Things To Consider Before Investing In Bitcoin
Like any investment, cryptocurrency comes with risks and potential rewards. Compared to traditional types of investments, cryptocurrency is particularly risky.
Here are some things to think about before you invest:
- We dont recommend investing all your life savings on cryptocurrency
- Its best to see it a bit like gambling so only invest small amount of your disposable income
- Never invest more than you can afford to lose
- If you havent got much money left at the end of each month, its best to steer clear of crypto and focus on saving your money instead
Weigh up the pros and cons first:
Pro: Cryptocurrencies are global, meaning they have the same value in every country and no exchange rates.
Con: Cryptocurrencies are extremely volatileand very risky investment. People have also reported having to wait to get their cash out because of technical snarl-ups.
How Do I Buy Cryptocurrency
While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.
To buy cryptocurrencies, youll need a wallet, an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Here’s more on how to invest in Bitcoin.
Coinbase is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell Bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies, such as eToro, Tradestation and Sofi Active Investing. Robinhood offers free cryptocurrency trades .
Is Wealthsimple Crypto Safe
Wealthsimple has farmed out custodial duties to U.S based Gemini Inc. to keep your crypto-assets safe. Gemini custodial service is heavily regulated by the New York State Department of Financial Services. They have a great track record and maintain a $200 million commercial criminal insurance policy to protect against the theft of Cryptocurrency. However, their policy does not protect your account in the event of any loss due to unauthorized access. So, take extra measures like enabling two-factor authentication on your account.
Wealthsimple Crypto is made available to Canadians by WDA, coordinated through the Canadian Securities Administrators Regulatory Sandbox under time-limited registration and regulatory approach. Wealthsimple Digital Assets Inc. is registered as a restricted dealer in Canada . It is essential to note that, crypto-assets purchased and held in a Wealthsimple Crypto account are not protected by the Canadian Deposit Insurance Corporate or Canadian Investor Protection Fund .
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Are Cryptocurrencies A Good Investment
Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did.
Thats whats called the greater fool theory of investment. Contrast that to a well-managed business, which increases its value over time by growing the profitability and cash flow of the operation.
For those who see cryptocurrencies such as bitcoin as the currency of the future, it should be noted that a currency needs stability.
Some notable voices in the investment community have advised would-be investors to steer clear of them. Of particular note, legendary investor Warren Buffett compared Bitcoin to paper checks: It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money too. Are checks worth a whole lot of money? Just because they can transmit money?”
» Learn more: Is Bitcoin safe?
This price volatility creates a conundrum. If bitcoins might be worth a lot more in the future, people are less likely to spend and circulate them today, making them less viable as a currency. Why spend a bitcoin when it could be worth three times the value next year?
What Are Coinbase And Robinhood
Coinbase and Robinhood provide platforms for investors to buy and sell cryptocurrency. Coinbase is a crypto exchange, so you can make crypto to crypto trades and withdraw your coins to PayPal or your Bitcoin wallet. In contrast, Robinhood is a brokerage. Although you can withdraw cash funds, you cant transfer crypto coins out of your account. However, Robinhood also offers stock, options, and ETF trades, whereas you can only buy or sell crypto on Coinbase.
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Is The Project Mature
Sometimes a projects price simply rises because of a growing awareness around its potential. But its not necessarily tied to how the project is performing yet, and so it isnt really tied to real numbers or revenue / profit.
In crypto, most projects are still really in a nascent stage, and so price spikes are usually the result of one of 3 things:
Pump and dump hype events.
Growing awareness around value.
A new feature or development has been released, or is about to be released.
Once in a while, a feature comes out that puts buying pressure on a token by burning more tokens and acting as a deflationary mechanism. But initially, the anticipation around these types of feature releases brings a higher price spike than the feature itself.
But none of these events really indicate a projects maturity. If the project has grown to its near-maximum potential, serving a large portion of its target market, then its mature.
But most crypto projects are so early, they arent anywhere close to achieving this. There are certain projects out there that can easily touch billions of customers, and are currently only touching a few thousand people. Despite that, many of these projects already have enormous valuations, with reasonable room to grow.
Ways To Invest In Bitcoin
Buying the coins on a cryptocurrency exchange is the most common way of investing in bitcoin.
But there are other options:
Buy shares in bitcoin-related companies
You could invest in cryptocurrency exchanges or even buy shares in companies that are accepting bitcoin as payment.
Invest in companies involved in blockchain technology
You could invest in the blockchain network . For example, tech platform Solana claims to be the fastest blockchain in the world.
Several investment companies are launching bitcoin funds.
It will still be volatile, but it could be easier to sell your investment and get your money back than investing directly.
There are also funds that have some exposure to bitcoin as well as traditional assets like and bonds.
These are a form of financial derivative that gives you the right to buy or sell bitcoin at a set price before a certain date of expiry.
Unlike buying Bitcoin cryptocurrency outright, bitcoin options enable you to take a speculative position on the future direction of a market price.
You would buy a call option if you believe the market price would increase:
Read about Lewis, who taught himself about cryptocurrency and made £8,500 in less than a year.
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How Does Wealthsimple Make Money From Wealthsimple Crypto
Wealthsimple Crypto makes money from the price spread. When you submit a purchase or sell order, you will see two prices the current price of the crypto-asset and a slightly higher transaction price. The difference between these two prices is known as the spread and includes the cost to custodian Gemini Inc., the liquidity providers, and the operational overhead for Wealthsimple.
How Many Cryptocurrencies Are There What Are They Worth
More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Aug. 18, 2021, was more than $1.9 trillion down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $849 billion, regaining some ground from recent price lows. Still, the market value of bitcoin is down from April high of $1.2 trillion.
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How Do Royalties Work
Royalties are paid to the creator whenever their work is sold on the secondary market, allowing them to be recognized and compensated for their work.
When the creator puts an item up for sale, they can specify how much royalties to charge as a percentage of the listed price for each secondary sale. For example, if you set a 10% royalty, then you will get $500 when your work is sold on the secondary market for $5,000.
Note that royalties are fixed at 10% for resales of collectibles created directly by creators through the platform.
What Are The Fees When Buying Bitcoin
If you want to buy and sell bitcoin, there are usually fees to pay, such as:
- Transaction fees
Investment companies that are showing an interest include:
- The worlds largest asset manager, BlackRock, opened two of its funds to the possibility of investing in bitcoin futures
- UK based Ruffer Investment Management added bitcoin to its multi-asset portfolios before pulling out five months later with a $1.1B profit
- In December 2020, one of the worlds biggest index providers, S& P Dow Jones Indices announced it would launch indexing services in 2021 for over 550 of the top traded cryptocurrencies.
The Bank of England and other central banks are exploring the possibility of their own central bank-backed digital currencies.
As more institutional investors get on board with crypto assets for capital gains, this could help to calm dramatic price moves.
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Diversify Your Crypto Portfolio
It doesnt pay to have too much invested in one single cryptocurrency.
As with stocks and shares, spread your money out among different digital currencies.
This means you dont risk being over-exposed should one of them plummet in value especially as the market prices of these investments are highly volatile.
There are thousands to choose from, so do your research.
You Still Don’t Know What Bitcoin Is
Your friend, kid, colleague, and neighbor have told you Bitcoin is the better than any term investment, but you still do not know what it is? Do you get a headache every time you try to understand blockchain? If the crypto market seems too complicated to handle, even for a short term investment, than it might be time to sell. If you cannot see the time high coming, there is no point in holding on.
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You Have Achieved Your Goal
Following one of the basic principles in trading, in order to make a profitable investment, you need to sell it for more than you bought it for. It is your moment to sell when the Bitcoin price rose to the highest point since you decided to buy Bitcoinit’s called your time high. The best decision is to set a targetif the market reaches a certain time high, you consider selling. In most of the digital currency exchanges, you can also set up stop loss alerts so you always know when your investment has reached your goal.
An Example Of A Portfolio Scaling Out
Here is an example of a portfolio that holds 2 Bitcoin, 10 Ethereum, and 1,000 EGLD. The models above gave us an average Bitcoin top of $241,000. As discussed in the first segment, timing the top is a fools errand. Securing 75% of the top is a success for the average retail investor.
Lets start with the Bitcoin position. When scaling out, your wishful goal should be to have your average at $241,000. Your middle sell average could be $180,000, which is still a success. Your lower sell average should be around $150,000.
To achieve these numbers, it would be wise to breakdown your total Bitcoin value and scale-out accordingly. Your first sell order could start at 0.1 Bitcoin. Then increase the value as the price appreciates. These periodic sales should be timed with market upswings, not corrections. And they should not take place in the final stage of the model approaching its peak. If your model predicts Bitcoin will do a 5x from current numbers, then assume your altcoins arent shit coins. Apply a similar multiplier to their current price to find a top.
Then find a middle and lower sell average to shoot for as goals. The same 75% goal mentioned above should stick true to your entire crypto portfolio. Also, if history repeats, Bitcoin in 2017 topped out about 20-30 days prior to the rest of the market. Once Bitcoin begins to stagnate at high levels, the clock is ticking for altcoins to be sold.
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Much Of When To Hodl Or Sell Depends On How Scared You Getand How Much Cash You Need
If you notice price dipping significantly and banked all your investment money, you probably need to read up on new investing strategies. However, there’s still a way to recover things and let your cryptocoins climb up a bit.
Cryptocurrency is volatile, enormously so. It’s enough to make many people panic-sell when they shouldn’t. This can lead to a lot of potential losses as currency could jump back.
To prevent foolish sales, a lot of investors choose to sell off enough cryptocurrency to make ends meet for a bit while keeping the rest in HODL. This allows you to keep yourself financially stable while waiting to see how things play out.
Best Exchanges For Selling Cryptocurrency In 2021
Cryptocurrencies like Bitcoin, Ethereum, Ripple, Dogecoin, or Litecoin can be sold on several exchanges back to the original source you deposited with, or you can exchange them into stablecoins like Tether .
Selling cryptocurrency can pose quite a problem to people who havent tried to previously. As mentioned, it is quite profitable to learn how to dispose of your digital assets yourself without needing an intermediary aside from the broker that you are using. The basic advantage of this is you can avoid the risk of losing your digital assets along the way or being scammed by third parties. It is also important if you want to gain the actual value of your crypto without large fees that affect your profits.
Here are some of the best exchanges to use whenever you are looking to sell your cryptocurrency for fiat:
The brokers/exchanges above are some of the most popular in the cryptocurrency industry. They are prominent and indispensable for millions of investors that clamor for seamless trading as well as effortless selling. Primarily, they are structured in a way that appears friendly to novice traders and virtually everyone with an interest in digital assets.
Beyond these, the majority of the above exchanges offer several methods of crypto-to-fiat liquidity via banking integrations, credit/debit cards, and secured peer-to-peer services.
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Have A Strategy For Crypto Trading
It isnt easy to separate genuine cryptocurrency recommendations from the scams there are lots of sharks out there waiting to take your money.
In 2020, according to the UK fraud-alert service Action Fraud, reports of crypto investment scams surged by 57% year on year to 5,581, with investors losing a total of £113m.
So when youre confronted with a lot of information about a cryptocurrency, take a step back from the hype.
Try to look critically at the project. How many users does it have? What problem does it solve? Does it have any links with industry? Avoid coins that promise the Earth but havent delivered anything tangible.
How And When To Take Profits From The Crypto Market
Let’s do some real talk about selling your crypto.
This is something I’ve been putting some real thought into lately.
With all the buzz and enthusiasm about crypto, it is easy to always think it goes up and up. But, we all know that isn’t true.
Or you could take the utopian view. That BTC is superior to all else and you should have “diamond hands” and never sell – ever.
But, here’s the thing…
We’re still really early in this new cryptocurrency world. And yes, long term, I think it goes way higher than where we are right now. But, does that mean you never sell any?
If you don’t take profits, then what’s the point? Just holding it does nothing but make big numbers on your computer screen. For you to actually have any real-world impact on your REAL, physical life, you’ve got to sell some of your crypto back into fiatFiat, or fiat currency, is a currency that exists and has value merely because it’s home government says so. A fiat curr… and then use that to buy things.
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Why Have Cryptocurrencies Been So Volatile
Almost all assets have some metrics that can be used to value them fundamentally. Even gold, which Warren Buffett sees as a dead asset, can be valued using its mining cost curve as the base rate. However, for cryptocurrencies, things are differentthey mainly move on speculation, news, and celebrity endorsements. As can be expected, they’re more volatile.
There Are Negative Rumors Around The Project
Crypto is extremely susceptible to what people say: on this market, you often buy the rumor and sell the news. It applies even to the best-performing assets like BTC, let alone young coins.
Consider ditching the asset if you see one of the following rumors circulating on the net:
- Technology issues
- Major investors going back on the deal
- Internal conflicts within the team
- Legal battles
- Major security breaches and hacks.
All these things can trigger a price drop. When many investors lose faith in the project, they will start selling their tokens massively.
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