Price fluctuations and extreme volatility are usually what make many investors shy away from investing in cryptocurrencies. On the other hand, other people see crypto investments as owning capital-backed assets. Investing in crypto has grown in popularity, thanks in part to its growing acceptance as a new asset class.
Cryptocurrency’s infamous volatility and lack of regulations make institutions like pension and retirement companies hesitant to put money into them. But individually, if done with the right strategy, investing in crypto can be a nice way to diversify your portfolio.
Experts would recommend Bitcoin for your first crypto investment if you’re a beginner in the world of cryptocurrencies. Bitcoin is the world’s largest digital currency to date and has recently reached a market cap of $63,588 just last April. Right behind the digital currency rankings is Ethereum.
It has been said that allocating a small portion of your portfolio to Bitcoin may improve your returns while keeping the total volatility of your investments at a manageable level. Ideally, a retail or individual investor should only allocate 1% to 3% of their portfolio since it runs the risk of losing a huge amount in value in a short period of time.
There is only nothing but pure speculation around the future price of Bitcoin since it has no inherent value. Billions of dollars worth of market cap have been lost to the volatility that plagues the cryptocurrency market. It has also lost quite a bit due to hacking.
Some analysts say that you should only invest in Bitcoin if you truly believe that prices are going up. It is not affected by inflation and is extremely temperamental, thus becoming an impractical store of value or payment method. The only good thing they see about its potential for price appreciation.
There are also concerns about hacking. Reports of breaches have been rising because it can be a highly profitable gimmick. The lack of tools that can track digital footprints and the absence of legal recourse since a governing body only further encourages cybercriminals.
Even the tools that hackers use have evolved to allow them to steal directly from crypto wallets. Just about anyone with the right tools can hack and earn a quick buck.
If you’re still interested in Bitcoin, then how exactly do you invest? Well, here are a few pointers.
There are two ways you can go about it. You can either invest in Bitcoin directly or invest in blockchain funds. Still, experts advise that you just invest directly.
There are a number of good and trusted platforms that allow you to trade Bitcoin directly, the Yuan Pay Group platform is one of them.
Other digital payment companies and brokerage companies have joined the crypto retail market and allow investors to buy Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
It would also be wise for investors to look into storage options before they buy Bitcoin. Digital assets can be stored using either physical offline wallets or digital wallets like brokerages, secure mobile apps, or cryptocurrency exchanges.
A portion of investors views their Bitcoin investments as akin to buying gold, retreating back to it once the value of fiat currencies declines. Some consider it as an entirely new asset class, and some treat it as a currency or commodity.
With all that being said, investing in Bitcoin is still a difficult undertaking because of its huge fluctuations in price.
To put some of that volatility into perspective, Bitcoin prices can be three times as volatile as stocks. But this exact volatility is exactly how traders make their money since it gives way to profitability if you have the right skills and mindset.
It is still too early to make predictions on which direction Bitcoin is heading because it is still so new. There is still a long way to go before we can guarantee the reliability of the information and data that we have about it.