One of the very straightforward questions that I get as I interact with my peers is “ How do I invest in Bitcoin?” Most of the people who ask this question come from the point of knowledge that Bitcoin has the potential to transform their financial lives for good, or to lead to massive losses. Is there a unique formula that everyone can rely on to ensure that they make gains from investing in this cryptocurrency? Let us find out that in a bit.
Now, for someone who wants to get started with cryptocurrency investments, the two main things that should concern you are “When will you buy the cryptos? “ and “ Which cryptos will you buy?”. Investing in a single cryptocurrency is not a very great strategy, and most successful investors will advise you to pick a number of them. A single crypto may perform exceedingly well and boost your finances, but if the market forces lead to a decline in its value you face the risk of getting negative returns.
A suitable strategy would be to create an “index fund” of cryptocurrencies and then apply the dollar cost average approach to time your investments. An index fund is simply a collection of various assets that are purchased at the same time to offset any variance that any of those assets may have. In the context of cryptocurrencies, you should seek to come up with a unique combination of coins. You can for instance purchase Bitcoin, Etheruem and Litecoin, or a combination of Bitcoin and any other coins such as Dogecoin.
By creating a cryptocurrency “Index Fund” account, you will have cushioned yourself against the huge losses that would arise from the volatility of a single coin. Depending on how well you select your coins, the gains from one coin can cover for the losses booked for the other coins.
The dollar-cost averaging approach is used to spread out risk. As opposed to buying the cryptos all at once, you can purchase them on a monthly or weekly basis. Spreading the buyouts minimizes the losses and still offers the long term investment benefits. You may not book very high profits as you would if you had perfectly timed the entry into the crypto market, but you’ll have secured yourself from the risk of a mis-time.
The dollar cost average approach is a popular investment strategy used by stocks investors to spread out risk. They usually purchase specific stocks on a monthly basis, and this works well for them since most stocks are not quite volatile. For cryptocurrencies, however, I would recommend that you try making purchases on a weekly basis. You can also make daily purchases, depending on the amount of money you have set aside for cryptocurrency investments.
So far, I hope you have gathered that the best way to invest in cryptos is to buy a variety of coins over regular intervals.
You can purchase your cryptos from very many different coin exchanges, but I would recommend that you use Coinbase. This crypto exchange has the largest variety of cryptos in a single platform. You can, therefore, purchase all your coins on Coinbase and store them in a secure cryptocurrency wallet.
If you are a long-term investor who already has a functional IRA, you can actually add Bitcoin to your list of investment assets. All you need to do is to create a Bitcoin IRA account and link it up to a secure Wallet such as Regal Wallet and begin adding the coins to this account. Investing in Bitcoin through a cryptocurrency IRA has several benefits, which you can check out in this review.
The question “ How do I invest in Bitcoin is best answered by looking at the coins you want to buy and when you want to buy them. As a prudent investor, you should purchase a variety of coins in order to cushion yourself from the losses that arise from volatility. You should also use the dollar-cost averaging approach, which basically entails making several coin purchases over a certain period of time. Long-term investors can also rely on a secure cryptocurrency Wallet such as Regal Wallet to keep their coins safe from theft.
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I hope that you enjoyed this article about how you should invest in Bitcoin. Feel free to express your thoughts in the comments section, and to also drop a question if you have any.
I wish you success!