Bitcoin has undoubtedly had its most exciting (and turbulent) year, having gone from a relatively unknown phenomenon at the start of 2017 to a major buzzword and focus of international news stories across the world by the start of 2018. The cryptocurrency gained huge momentum as investors piled their money into it, increasing its value exponentially, eventually peaking at a value of £14,759 at the end of the year (it was worth less than £1000 in early 2017).
Now the cryptocurrency has fallen in value, showing just how volatile it can be. Here is a short guide on how to invest in bitcoin.
The most common way to invest in bitcoin is by buying it outright, and if the cryptocurrency is in high demand from buyers, then its value is likely to increase. Most people buy bitcoin through online exchanges, which usually charge a small commission for each transaction made.
To purchase bitcoin outright, you will also need to set up a bitcoin wallet, which is a digital application which allows you to store your cryptocurrencies on your computer/phone/digital device. Once you have bought your bitcoin, whether from an exchange or directly from another person, you must then constantly check the bitcoin market to see how your investment is doing.
As previously mentioned, bitcoin is one of the most volatile assets in the world, and as such it is very difficult to predict how it might behave in the future. Much of its value is fuelled by speculation, and it is completely decentralised and unregulated, meaning that the upswings and downswings in its value can be extremely large.
So, as a long term investment, bitcoin can be seen as very risky if it is bought directly. Whilst it has the potential to make a lot of profit if it rises in value, it can also incur heavy losses if it goes the other way. Short term investments are likely to be far more effective as a result.
Buying bitcoin outright, however, is not the only way to invest in the cryptocurrency. Bitcoin CFDs are now a popular way to invest in the asset without ever actually owning it. Instead, they involve speculating on the price movements of bitcoin, and investing in the cryptocurrency through an online trading broker.
CFDs are also used to invest in a variety of other assets too, so are a far more standard method of investment in general. One of the main advantages of investing in bitcoin CFDs over buying bitcoin outright is that you can profit from the price of the cryptocurrency falling as well rising, depending on which way you invest.
How to Make a Profit
No matter how you choose to invest in bitcoin, following its market trends is of paramount importance if you want to be in with a chance of making a profit. It is also necessary to research any events which may affect its value, such as the introduction of cryptocurrency regulation (likely to decrease its value) or the acceptance of bitcoin as a payment method by companies (likely to increase its value).
Once you have a good understanding of how to research bitcoin, it may be worth trying to develop an informed trading strategy which you can follow in order to maximise your chances of making a regular profit.
Bitcoin and cryptocurrencies in general are undoubtedly one of the most exciting developments of recent years. Whilst they can be unpredictable, they also have huge potential, and may one day revolutionise the way people pay for products/services around the world. Be cautious when investing, and do plenty of research to inform your investment decisions.