In the case that you want to invest in Bitcoins or any other cryptocurrency for that matter, you need to learn a lot of things. The whole endeavor of investing in altcoins is not too complicated; you can learn the basics pretty fast. Opening your personal accounts for crypto trading is a breeze; setting up your digital wallet and a private key also takes a few minutes. However, although all of the technicalities in the crypto trading process are easy peasy, there still are a lot of essential steps that you should know about — you need to learn how to protect your investment, both literally speaking and from a more complex economic aspect.
First of all, imagine a certain number of Bitcoins that you collected as a sum of “regular” money. So ask yourself — what would you do with a certain amount of money that you wanted to save? Would you keep it in your apartment? Would you put it into your bank account? Would you put it in a savings fund? When you choose between these methods, you have one primary thing in mind — safety! Your first thing is, therefore, a safety aspect. You want your money (investment) to be safe, secure from theft. The second thing that you want is to accumulate more money with the initial investment — you want some interest! The same thing is with Bitcoins — you want safety and interest! Now, we shall discuss both aspects.
The matter of safety in dealing with Bitcoins more or less comes down to choosing the right wallet. We mean, what’s the point of discussing some advanced economies and trading strategies if someone hacks your wallet? The best thing to choose here to secure yourself from unwanted online threats is to go offline! Hardware wallets are the safest way to go — they are hack-proof, and they give you peace of mind. One of the most popular hardware wallets is Trezor. So remember, the most crucial thing in Bitcoin investment is to protect your investment, literally. So keep your cryptos off the grid.
How to Acquire Bitcoins — Individuals
The next thing that you should learn about Bitcoin investment is how to acquire these coins — not all of the ways of getting Bitcoins are equally profitable. First of all, the price of Bitcoins goes up and down quite frequently. Then, not all trading platforms offer the same price. After that, there are other ways of getting some digital currency than simply buying them. So what methods can you, as an individual, use?
Buying Bitcoins on a reliable platform, such as Coinbase, at the right moment
That is a safe, relatively profitable method. The level of profitability depends mostly on the moment you choose — there is one basic rule here — purchase Bitcoin when the price drops. However, there is much more to say on this topic, and we shall do it later in the article.
Mining Bitcoins in a mining pool
Mining Bitcoins is profitable, but it requires large investments, both in time and money. That’s why many people go for mining pools — this way, you join hardware mining forces with other miners in the pool. This method is fast, smart, and safe if you pick a reliable pool. We can’t stress enough how important it is to do your research on a pool before you join it.
Investing in Bitcoins through a cloud
Many go for this method because it is freed of time-wasting and additional investments. Here, you invest in mining that some company conducts and just collect your share as the process progresses. Not a bad way to go, but you should read the contracts carefully — not all companies offer the same conditions.
Mining Bitcoins by yourself
That is the most challenging way, and many argue that it’s almost pointless today because a lot of Bitcoins have already been mined. However, there is also a pro argument here — even though you invest in GPU and electricity, you still gain a “clean” asset! Plus, there will always be 21 million bitcoins, so joining the game while there still are hashes to be solved is not a bad idea. When you put everything on paper, you can earn more by mining then by buying if:
- You have serious ambitions (not mining for a small financial gain)
- You are ready to invest, be patient, and realize that you can see the profit after a longer period of time (this method doesn’t work well for short-term plans)
So unless you are ready to give it your all, don’t pick this option.
Selling merchandise or services for Bitcoins.
Just as you would sell some of your stuff online for money, you can also sell them for Bitcoins. That is a pretty smart and secure method of acquiring some digital coins. Many online trading platforms today offer this payment method.
How to Acquire Bitcoins — Companies
Now, if you want to collect some Bitcoins as a company, the entire thing is a bit different. Actually, better said, the whole thing is a bit easier. In fact, if you want to acquire digital coins as a company, more doors, more possibilities open to you. The principle is still the same; it’s just that you can acquire more for less time and a smaller investment. So just as an individual, a company can get Bitcoins either through mining, direct purchase, or some form of trading. What’s different then?
Direct purchase (Peer to Peer)
This method can still work for companies, but it loses the point to some extent. As a company, you can more easily invest in mining, and thus, make a better investment long term.
So why is it profitable to invest in establishing a Bitcoin mining company? Basically, all of your expenses on mining will soon be covered with gain from contracts with individuals or other companies — here, you would be the cloud! Of course, although highly lucrative, this method works well only if you run a specialized Bitcoin mining company. So what you should do if you already run another type of business?
There are many great mining companies out there. So if you, as a company, are ready to spend a bit more, going for cloud is a good move. But how to decide upon the amount that you should spend on a cloud? Well, the general rule is not to go over 10% of your annual net income — going for anything higher than that amount is risky. The Bitcoin marketplace is full of potential, but at the same time, it’s young and relatively unpredictable.
That is probably the ideal way to acquire Bitcoins for companies — add Bitcoin payment as one of the payment methods for your product, service, or even for project funding. Why offer just credit or debit cards as a payment option for your services — you can also offer cryptos! The great thing about this method is not just the fact that you will easily get a lot of digital coins — you will most definitely increase the number of your customers! So using Bitcoins will pay off in two different ways.
Now that we have learned how to fill our hardware Bitcoin wallets with some Bitcoins, let’s see what you can do with them afterward? Should you spend them? Should you sell them? Should you keep them? Let’s talk about that part!
How to Make a Profit — Individuals
There are basically three main ways you can pick from if you want to make a profit out of Bitcoins. After all, isn’t the whole point of investing improvement and enlargement of your assets? After all, the part about possible ways of profiting is also a part of the story about investing. So I invested in Bitcoins. Now you have some Bitcoins for personal use. What should you do?
Sell them when the price goes up
- Pro: You make an instant profit
- Con: You need to invest all over again — this is more or less a start of a stock trading business. However, even if it’s a short-term endeavor, to buy and sell Bitcoins when the first chance occurs is not a bad solution.
Trade with them
- Pro: You help the market, you can get cryptos with more “potential,” and it’s a smart way to manage your funds
- Con: The crypto you trade Bitcoins for can fail, plus, you need to invest in them again
- Pro: Many experts believe that cryptos are the future — saving them is maybe the best way to go. However, we say “maybe” because, at this point, no one can predict with certainty the future value of Bitcoins.
- Con: This method requires patience — you basically need to forget that you have them. Also, when you choose to accumulate more coins, never forget to assess how much you can spend on them carefully!
Let’s see now how you can make a profit as a company.
How to Make a Profit — Companies
Again, as a company, it’s a bit easier for you to turn a profit. Let’s see what the options are!
Sell, sell, sell
- Pro: You can always hire experts to make an assessment for you — choose both the timing and the amount.
- Con: In the long term, selling can always be a mistake.
- Pro: Can be great for your business — you can save a lot of money through Bitcoin exchange.
- Con: Quite obviously, if you don’t keep investing, you will lose your digital savings at some point.
- Pro: Just as with individuals, here too, this can be the best way to go. The future of cryptos is uncertain — but again, after a careful analysis of the market history so far, it seems that their popularity will continue to grow.
- Con: Unpredictability.
Choosing the Right Timing Strategies
This section of the article is dedicated solely to those who plan to sell their investment. So what should they pay attention too? How to guess the “right moment” to sell?
New Crypto Arrives on the Market
One of the most important factors is always to follow what goes on the crypto market. Each time a new altcoin arrives, the price of Bitcoin can be altered. So this is the most important thing.
Important News in the Global Economy
Happenings in the world of the economy on a global scale are a huge factor here — the first reason why is because any change in the global economy can push people into buying coins. The second reason is — no matter whether the economic changes on one part of the world influence your country’s economy, any economic change in any part of the world can influence Bitcoin. There are no regions, countries, and continents here — Bitcoin is a global thing, and everybody can mine!
Any improvement of the current GPU technology can lead to an increase in miners. Follow IT news in general, but especially the news about hardware and software that are Bitcoin related.
Political Changes — Should you keep an eye on those?
Political changes can generate economic changes and vice versa. So should you pay attention to politics? Of course! But what occurrences in global politics should be a sign or an alarm for you? Well, this question can have so many answers. But the things that you should focus on the most are those occurrences that can “drive” people into cryptos — things like tax increases, new scandals from the world of “privacy breaching,” new policies about banking, finance, funding businesses, etc. Political scandals led to the huge popularity of open-source technology as well — so this is something that you should keep in mind.
Feel the “General Atmosphere”
Of course, you should always try to “guess” the current climate on the crypto market. Remember, the value of Bitcoin is hugely generated by the people’s “faith” in it. Are people mining more? Do people tend to sell or to buy a lot? Also, don’t always go with the flow — try to judge the situation calmly and analytically. Sometimes, the majority is right, at other times, wrong.
Since we reviewed some of the timing strategies, let’s remind ourselves what a rollercoaster the history of Bitcoin value was.
One thing that we can say for sure after taking a look at this table is that Bitcoin is a pretty unstable currency; however, it also has a lot of potential. Moreover, those two aspects are related — the price of Bitcoin shifts because more and more people change their opinion about it,
So we have learned how to buy Bitcoins, how to keep them safe, and how to try to make some profit out of them. All in all, Bitcoins are a smart investment; at least they’ve been so far. Also, we are now watching a revolution of the financial world as we know it; we are just not aware of it yet. After all, when many considerable changes in history occurred, not all of the witnesses were aware that such changes were taking place. So investing in Bitcoin is somewhat like investing in something that really looks like it’s going to change the way we understand currency.
Also, there is one more thing that you should keep in mind here — when people choose where to invest their funds, generally speaking, they often tend to make a mistake. For instance, in many cases, it’s safer to invest in antique coins than in real estate. Why? Because the price of antiques usually just grows, while real estate prices can drop. Plus, real estate demands maintenance. So what’s the lesson here? You should invest only in something that doesn’t spend more of your money and in something whose value will just increase over time. Does Bitcoin fulfill these demands? Unfortunately, it’s hard to say at this point — we have to wait and see.