Bitcoin Investment - A digitalized investment forum
Brief Idea of the term "Bitcoin."
How to define Bitcoin is still a controversial topic. Is it a payment site or a currency, or a bank? What is it?
Well, Bitcoin is Cryptocurrency. In simple words, it is digital money, or to further it is a brilliantly designed software. There is no physical form of these coins. Any financial institutions or banks, or government agencies didn't approve of bitcoin. Trading bitcoin through a Decentralized ledger system is Blockchain. There are collections of nodes that run bitcoin codes. Virtual ledgers called "Blockchain" store these codes form blocks of transactions. It is a purely digital phenomenon.
Bitcoin owners or holders of Bitcoin need to have a Bitcoin wallet, a virtual online wallet. A transaction using Bitcoin proceeds by sharing Private keys, which bitcoin owners have. For paying in terms of Bitcoin, all a buyer has to do is share a unique private key to the seller to allow Bitcoin transmission.
Bitcoin uses peer-to-peer technology to facilitate instant digital payments.
Do Bitcoins have value?
Currently, 1 Bitcoin (BTC) value is 18,246.40 United States Dollar($).
Bitcoin has gained value in the market because of multiple factors similar and, in some scenarios, superior to existing fiat currencies.
Bitcoins are scarce, divisible, decentralized, and highly transportable, which makes them reliable. The estimation of Bitcoin vigorously relies upon investors' confidence, its combination into budgetary business sectors, public interest in utilizing it, and its presentation contrasted with different digital forms of money.
The top three reasons that have made Bitcoin gain value in the market are:
- Transferability: Bitcoin is transferable within minutes. Government holidays or any hurdle by bank fee payments or currency exchange turmoil can’t block bitcoin transactions.
- Durability: Unlike fiat currencies having a physical form, bitcoins are digital and hence durable. They are free from any physical harm, like stealing, burning, etc. The best part is one cannot lose bitcoins. If a user loses cryptographic keys, the bitcoins in the related wallet become successfully unusable for all time.
- Free from forgery: Decentralized blockchain ledger systems are involved. It is difficult to counterfeit Bitcoin. The only way to counterfeit it is by spending one bitcoin twice (Double spending). However, it is a rare phenomenon requiring an overwhelming amount of effort and computing power. Hence chances of it occurring are highly unlikely.
Investing in Bitcoins
It would not be incorrect to assume that digital currency is the future. In the current era of global pandemics like Covid, almost everything has become digitized like never.
Many endorsers of bitcoin believe it facilitates a much faster low fee payment system of transactions across the globe. Bitcoin carries an exchange value. Its exchange rate against the dollar attracts potential investors willing to risk currency play. Bitcoins are a fast alternative to fiat money or traditional commodities like Gold.
In fact, in 2014, the Internal revenue service gave bitcoin the status of an asset. The profits from Bitcoins were taxable; the purchase, sale, and mining of bitcoins were taxable.
This is just an avid example that countries have accepted the virtual currency medium, and it won’t be a surprise if this turns out to be the future of the financial world and economy.
Bitcoin does not follow a regular equity investment (nobody issues any shares). Digital money draws speculative investors for its value rather than as a medium of exchange.
Getting started with Bitcoin Investment
Don't worry; you need not be a highly intelligent coder or a hardcore techie to become a Bitcoin investor. There is no need to understand the complex computer programming that goes into this.
Although investing in Bitcoin may seem complicated for beginners, it becomes much easier if broken down into proper actionable steps.
Let’s explore the steps in details:
Step 1: A secure connection to the Internet
An obvious but highly integral step - the first thing an aspiring Bitcoin investor must have is access to a stable Internet.
Step 2: Getting a bitcoin wallet
It is for storing the bitcoins.
Wallets can be hardware or software wallets.
Hardware wallets are more traditional, however, more secure since these are in offline mode. Two popular hardware wallet platforms are Trezor and Ledger. As stated earlier, bitcoin users have a private key like ATM PIN to carry out their transactions. These hardware wallets store the user's private key on physical devices like flash drives. As a result, hackers cannot access these keys using an internet connection.
Software wallets are nothing but mobile apps that connect to bank accounts. These wallets allow super quick and easy access to bitcoins, but then the money stays in the third party's hands, which is one drawback.
Blockchain.com, Coinbase, Mycelium are some popular Software wallets. Platforms like these are quite popular in the United States. For beginners, it is the best and easiest way to start as they directly connect it to the Bitcoin exchange; hence it ensures a simplified buying and selling process.
Step 3: Linking wallet to bank account/other modes of payments
To get started with bitcoin investment, the first one needs to purchase bitcoins. Connecting to a bank account or card is mandatory for that.
Transactions made using bank accounts usually take a longer time to process, like four to five days on average. However, first-time investors must try this out.
By linking the wallet to the bank account, users can easily buy or sell bitcoin and deposit the money into the bank account.
Cards allow the instant purchase of Bitcoins. However, the flip side to this mode is that it limits the transaction amount. The users can also not directly sell bitcoins or deposit money directly to their bank accounts by using cards.
Step 4: Joining a Bitcoin exchange
Bitcoin exchanges are the marketplace where one trades bitcoin for traditional currencies. Bitcoin exchanges can vary in terms of security level, and exchange rates offered, processing fees charged, etc.
Some top recommended Bitcoin agencies are Binance, Coinbase, Bisq, Kraken, BTC markets, etc.
Basic Investment Strategies
Let’s run through some basic cryptocurrency investment strategies to get started with.
HODL: This is the most common Bitcoin investment strategy. The term "HODL" (or hold) originated in 2013 with a post to the bitcoin talk forum. It is a term derived from misspellings of the word "hold." It refers to the buy and hold strategy or often said as "hold on for dear life." Under this strategy, investors buy a steady coin and hold it as long as possible. HODL has emerged as a byword for an approach to cryptocurrency investing that shuns trading based on short-term price moves.
"Hodlers" repudiate identified with Bitcoin trading. They do this too dangerous balance propensities like FOMO (dread of passing up a great opportunity), which can prompt purchasing high, and FUD (fear, uncertainty, doubt).
This strategy is a must-try for novice investors.
Dollar-Cost Average: It is like doing a SIP (Systematic Investment Planning) in the world of cryptocurrencies. It is quite a straightforward strategy. All investors have to do is start by setting aside a fixed amount they would want to invest at regular intervals.
For instance, if investors are planning to invest $500 on 1st every month for ten months. Investors might see the price has spiked on the 1st of some months.
Copy-trading: As the name suggests, this approach entails monitoring, learning, and following the moves of successful traders and then applying it. It is most suitable for novice investors, where they can learn and earn until they become experts.
There are even certain social trading platforms that, in fact, enable traders to monitor the financial trading activities of other traders. There are also auto trading apps like Bitcoin Profit App.
BFTD or Buy the Failed Dip: As it goes by its name, this strategy refers to buying low and then selling high. The most complex part of this strategy is to know what to purchase when the value has fallen. Not every fallen value might recover; however, some popular coins will definitely recover. The trick is to predict this popularity to win the game.
Points to remember when investing in bitcoin
- Bitcoin transactions are irreversible: Any transaction performed over the bitcoin network can’t revert. The money will leave the account at the moment if the transaction is successful. No one can cancel it after that.
- Volatile: It is very important to do thorough research before investing in Bitcoins. It is always advisable not to invest over one that can afford to lose. The more the number of buyers willing to buy bitcoins, the higher the price would be. Prices will decline with an increase in the number of sellers.
- Security issues: Since it is digital, they pose risks of hacking or cyber-attacks. Many recommend that bitcoin users keep their private keys offline. If one loses bitcoins from the bitcoin wallet because of any reason, it can be reversed since there is no centralized governing authority to this.
- Pseudonymous: Bitcoin is anonymous. In a bitcoin network, every transaction involving a particular address is stored forever in the Blockchain and accessible in public.
So are you ready now to buy bitcoin for the first time? It is pivotal to remember that albeit one bitcoin costs a few thousand dollars, one can partition bitcoin up to eight decimal focuses. The smallest unit of bitcoin is Satoshi. Regardless of whether the cost of bitcoin skyrockets, you'll have the option to purchase a Satoshi for a minuscule factor of a penny.
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