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5 Ways to Smartly Invest in Bitcoin

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Cryptocurrency has gained significant traction in recent years and has caused quite an excitement, especially in the investment sector. In the first week of 2021, the price of Bitcoin managed to hit a new record high of $42,000. However, right after that, on January 11th, Bitcoin’s value dropped by more than 20% while some other cryptocurrencies fell still further. 

Clearly, you need to know smart ways to invest in Bitcoin to stay afloat in this ever-fluctuating market.

The massive and volatile swings in its prices show how volatile the crypto world is. It can get really scary, especially if you’re new to the unexplored world of digital currencies. Make a few bad initial decisions, and you could be deep in debt in no time. Here are 5 smart ways to invest in Bitcoin that are going to push you in the right direction.

1. Only Invest What You’re Willing To Lose

Taking financial risks might make some people nervous, while some take complete advantage and jump on a potential opportunity. Advisably, if taking risks makes you nervous, think twice before investing in crypto as it is extremely volatile. However, if you’re a risk-taker, invest only a portion you’re willing to lose in case things go south.

You should only invest the amount that you can afford to lose. The prime purpose of investment, be it traditional or digital, is to add more value to your existing wealth and not to lose it entirely. Therefore, it is cautious and one of the smart ways to invest in Bitcoin. This way, even if you suffer losses, they won’t completely strip you of your wealth and won’t be destroyed.

Most importantly, there is no rule that you should invest the same amount as some other person did. Just because “A” invested Rs. 10,000 doesn’t mean you have to do the same. It is your decision if you’re willing to risk, and if you’re not, that’s your choice as well. What matters is that you invest within your limit, that is, what you’re willing to lose, and this is one of the smart ways to invest in Bitcoin.

2. Maintain A Healthy Crypto Portfolio

A healthy crypto portfolio involves investing in more than just Bitcoin. This strategy helps to minimize losses and maximize profits. Yes, it has its complications, but it’s better than investing in just one coin. Cryptocurrencies are extremely volatile in their pricing, but all of them simultaneously failing doesn’t seem likely. 

Diversifying your portfolio by investing in different cryptocurrencies will allow you to hedge the potential risks involved.

By doing this, you won’t be too exposed to any single investment. Winning some and losing some is better than losing it all. Diversification is one of the smart ways to invest in Bitcoin and can help stabilize gains. Indeed, you won’t be able to reap all the benefits of a skyrocketing coin but you also won’t lose everything in case its value drops down.

3. Don’t Invest Based on Hype

Just like with any other traditional investment, ignoring the hype and filtering out the noise regarding Bitcoin will be crucial. Where investment in Bitcoins is concerned, your decisions shouldn’t be based on what others are saying. A smart Bitcoin investor never makes decisions based on hype and noise as it is highly risky. Relying on only what the crowd says about Bitcoin is not wise at all. 

The price might crash suddenly, leading to a terrible loss. Making money in the Bitcoin market isn’t easy. You need to have patience and the right knowledge to make worthwhile profits.

Rather, smart ways to invest in Bitcoin would be to thoroughly study the market, use the knowledge gained to take calculated risks, and ask for guidance from experts if necessary. It is important to seek advice only from people who have sufficient knowledge about trading and investment strategies, and picking the right set of people can be a hard task. Doing so will allow you to form your own strategies and successfully filter out unwanted hyped-up information.

4. Start small, rather than big

Given its short history yet highly unpredictable behavior, it is usually wise to keep your initial investment in Bitcoin relatively limited, and it is considered as one of the smart ways to invest in Bitcoin. In a way, buying Bitcoin is much like buying any other currency. You always need to be mindful that its price rises and falls compared to other currencies.

Even the most experienced investors have allocated just a single-digit percentage of their capital to Bitcoin, investing the rest on less volatile assets. Despite the hype and forecasts, maintain your investment discipline by not getting swept up by promises of gigantic upswings.

5. Keep it safe and secure

Many crypto exchanges continue to suffer the occasional hack even today. It is extremely important to choose a platform that has best-in-class security that invests in regular security audits to ensure a highly secured cryptocurrency trading platform.

Since Bitcoins do not exist in physical form, seasoned Bitcoin investors store them in digital wallets. A hardware wallet is a handheld, offline device that securely stores the private key necessary to transfer your Bitcoin holdings from one place to another.

Many investors follow "seed backup", which is a backup of the phrase (i.e. a set of words) that lets you access your Bitcoin wallet. People holding large quantities of Bitcoin engrave their seed phrases onto metal plates and then store these plates somewhere safe (such as a bank deposit vault).

The appeal of Bitcoin's 21-million finite supply became more pronounced in the context of the 2020 coronavirus pandemic

But even before the COVID-19 pandemic, Bitcoin has enjoyed significant longer-term price increases. It hasn't been a smooth ascent, though. Over the years, Bitcoin's price has bounced all over the place, sometimes plunging by hundreds of dollars in hours. Given such price swings, Bitcoin has provided investors with higher than average returns in exchange for taking on higher than average risk.

To make a profit from investing in Bitcoins, you have to carry out a deep study. This way, you’ll be more knowledgeable about them and understand the utility it contributes to the crypto world. In this form of investment, you don’t have to gamble to make a profit, so be careful with whatever decisions you make because the worst thing you can do is to invest in cryptocurrencies you know little or nothing about.

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Nischal Shetty

Nischal Shetty

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WazirX

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