Here’s how to start investing in Bitcoin - Technologies News

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Here’s how to start investing in Bitcoin

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Waiting to kickstart your Bitcoin trading journey? Here are five factors that you should look at when figuring out how much should you invest in Bitcoin.

#1: Risk tolerance

The cryptocurrency market can be extremely volatile. Thus, when you’re wondering how much you should invest, think of it as an amount that you could lose entirely.  Read more

When you have this figure sorted ask yourself these questions:

  • Would it be a devastating loss to lose the entire amount?
  • Would you be too hard on yourself and lose sleep over the investment?

If yes, then you may want to consider lowering the investment amount. In case you’re still not happy with your investment amount, you may want to reach out to a financial advisor. This will be great to get some sound advice. You may be tempted to invest a lot at once and then end up selling in a panic when you incur a loss. In some cases, selling assets at a loss may not be so bad as long as it is a well thought out decision. But to avoid anxious decisions, it is best to keep your investment amount in check.

#2: Profit tolerance

Although it may sound stupid at first, think about it: if you invest an amount that you cannot afford to lose, what will happen if you x20 your money?

This may not seem like the most sound financial advice but give it some thought–if you feel extremely emotional about losing money, what would your response be if your money was to grow by say 20 folds?

One thing’s abundantly clear, is that only the patient and calm investors make profits with Bitcoin and other cryptocurrencies. Thus, you should take a look once again at the amount you want to invest. What will your response be if it were to grow at such an exponential rate? Would you buy another asset or your dream car? Or would you simply hold onto it and wait for it to keep growing?

In a nutshell, the secret to making a good investment is to keep emotions out of the picture. It will be a very crucial thing as your progress could even help you lose less when the market is falling and earn more when the rates go up.

#3: Timing

Something that most crypto experts will tell you is that this market is full of repeated cycles. A typical market cycle would live for a year or two where the prices peak creating major bubbles that eventually burst.

What you have to bear in mind when you’re figuring out how to start investing in Bitcoin, is the timing. It has the power to change the game completely. Thus, when looking at how much you should invest, understanding these market cycles often reveal some of the best investment paths for Bitcoin. Here are some points that you should keep an eye out for:

  • Would the markets close at a high?
  • What is the duration of the ongoing bull/bear run?

Remember that if the market is at an all-time high in terms of price and time, you’re better off not investing in that period.

#4: Change of mind

People may find it hard to stick to a decision in a market that keeps evolving. Therefore, it is wise to leave a buffer at hand in case the market situations lead to changes in the trade. The best thing to do here is to split your investment over time. Once you know how much you want to invest, you can divide it over the next three, six or 12 months.

So if we assume that you have set aside $12,000 to spend over the net 12 months and the market is at a high, rather than investing $1,000 per month you start putting in $400 each month and invest more when the prices are low.

#5: Diversification

When trading any financial instrument, it is not a good idea to rely on luck. Every smart investor will tell you to diversify your portfolio by allocating your capital to different assets. These assets can be anything, like real estate, stocks, and gold. You may also want to put some money in the bank to earn interest. Basically, you want to avoid having all eggs in a basket. It is great when you’re earning more but once you start losing, there may not be an end to it if you’ve invested in just one asset.

How much to invest in Bitcoin?

Regardless of the asset class, you want to invest in, it is imperative to have a plan in place. This has to be in place when we talk about the stakes involved. This means that one should stay grounded to reality when assessing how much money they can afford to risk on the basis of their budget.

  • For instance, Bitcoin is a liquid asset which implies that it can be encashed at any time.
  • Since Bitcoin is also very speculative, if you may want to encash your token to maybe fund an emergency situation, what you get in return might be less than what you put in.
  • Thus, you must invest only the capital that you are comfortable with.

 

When investing in Bitcoin, you should avoid adding all your capital to it. Bitcoin should not be dominating your portfolio, let a major part be made up of traditional asset classes like index funds, ETFs, and blue-chip stocks.

This will make it easier to balance the risks by reducing your exposure to just one asset. Rather than paying a lump sum upfront, you can try to go for a recurring investment for Bitcoin.

 

Minimum Bitcoin Investment You Can Make

You can start a Bitcoin investment with as little as $2 in some cases. The minimum amount that could limit your investment is the one set by your crypto platform. While you can choose to start small, we suggest avoiding micro-investments as there are several fees involved when it comes to trading, storing, and transferring cryptocurrencies. The fees may end up being more than your investment size. If you want to go for a small investment, set aside at least $50 for your Bitcoin purchase.

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