Everyone is talking about Bitcoin these days, it’s the new hot trend in the market around the world. The bitcoin and cryptocurrency market has got a lot of lime light and interest from investors. Many professional and beginner traders started to involve bitcoin and cryptocurrencies in their portfolio to diversify investments. The cryptocurrency market is mostly compared to stock or forex markets but has many differences that make it a lifetime investment opportunity. The majority of the cryptocurrencies are unregulated and allow people to trade for goods, services or money without the involvement of any central banks or government. Bitcoin is known as the money of the Internet and can be instantly transferred with very low fees across the world between two parties.
I have been trading and investing in Bitcoin since a very young age and hence I have obtained a fair bit of knowledge and experience with it.
Let me share a few fundamentals with you.
- Highly Volatile
The market is highly volatile as compared to the stock market or forex market. The average volatility of Bitcoin is around 5% which means the price will move around 5% either side daily. That means the traders have daily opportunities to make profits that are made in weeks or months in the stock market.
This is also a good thing as you have the opportunity to make fast money. If you are good at chart reading and risk management then the Bitcoin market has a lot of opportunities to make handsome profits. Some new investors may think volatility is bad for the market but the cryptocurrency market is run by the buyers and sellers. There is no one to set the prices or trigger the circuit breaker.
Bitcoin is a peer-to-peer network that allows users to send money directly from one party to another all over the world without the involvement of any central bank or Government. The price of fiat currencies does not fall overnight that gives them the trust of investors and consumers. The Bitcoin and cryptocurrency market are not controlled by any central authorities meaning the price of the asset is totally in the hands of the buyers and sellers. The Bitcoin market works on demand and supply rules but sometimes some external factors affect the price and the market gains or loses 10-20% just in a few hours.
There is no-one to help you if you did something wrong in transactions. If you are using a bank or regulated authority to send transactions then if something is wrong with your transactions you can complain about it and the bank will help you. But in the case of Bitcoin, the transactions are non-reversible and once a transaction is confirmed the money is gone permanently.
- The Trade Volume
Before investing in any cryptocurrency you should check the trading volume and available exchanges for that coin. Bitcoin and the top 10 cryptocurrencies are listed on almost every exchange and there is very good liquidity for them.
But if you are looking to invest in other altcoin or a new cryptocurrency you should check the exchanges and trading volume of the coin. I (Benjamin Gimson) recommend you to only invest an altcoin that are listed on more than 5 big exchanges and have good daily trading volume.
Low trading volume means anyone can dump or pump the coins with a very low amount. You also get problems with buying low trading volume coins. Whereas high trading volume coins price is more stable than others and it is easier to buy big amounts.
- Portfolio Diversification
After the rise of Bitcoin, many developers come up with their own cryptocurrencies and some companies rise with it. At the time of writing, there are more than 5000 cryptocurrencies available in the market but always remember 95% of them are useless and probably scams.
Good investors never take all eggs in one basket means they never invest their whole amount in a single asset. Rather than they prefer to invest in multiple assets to maximize the gains, it doesn’t matter in which direction the market moves. You need to do deep research to find the best cryptocurrencies along with Bitcoin that will rise in the coming years.
New investors think Bitcoin has already increased a lot and owning 1 BTC is not possible for them now. So they choose other coins like Ethereum, XRP, Litecoin or other altcoins available in the market. Diversifying your portfolio is a good practice but don’t over diversify means don’t buy everything in the market. We recommend you must hold Bitcoin in your Portfolio.
- Select the right trading platform
The cryptocurrency market is traded online and there is no regulation on it. There are many exchanges available on the Internet that provide cryptocurrency trading. Always do research before choosing any cryptocurrency exchange to trade. Choosing the right exchange will save a lot of fees and also provide you multi-level security.
There are many factors that you should keep in mind before choosing the cryptocurrency exchange such as trading volume, number of coins offered, security levels, trading and withdrawal fees, deposit limits and the customer support of the exchange.
The Bitcoin and cryptocurrency market is very new and there are a lot of developments on the way. I, Benjamin Gimson, always do research before investing in any market. Use hardware wallets to store your funds safe for the long term. Bitcoin is the opportunity of a lifetime.