Written by R. A. Stewart
Bitcoin is an alternative investment for those investors who do not mind the roller coaster nature of cryptocurrency. If you have the risk profile to be able to stomach the prospect of losses and are sensible in how you approach this form of investing then you can make money from Bitcoin as others have done.
Here are some things you should keep in mind:
1 Bitcoin has a short history
The disadvantage of a short history is there is less data to work with for making future predictions, but it should be kept in mind that past performance is no predictor of the future. Using the share market as an example, one can find companies that have made it through the 1987 sharemarket crash. This is a sign of resilience. No one knows how a future share market meltdown will affect the price of Bitcoin because it has not had to deal with such an event.
2 Something is only worth what others are prepared to pay
Bitcoin is only worth what others are prepared to pay, in other words, it is demand that determines its price. This rule also applies to other forms of investing such as gold, art, property, and the share market.
3 Only invest discretionary spending money in Bitcoin
Only discretionary spending money should be invested in Bitcoin. This is money you can fully afford to lose. Money in this category is money you spend on entertainment and hobbies. If you can transfer some of this spending money into Bitcoin, you may just make a bit of money. What I am saying is, you should never spend what you cannot afford to lose in Bitcoin. There is a saying,”Scared money rarely wins”.
4 Diversify
It is important to diversify with cryptocurrency investing as it is with investing in the share market, but just how does one do this when Bitcoin is the main player in cryptocurrency with Ethereum coming in a distant second. I am talking about investing with different crypto exchanges such as Coinbase, Blockchain, and Kraken. There are a lot of others. A few have gone under which have caused investors to lose a lot of money.
5 Don’t get greedy
Greed is the downfall of a lot of investors. It is tempting to think, “If I invest my life savings in Bitcoin, I will make a killing by xxx date. You could also lose it all. Always remember that for every person who made such a killing there are others who lost their shirt. What usually happens is the one who made the killing will usually try the same thing over and over and give back those gains.
6 If there is an opportunity for capital gain
There is also the chance that you may lose. If you expect to never lose any money at some stage then Bitcoin is not for you. Bitcoin investing requires you to have the kind of mindset that can cope with the roller coaster ride which characterizes cryptocurrency otherwise you will panic when things don’t go as expected. Investing requires a cool head at all times, even when the newspaper reports tell you that you have lost your money. The truth of the matter is that newspapers do not always give you the full story.
I remember when the price of Bitcoin peaked in November 2021 then halved a year later. One newspaper article said, “Investors in Bitcoin have lost half their money.”
That is only true if you had invested in Bitcoin at its peak because if I had sold Bitcoin when the paper was saying, “Investors have lost half of their money,” I would still have received more money than my original investment.
About this article
The content in this article is of the writer’s own opinion and experience and may not be applicable to your own circumstances, therefore discretion is advised. You may use this article as content for your website, blog, or ebook.
Read my other articles on www.robertastewart.com
