitcoin, on the other hand, doesn’t work like this. There is no governing body controlling Bitcoin. As a decentralized currency, it doesn’t have the same rules and regulations as other currencies.
On top of that, there’s no chance that your Bitcoin will be devalued by a third party. The Bitcoin that you have is based on the market value, not on what a government or financial institution decrees. For many Bitcoin investors and users, this is the most important and attractive feature—that BTC is not controlled by any government or central bank.
2. No One Knows Its Origin
Another thing to be aware of before you invest in Bitcoin is that it has some rather nebulous beginnings. The cryptocurrency was first introduced in 2008 by someone called Satoshi Nakamoto. No one knows whether Nakamoto is a real person or an entity that created the currency.
In fact, this mysterious fact surrounding Bitcoin has been a point of contention for years. It likely won’t affect your investments, but it’s still good to know.
3. Bitcoin Is Anonymous
Another interesting thing about Bitcoin is that it has no physical form. The only way to use it is to exchange it on specialized trading platforms online.
Although you will need to create a username on these platforms, you don’t have to provide any personal information, making it an anonymous source of cash.
As a result, it’s often been used by donors who want to remain anonymous. For example, they can donate Bitcoin to a charitable organization without worrying that their identity will be revealed.
4. Bitcoin Is a Real Currency
Although it is a fully virtual currency, Bitcoin is still a very real type of money. You can use it in the same way that you would the American dollar or the euro. Many companies now accept Bitcoin as a form of payment as well as fiat currencies, and this trend is growing.
5. Bitcoin Is Unpredictable
Probably the most important thing for investors to know before buying Bitcoin is that it’s an unpredictable currency.
Although it can make a great investment, it can also be a very risky one. Bitcoin’s value has been known to fluctuate dramatically in the market, causing many people to lose or make large amounts of money over shorter periods of time.
If you’re going to invest in Bitcoin, it’s a good idea to diversify your portfolio. Make sure that you’ve planned for the risk associated with this volatile investment.
6. Bitcoin Can Be Sold in Multiple Exchanges
Another thing to know about Bitcoin is that, as mentioned earlier, it’s not used in the same way as fiat currency. Instead, you buy, sell, and trade it on virtual exchanges.
Before you start investing in Bitcoin, it’s a good idea to get a feel for these exchanges. Take a look at what platforms you want to use and get learn the ins and outs before you start investing. That way, you can ensure that your investments will be a success.
7. Bitcoin Cannot Be Hacked
Bitcoin is a relatively new technology, but in its nearly fourteen years of existence, Bitcoin has proven itself to be the most secure digital system in the world and the most reliable monetary system ever invented. Bitcoin’s blockchain has never been hacked, and zero counterfeit currency has ever been uttered on the network.
Hackers can, however, steal bitcoins by gaining access to bitcoin owners’ digital wallets.
If you’re going to start investing in Bitcoin, it’s imperative to transfer them to your own digital wallet, and avoid leaving them on the exchange you used to purchase them.
8. Bitcoin Isn’t the Only Cryptocurrency
While Bitcoin might be the most popular cryptocurrency, it’s certainly not the only one. Anyone who is considering investing in Bitcoin should look into other cryptocurrencies as well.
Consider diversifying your portfolio to include more than just Bitcoin. In doing so, you can help protect yourself from loss and limit your overall risk. My personal favorite is Theta, which as of late June of 2022 is trading in the $1.10-$1.30 range, and is valued at only approx.. $1.25B.
9. There Are Some Big Public Figures Backing Bitcoin
One of the reasons why Bitcoin has become such a popular cryptocurrency is because it has some big-name backers. In recent years, billionaires, and large hedge funds and even countries have invested in Bitcoin. In particular, in June of 2021, the country of El Salvador approved Bitcoin as a legal currency, and several other nations are considering joining them. Despite Bitcoin’s incredible meteoric rise over the past 14 years, there is still widespread skepticism on the part of the majority of the investing public, and there is surprisingly still a contingent who say that it’s a scam.
On April 26, 2022, Fidelity Investments announced that they would be adding Bitcoin as an investment choice in their 410k plans, and they are the top (or close) 401k provider. So, when coupled with the increasing number of billionaires and hedge funds and other large entities buying and holding Bitcoin, it seems increasingly unlikely that Bitcoin is a “scam” or can go to zero, and that the naysayers will continue to be embarrassed as time goes by.
Get Started Investing in Bitcoin
When handled properly, Bitcoin can be a very valuable investment. With these 9 tips, you should have a better foundation for investing in Bitcoin and earning some fast cash.
