InvestLite: Bitcoin investment explained

November 19, 2020   Bitcoin

Bitcoin is digital money that does not physically exist. However, there are special registers where information is stored about how many bitcoins someone has and who transfers them where, and such registries are called blockchains.

The difference between Bitcoin and the traditional currency is that Bitcoin registers are not stored in banks or other payment systems. It means Bitcoin is a decentralized currency and is not strictly regulated by government authorities or institutions, which makes users’ actions freer. Transactions with Bitcoin cryptocurrency take place daily.

Registers, where Bitcoins are stored, are protected by special cryptography, which makes tampering impossible. It is also not possible to rewrite data in blocks and change the course of events sharply. Therefore, Bitcoin is considered quite secure digital money. Nevertheless, it is impossible to say that Bitcoin is safe because there are always some nuances, which are important to be aware of.

For several years of its existence, bitcoin has become truly digital money, that is, it began to serve as a full-fledged medium of exchange. Over the years of its existence, bitcoin has received recognition and has gained popularity, and nowadays many market participants perceive it as a serious investment tool. Using bitcoin, you can buy goods and services and exchange cryptocurrency.

A brief history of bitcoin investment


Bitcoin was created in 2009. Over the years of its existence, Bitcoin has been able to attract the attention of a huge number of traders and investors. This is the first digital currency in the world, though not the only one at the moment. Therefore, it is she who is given the most attention from investors who want to invest in cryptocurrencies.

Within a relatively short period, Bitcoin has become the generator for the creation of more than a thousand different cryptocurrencies, as well as many other blockchain projects. The history of bitcoin prices is full of highs and lows, as the attitude towards cryptocurrencies is sometimes not serious and not stable.

Investing in bitcoin is interesting as the emission of the cryptocurrency is limited thanks to the initial algorithm. Over time, it becomes more difficult to mine bitcoins. The process of production of bitcoins is called mining, and the asset itself is often called digital gold.

Today, bitcoin is not only the most popular but also the most expensive cryptocurrency. According to the official data, its capitalization is more than half of the entire cryptocurrency market.

Bitcoin has experienced sharp price changes. For example, there was a big investment stir in 2017, which led to the fact that the piece of one Bitcoin increased to 20 thousand dollars. At that time, there were lots of different forecasts and expectations. Many market analysts have argued that this price rise is temporary, and it turned out to be true. In 2018, the crypto industry faced a crisis, which led to the fell of Bitcoin's price to 3.5 thousand dollars.

However, the era of cryptocurrencies did not end there. In 2019, the bitcoin price has shown slow but steady growth. Data from bitcoinprice.com also shows that the price of bitcoin has risen in 2020.

In general, the forecasts of experts are different. Some even predict the rise in the value of bitcoin to one hundred thousand dollars or more. However, what will happen to the price of bitcoin largely depends on the activity of investors and their investments.

Bitcoin vs traditional currency investment


Bitcoin is not just a digital cryptocurrency, but also an investment tool. The principle of investing in bitcoin can be compared to investing in dollars or any other classic currency, which people use in everyday life.

Investing in bitcoin can be dismissed, on the one hand, as a promising instrument that is only gaining popularity, but on the other hand, bitcoin has already established itself as a highly profitable, but risky investment.

Here comes a question: can cryptocurrencies and particularly Bitcoin be considered a serious investment? Yes, cryptocurrencies can be a serious investment like other traditional financial assets. But anyway, there are some differences between investing in cryptocurrencies and conventional investments. So, here is what differs bitcoin from traditional currency:

  • Bitcoin is completely digital and is not represented in a physical form.
  • Bitcoin exchanges are not insured by government agencies.
  • Bitcoin investment is decentralized and allows transactions without government oversight.
  • The history of Bitcoin price volatility is not that long, and therefore traditional technical analysis does not always give correct results.
  • Fundamental analysis for Bitcoin is much different from the fundamental analysis of traditional assets.

Pandemic influence on bitcoin investment


Due to the Covid-19 pandemic, the demand for bitcoin from investors has significantly increased. This was stated by Tetsuyuki Oishi, an analyst, and head of the Bitcoin Lab. He stated that the first reason for this is the low probability of a quick recovery of the stock market to its previous values.

The analyst believes that another reason for the growth in the attractiveness of bitcoin investment is the low correlation between the crypto market and traditional financial instruments. Gold and cryptocurrencies have depreciated greatly during the downturn in the stock market, but now their price has recovered. Overall, Bitcoin showed a rise in price during the crisis provoked by the coronavirus pandemic.

Features of btc investing


The main advantage of investing in bitcoins is the ability to generate stable profits in the long term. As for the dynamics of the price movement of bitcoin, slight falls are possible, but, as the practice has proven, the rate is still rising, and in some cases very active.

The price of bitcoin is formed solely due to the desire of people to pay for virtual money since the total number of bitcoins in the world is fixed. This factor also has a positive effect on the value of bitcoin and contributes to its strengthening. It also protects the cryptocurrency from the effects of inflation. It is formed all over the world by all miners. Every year, the rate of production of a unit of this cryptocurrency is getting lower, which again increases its value.

Also, among the features of investing in bitcoins are the following:

  • Bitcoins can be exchanged for real money.
  • Bitcoins can be accepted as a payment method.
  • Due to the fixed finite amount of bitcoins, there is no impact on inflation.
  • Bitcoin investment is completely anonymous. People do not have to provide any details when investing their money.
  • The rate of growth of the bitcoin rate is quite high and prone to growth.

Risks of bitcoin investment


There are two things you need to do before you decide to invest in bitcoins. First, take a close look at what bitcoin is. Secondly, you need to know all the possible risks associated with investing in bitcoin. Bitcoin investing combines the risks of investing in classic currencies, but they are supplemented by risks associated with the principles of cryptocurrency, such as:

  • Risks associated with the exchange rate;
  • Lack of centralized control;
  • Uncertain legal status;
  • Low prevalence;

Exchange rate risks can occur also when you exchange the currency in which you conduct your operations for any other currency. This applies not only to bitcoin but also to all other currencies.

The bitcoin rate is shaped by supply and demand. In defense of a stable exchange rate, they cite the fact that the number of bitcoins is limited. And if we look at the history of the bitcoin rate, we will see that the currency has never been characterized by a stable rate or some kind of long-term predictability. Therefore, it is important to conduct your financial activities with bitcoins with care and knowledge.

How to manage bitcoin investment


Bitcoin investment is similar to investing in any other currency. The principle of this type of investment is to buy at a lower price and then sell at a higher price.

Investing in bitcoin and other cryptocurrencies as well have many advantages. So, you have access to them literally around the clock, and all transactions are carried out instantly. In most cases, this is done without any fees. When performing various operations with bitcoins, numerous technological advances are used, which make transactions not only convenient but also secure.

Besides, Bitcoin transactions themselves are very diverse. For example, microtransactions literally in thousandths of a dollar, direct or anonymous transfers are possible.

Reasons to start bitcoin investing


Compared to other financial market instruments, investing in bitcoin has many advantages, some of which are unique and characteristic only for the cryptocurrency sphere.

  • Volatility. The price of bitcoin has already experienced a sharp increase. Bitcoin is considered one of the most volatile assets, along with stocks.
  • Growing demand and popularity. A couple of years ago, Bitcoin investment was considered something unserious, but now it is compared to investing in gold. Cryptocurrency is beginning to gain recognition from both regulatory representatives and society.
  • The value of the asset is increasing. The price of bitcoin is growing, including due to the complexity of calculating blocks, and this will apparently continue for a long time.
  • Independence and decentralization. Unlike conventional money, Bitcoin cannot be influenced by anyone or anything, including crises, sanctions, revolutions, etc.
  • Control over the account. No one except the investor can control his account, the distributed ledger technology will not allow third-parties, third-party organizations to enter it, no one will freeze money and limit the amount of the transaction.
  • Anonymity. During Bitcoin transactions, no one knows where the funds came from and where except for the participants in the monetary transaction.
  • A limited number of coins. The program code provides for the release of 21 million bitcoins, and no more coins will be issued.

Bitcoin investment strategies


Investors who have decided to make bitcoin investments are primarily interested in how best to do it to get effective results. When investing, there is no need to immediately invest an amount equivalent to the value of bitcoin.

Investing in bitcoin can be very effective and profitable, but you need to decide on the method of investment because some of them are more profitable and riskier, some are less. Below we will consider the ways to invest in bitcoin.

  • Purchasing and selling bitcoins. This method is passive, it involves buying cryptocurrency at a certain stage, and then selling it at a higher price. In order to buy and sell at the right time, you need to thoroughly analyze the market, use trading strategies, and apply technical and fundamental analysis.
  • Trading on Crypto exchanges. Cryptocurrency exchanges began to be created sometime after the appearance of bitcoin and quickly gained popularity among traders. Risk-loving investors trade here and often win because BTC is highly volatile. However, in order to receive a large income, you need to devote a lot of time to trading, work every day and, in addition to the trading itself, study analytical information. Besides, the choice of exchange is important.
  • Investment funds and projects. Foundations and projects are similar to ordinary banking institutions, but operations here is carried out only with digital assets. The principle of this way of investing is that market professionals use your funds to generate income, and they receive some percentage from this.
  • Mining. For several more years this method was very attractive since there were not so many miners. Today, mining is of a larger scale and mining will require large capital investments. For mining, you need to buy special devices and notice that the mining market is quite competitive.
  • Trade with a financial service provider. Making a deposit to work with a financial service provider can be controversial and risky if you do not study the issue thoroughly. However, by choosing a regulated broker, you will be able to fully trade bitcoins.

Bitcoin cfd trading


The value and current rate of bitcoin are provided by the demand for it for payments and investments. From this point of view, bitcoin differs little from the dollar or euro, the exchange rate of which in relation to the national currency consists mainly of the balance of supply and demand. As a result, bitcoin has gained widespread popularity in online trading. Due to the innovative nature and excitement created around cryptocurrencies, digital currencies, especially bitcoin, experience sharp fluctuations in exchange rates, which allows trading using contracts for difference (CFDs).

Nowadays, CFD trading is gaining momentum and becoming a trading tool for advanced and novice investors. Bitcoin CFDs allow you to trade on cryptocurrency price changes without actually owning it. This means that investors can earn on price dynamics without the need to know how to buy and where to store bitcoins. This facilitates the investment process many times over. In this case, bitcoin can be considered not only a means of payment but also a full-fledged instrument for trading.

Bitcoin investing: the first steps


If you are looking to make a Bitcoin investment, here are a few things to keep in mind:

  • Find out how willing you are to take risks. The first thing you need to do is figure out how much you want to invest. Remember that cryptocurrencies are volatile investments, and the crypto market is relatively new. Besides, Bitcoins can make significant fluctuations during the day.
  • Learn as much information as you can. Before you start investing, you must have a good knowledge of the world of cryptocurrencies, as well as a good understanding of what each step means and what it is aimed at. What you need is basic knowledge about cryptocurrencies, markets, and trading.
  • Build a diversified portfolio. You need to choose which cryptocurrency you want to invest in. Of course, Bitcoin is the most popular and well-known digital money, there are many other cryptocurrencies, that are worth exploring as well.
  • Choose a financial service provider you can trust. Explore the information about the various brokers that provide the opportunity to trade CFDs on cryptocurrencies, because this will free you from the direct purchase of large amounts of bitcoin.

Legit bitcoin investment with InvestLite

Trading with InvestLite allows you to trade a wide variety of products, including the most popular cryptocurrency today, Bitcoin. Investors can get the most out of Bitcoin price movements, and at the same time, it does not matter at all in which direction the course is moving, because it all depends on the correct forecasts.

Trading CFDs on bitcoin relieves our investors from the need to open a digital wallet to store cryptocurrencies and take care of its safety, making a lot of effort for this. With us, you save time and money, as your trade is carried out in a convenient and powerful MetaTrader4 terminal.

Here, at InvestLite, all deposits and withdrawals are made through your trading account. We provide you with the security of your transactions as we are a regulated broker. In addition, we provide leverage to maximize your trading results.

Conclusion


Bitcoin investment is not a guaranteed way to get rich, but only a tool with which you can reach a new financial level. The emergence of bitcoin and its introduction into the financial sector has influenced the way society perceives global finance and banking, changed the stereotypical thinking of people, and created many opportunities for investors who want to try their hand at something new.

It is important to remember that the history of the Bitcoin rate cannot be used as a forecast of the future rate. If you want to try Bitcoin investment, you need to consider all the risks, just like when investing in any other cryptocurrency. Also, the cryptocurrency market is known for its excessive volatility, which may cause concern for many traditional investors working in regulated markets. However, this is not a desperate situation, and today a lot of investors have already achieved their financial goals by investing in bitcoin. The path of each investor is unique, promising, and moderately risky.

In general, Bitcoin investment is one of the most interesting and at the same time controversial transactions that investors make. To avoid losing funds, you should not invest more than you can spend and choose time-tested assets and long-term strategies, as well as a regulated financial service provider.

FAQ


How do i invest in bitcoin?

There are several ways to invest in Bitcoin, and we offer to buy and selling Bitcoin on our online platform.

Can you lose money on bitcoin?

Investing in Bitcoin can be quite risky because this cryptocurrency is volatile. Anyway, choosing the right strategy and making the right forecasts can help you to minimize risks.

What is the easiest way to invest in bitcoin?

The simplest way to invest in Bitcoin is trading CFDs, which do not require a direct purchase of the asset.

How can i earn bitcoin fast?

You can buy Bitcoins on the Internet or in person.

Who owns the most bitcoin?

It is considered that Satoshi Nakamoto, the creator of bitcoin now owns a million bitcoins that are spread across hundreds of wallets.

Which cryptocurrency is best to invest in 2020?

The cryptomarket is sometimes difficult to foresee, but no doubt that it is better to invest in cryptocurrencies that have high liquidity and options in trading. Many investors choose Bitcoin because it is the most popular one.

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