The modern financial market is full of various instruments, but the appeal of Bitcoin is undeniable. It is a trendy digital asset that became a staple for many managers with companies like Blackrock, Fidelity Investments, and many others giving their wealthy customers access to this new market. Cryptocurrencies can be quite hard to understand and the learning curve is steep. However, it is the asset of the future.
Should I buy Bitcoin right now?..
This question has been raised many times by many people over the last decade. The concept of Bitcoin appeared on the horizon after the financial crisis in 2008. It quickly took the world by storm with many people joining the development effort. Today, it turned into a massive financial instrument that can soon become a widely adopted exchange medium and substitute fiat money like traditional currencies.
Early adopters did recognize the potential of coins and many hoarded sizeable fortunes. However, when the price went up and hit $1000, many decided that it was a good time to sell. In the end, they became millionaires. Little did they know, the price skyrocketed in 2018 and just a couple of years after that it reached its ATH of $60K. People who sold their tokens before that realized that they lost a lot.
Since 2018, the main motto of the Bitcoin community is to “HODL”. The word is a meme conceived due to a misspelling of “hold”. It means that people who believe that the future of the world’s financial system is in digital currencies should stick to their guns and hold their BTCs for as long as possible until it appreciates and reaches a new high.
While this particular investment approach may sound a little bit weird to people who do not like putting all their eggs into one basket or relying only on speculations, most old-school Bitcoin users prefer exactly that — to hodl.
What many other people realized quite quickly is that making money in crypto can be a much more lucrative endeavor than sitting on a pile of BTCs. Other crypto projects started taking off after 2018, but you don’t have to focus on DeFi platforms, new blockchain networks, and complicated financial services to start making money. There are many ways to earn money by working with flagship tokens like Bitcoin and Ethereum.
How to earn money from cryptocurrency?
There are two most commonly employed approaches to making money by investing in crypto:
- You may focus on amassing promising digital assets like Bitcoin and Ethereum. It is “hodling” in its purest form. You only buy BTCs and ETHs using a safe strategy like DCA buying. You can even use bots provided by companies like WunderTrading or 3Commas. This strategy does not give you too much agency and relies on an expectation that the crypto market will be growing indefinitely.
- Trading cryptocurrencies on DEX and CEX platforms. We have many exchanges to choose from. Cryptocurrencies are mostly liquid and allow users to quickly swap one asset for another. You can also use stablecoins pegged by the US dollar (Tether or Binance USD) to trade cryptocurrencies actively against fiat money.
- The world of crypto offers you an unimaginably large selection of financial instruments to work with. Tokens and NFTs are still released every week and many projects can look quite promising from the start. It is hard to give any kind of financial advice in this environment. On the other hand, we can talk in detail about Bitcoin and Ethereum.
Let’s start with the biggest financial attraction for speculators since the 2010s — Bitcoin. We will try to learn the fundamentals of how Bitcoin investment works.
How to start Bitcoin investment
The contemporary crypto market is quite flexible and offers a variety of ways to purchase flagship tokens like BTC and ETH. You may find it difficult to buy some obscure tokens and NFTs, but buying BTC or ETH is quite easy. Here are some of the options that you may be interested in:
- DEX platforms. Decentralized exchanges are great for traders concerned with the privacy, safety, and security of their funds. Many DEX platforms are considered quite reliable and safe to use. However, depending on security protocols, finance handling, and many other factors, the speed and liquidity may suffer.
- CEX platforms. Centralized exchanges are usually corporate entities operating in the crypto market. You may choose from a wide range of different platforms including monstrous exchanges like Coinbase or Binance. These companies focus on customer experience and offer a rich selection of financial products and services to their clients. Working with them is like working with a brokerage company. One of the downsides is that these are custodial platforms.
- P2P exchanges. Peer-to-peer trading is a staple of early Bitcoin investment strategies. These public platforms allow users to communicate directly and make trades without any external oversight. Individuals dealing with individuals. Modern platforms offer escrow services and additional protection for users, but deals still occur between two independent parties.
- In-app purchases. You may use special online services and mobile apps like CashApp to buy Bitcoin and Ethereum. Some offer other cryptocurrencies, but the main focus of many is BTC. Purchasing tokens here is straightforward, but comes with additional fees that can make a difference for people who want to make money trading cryptocurrency.
- Buying from a “friend”. Some people still buy their tokens from friends and acquaintances. In many ways, it is the safest and most reliable way to buy crypto if you do not have any prior exposure to the market and the underlying technology. Friends can show you how to set up a wallet and guide you through the initial difficulties.
How much money can you make off Bitcoin?
Many people start investing in the crypto market expecting the same type of money-making as five-six years ago. However, the reality is much different and you must have reserved expectations. Bitcoin has been averaging $23K throughout the first quarter of 2023. It is already a high price that can grow dramatically in the nearest future.
Even the biggest estimated growth of 430% (optimists believe that the price will reach $100K by the end of 2023) is not as impressive compared to the massive gains that happened in 2016 or 2018. You should not expect to increase your capital tenfold in five years. Nonetheless, the current trajectory of this digital asset is more than just positive.
The expected return depends on your perception of the crypto market in general. If you believe that the world will move along with the idea of adopting and using Bitcoin for many financial operations, investing in this cryptocurrency is a natural decision. People who do not have this belief and want only to make a quick buck should stay away from slowly buying and amassing tokens since the volatility of the crypto market is a notorious problem for newcomers.
When is a good time to buy Bitcoin?
Novices in the industry often ask “Is now a good time to buy Bitcoin?” The problem with this particular line of questioning is that even experts do not have a good estimation of the potential price ceiling for BTC. Some claim it can reach a million USD in just a couple of years. Some think that the growth will be moderate.
Financial experts with insights into the global financial system often think that the weakening US economy and the destruction of the global supply chain may cause a visible depreciation of fiat currencies and make it easier for Bitcoin to reach new all-time highs.
The inherent volatility caused by the speculative nature of the market is out of control for retail traders, but there are ways to determine when you should buy Bitcoin.
- Using time-tested approaches like DCA buying. Distributed Cost Average is a very old trading system that allows investors to purchase assets at lower prices on average. While it does not work all the time, it is still a great way to amass assets over time. The method relies on systematic purchases during a downtrend instead of buying in bulk at random times. DCA can be fully automated using platforms like WunderTrading.
- Following experts in the field and buying when they recommend. This particular approach is a good idea for people who do not have any prior exposure to the market. The lack of expertise is the biggest obstacle that newcomers must overcome. If making up your mind is too hard, following people who already have good portfolios and can give a piece of good advice is a solid plan. However, abstain from listening to social media influencers and media figures.
- Employing technical analysis to identify good moments to enter the market with a long position. Various indicators and systems allow traders to decide when to make a purchase. Some indicators were designed to work specifically with Bitcoin. Hash Ribbons is a great example. It compares the total hash rate of the Bitcoin network to identify moments when the market is ready for another bull push.
Know that choosing the right time to buy is a skill that requires honing. You need to learn more about the market and the various factors that affect it. Since it takes time while many newcomers want to start right away, employing DCA buying is something that many veterans recommend.
How risky is Bitcoin?
The problem with risk tolerance is that each retail trader has their personal preferences and requirements. Investors with large portfolios naturally have higher risk tolerance because they are often not concerned with losing money on certain risky market positions. They are also not affected by market volatility as much as people with smaller portfolios.
In general, Bitcoin is a risky investment since it is a digital asset that does not have any physical representation. When you invest in real estate, you are buying a home that can be used by you and your close friends and family members. It is still something that you will own indefinitely. Even if the real estate market starts tanking, you will be left with an asset.
Bitcoin is a different story. Since you don’t have anything physical representing it, you are putting money into an idea. If the world starts using BTC for large trading operations regularly, its value will be preserved. However, if the world collectively decides that it costs nothing, you will lose everything.
To be completely fair, the same can be said about any currency including established global fiat currencies like USD and Euro. These banknotes printed on expensive paper are as expensive as people believe them to be. Their value can also drop to zero in a matter of months depending on the global political and economic situation.
All in all, BTC is a relatively safe investment in the short term and depends on a variety of factors when we talk about the long term.
Why is Bitcoin a bad investment?
To play the devil’s advocate, we will talk about why people may consider buying Bitcoin a bad financial decision.
- Bitcoin investment risk is defined by too many factors completely out of your control. The price of Bitcoin fluctuates due to many economic events that happen all across the globe meaning that news from China will affect traders in the US immediately. BTC is a speculative asset that depends on a variety of things that cannot be foreseen.
- Safety is still a big concern for investors. Bitcoin can be extremely safe, but it requires caution and alertness on the part of an owner. You need to use the best safety precautions and follow tips for safekeeping. Use cold wallets for long-term storage, do not interact with previously unknown entities using your main wallet, and try working on trustworthy platforms.
- The future is foggy. Many conservative investors try to stay away from untested assets. While many enthusiasts think that a ten-year market history is good enough, people who have inherited capital and diverse portfolios do not want to deal with something that may lose value overnight. It means that the growth is limited by the number of investors willing to participate in the market. Due to the inherent volatility of the asset itself, the number of such investors also fluctuates further causing instability.
- FUD is not just a word. This abbreviation stands for “fear, uncertainty, and doubt”. It is a meme among many crypto enthusiasts. Whenever someone starts questioning the validity of investing in crypto, enthusiasts start using this abbreviation to humiliate critics. However, there are many reasons to be doubtful about Bitcoin and its future. For starters, the adoption rate is still slow and many governments are thinking about implementing their versions of cryptocurrencies.
Whether you think that the best way to make money with cryptocurrency is to blindly buy all digital assets or have a reserved judgment about the market, you need to contemplate the ups and downs of investing in crypto.
How to make money with Bitcoin trading?
Trading digital assets are just like trading any other assets. The same logic and even analytical techniques apply here. On the other hand, the fact that many retail traders are not familiar with the underlying technology that allows the crypto industry to exist makes it hard for them to make truly informed decisions. Even people with industry insights struggle to make sense of all the information that comes to them.
On the other hand, you may completely ignore the technology and its complexities. Instead, you may use technical analysis to make investment decisions and open short-term market positions. Other ways that you may want to consider:
- Copy trading. Newcomers who do not have any prior exposure to the crypto industry may be interested in copying market trades performed by experienced traders. Some centralized exchanges, automation service providers, and even specialized platforms offer their clients such functionality. You choose traders that you want to copy and automatically repeat their actions on an exchange of your choice.
- Preset bots. If you want to use a relatively safe trading strategy, using time-tested preset bots like DCA and GRID is a good idea. These bots can be fine-tuned to your liking, but their standard settings are quite good. Use platforms like WunderTrading to launch bots and allow them to make money for you.
- Custom bots. People who design their trading strategies may find it useful to automate some of them. This approach works for people who understand technical analysis and can have some know-how about scriptwriting and building automated systems. Even without this knowledge, you may use the services of specialized automation vendors.
Do you still have questions?
We cannot go into details about crypto trading within the confines of this particular article. Retail trading is a complicated domain that requires us to talk about some minute nuances and advanced strategies. However, we do have answers to some frequently asked questions that may bother newcomers.
How much money should I invest in Bitcoin?
The rule of thumb is to never risk more than you can afford to lose. Some of the saddest investment stories are from people who lost everything due to a bad financial decision. Financial advisers usually recommend the following:
- Have an emergency fund with enough money to cover all expenses for several months.
- Set aside all the money that you need to cover monthly living expenses.
- Set aside a sum that will cover small unexpected issues like a flat tire or a leaking faucet.
- Invest everything that you earn on top of that.
A single BTC can be broken down into tiny fractions. You don’t need to buy a whole coin at once. Start by slowly building up your portfolio.
What is the best time to invest in Bitcoin?
The most optimal moment is when you have a disposable income. Instead of wasting it on entertainment or small quality-of-life improvements around the household, consider investing the money in Bitcoin or other cryptocurrencies. With DCA, you can make purchases systematically and forget about market volatility. The only goal is to build a bigger portfolio.
Picking the right moment to enter the market can be tricky and usually requires traders to analyze the current situation in the crypto domain. It is impossible to just pick a random date and say that it will be a good day to buy BTC.
Do you make money from Bitcoin?
People involved in the crypto industry are all into flagship tokens and usually make some money on top of “hodling” their digital assets. For example, some investors prefer staking their tokens which is a solid investment plan for long-term owners. Ethereum, Cardano, and many other networks support staking.
Bitcoin is a slightly different beast and requires more determination from users. Making money by trading Bitcoin is possible, but it requires expertise, risk management skills, and patience.
Should you buy crypto now?
Some crypto enthusiasts believe that anyone who purchases crypto right now is still an early adopter. Bitcoin, Ethereum, Cardano, Solano, and many other networks are making huge strides toward attracting more users and creating a fully digital global financial system. Being early is a good idea for any investor.
However, you should still try to optimize your purchases and make sure that you are not overpaying for digital assets that you plan to hold for a long time.
The main takeaway
Whether you want to use trading bots, start copy trading crypto, or want to buy some coins and hold, entering the crypto market is a good idea. Explore the rich world of crypto finance, and experiment with automation, trust management, and DeFi platforms.
Hopefully, you will learn more about the crypto industry and decide to invest in some flagship tokens. Just be careful and never risk more than you can afford to lose.