As a result of Bitcoin’s amazing value increase in 2017 (from under $1000 to over $17000 as of December 19th, 2017), many people have become interested in the cryptocurrency. While some see it as a store for value or as a get-rich-quick scheme, Jamie Dimon, the boss of JPMorgan Chase, has called it a fraud and Nouriel Roubini, an economist, has called it a “gigantic speculative bubble”. At the other end of the spectrum, both the Chicago Mercantile Exchange, America’s largest futures market, and the NASDAQ stock exchange have been at work preparing to offer Bitcoin-futures contracts.
This leads to many questions for the newcomer to Bitcoin investment. Before you go blindly into investing all your money in Bitcoin you should first ask yourself:
Is it Safe to Invest in Bitcoin? Will its Price Keep Going Up?
First of all, literally no one can tell you what will happen to the price of Bitcoin. You can never be sure, but you can be well-informed. This is true of any form of investment. It is especially true of Bitcoin. Since it’s still in its infancy, very few people have a clear sense of where it’s going and how all this sudden speculation is going to pan out in the long run.
With all this in mind, you should consider not only whether to invest but also how to invest.
Do you want to invest in equipment for mining? Do you want to buy and hold onto the currency in hopes the price will continue to go up? Do you want to invest in Bitcoin-related companies? Or, do you want to become a Bitcoin day trader?
Investing in Bitcoin Mining
Since Bitcoin’s inception, a popular way to profit from it is by mining. While in the early days, this was relatively easy for a newcomer to do on a small scale, for quite some time now, mining has only been profitable if done at a large scale, since you are competing with larger operations to solve the same math problems. This does not mean it’s impossible. It means you will need to spend a significant amount of money on hardware and the electricity required to run it in order to begin a mining operation. While a few websites sell the processing power to mine Bitcoins on the cloud, these are either a complete scam or a bad investment. Unless you are willing and able to invest in a mining operation of significant size, you are better to invest in Bitcoins themselves.
Buying and Holding onto Bitcoins
A lot of people have made a lot of money this year by holding onto Bitcoins purchased when the value was lower. This is the most direct form of Bitcoin investment. As long as the price keeps climbing, there is money to be made this way. If you choose to buy and bank your Bitcoins, there are some basics you should keep in mind:
- Never invest more than you are willing or able to lose. This is true of any investment but particularly Bitcoin, since its value is so volatile
- Avoid keeping your Bitcoins in the exchange where you purchase them. You should move them into your own personal wallet for security. The most secure option is a hardware wallet, which is a physical device where your private keys are stored offline. Examples of hardware wallets are TREZOR, LedgerWallet and Keepkey. Some users prefer software or desktop wallets.
- Never buy Bitcoins from untrusted sources. Only buy from verified and established exchanges.
- Never give out your private keys for any reason to anyone
- Never give over your Bitcoins to anyone or any website claiming they can double your money, provide surreal interest rates, or far-fetched investment schemes. Avoid scams by doing your homework on the company.
Investing in Bitcoin-Related Companies
There are numerous new companies and startups operating in the Bitcoin environment, some of which are destined for major profit, some destined to flop. As in traditional stock trading, you should really do your homework before you dole out money to entrepreneurs who may or may not or have your best interests in mind or who may fail. Do background checks and evaluate the company’s business plan, transparency, and history. There is plenty of money to be made in investing in the right startup.
Becoming a Bitcoin Day Trader
Day trading Bitcoin is a very profitable venture for some. But, in order to do it successfully, you need to study a lot and practice your strategies. The market is flooded with savvy traders waiting to take advantage of inexperienced newcomers to make bad decisions with their money. Again, there is plenty of money to be made here, but you have to do your homework first.
So, Should I Invest in Bitcoin or Not?
At this point, there is no doubt that Blockchain technology will be implemented in various business sectors and become a part of virtually everyone’s daily life. But, whether it is Bitcoin or another cryptocurrency that is adopted long-term as a worldwide currency is yet to be seen. The best advice you could get is to learn not just about Bitcoin, but other cryptocurrencies, and make your own decision on which you think is most likely to succeed. That’s where you should put your money.