Investment Types In Bitcoin and Forex Best Investments To Make Money

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Is Bitcoin a Good Investment and How Is It Valued?

What’s all the hype around Bitcoin? Will it ever replace money and is it a good investment? Let’s take a quick look.

Unless you’ve been living under a rock for the past five years, you are probably more than aware of the phenomenon of Bitcoin. But what actually is it? And could it ever replace traditional currency as a means of exchange?

Here we take a quick look at Bitcoin and explore its potential future as either an alternative to currencies or as an investment vehicle or both.

But first a required set of disclaimers.

This article is not intended to provide investment advice. All readers should please conduct their own thorough research before investing in any cryptocurrency. This writer does not have an investment in any cryptocurrency.

Can Bitcoin be converted to cash?

It most certainly can. By using the right steps you can readily convert Bitcoin into regular fiat currency and transfer it to your bank account.

But this, in a way, defeats the object of cryptocurrencies. They were, after all, devised to one day compete or even replace traditional currencies.

It was hoped from their inception that they could be used as a means of exchange. You could, and can today, makes purchases for all your favorite things.

But, as you may have noticed, very few businesses, and individuals, currently accept Bitcoin for payments. For this reason, it is understandable that if you do have some Bitcoin in your “wallet” that you might want to consider converting it to cash – – especially if it has appreciated against the dollar.

Of course, the opposite is also true. You may want to cut your losses after a “crash” in the relative exchange value of it and wait for a recovery.

Currently, there are several ways you can do this.

1. Sell on a crypto-exchange – You can use platforms like Coinbase or Kraken. This is one of the simplest and safest ways of doing this. Once sold you can then draw down to your bank account with ease.

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2. Make use of a Bitcoin ATM – At present there are an estimated 2,200 Bitcoin ATMs around the world. If you have one near you, this is another simple way of converting your crypto to cool hard cash.

3. Get yourself a Bitcoin debit card – There are some websites out there that let you sell your Bitcoin to them to credit a prepaid debit card.

4. Sell your Bitcoins to your friends or family – If you have like-minded friends and family who also have Bitcoin, you can directly sell yours to them for fiat currency. You will, of course, need to have a high level of trust between you for this kind of private exchange.

How does Bitcoin make money?

With all the news of Bitcoin’s gains and losses, you might be wondering if it is a viable investment vehicle to make some cash. But Bitcoin is not really intended for this purpose.

As we have already explained, Bitcoin and other cryptocurrencies, are actually meant to, one day, supplant fiat currency as a means of exchange for goods and services. The difference is that it should, in theory, make transactions incredibly secure and free of potential fraudulent activity.

But with regard to making money from it, you most certainly can. In fact, if you’d “invested” in Bitcoin from its early days you might well have become a millionaire today.

If you are savvy enough to buy low and sell high then you could, in theory, make a nice amount of cash as a consequence. But a word of warning, due to the high variability of cryptocurrency you can quite easily lose money too.

Its relative value against currencies is driven, like more traditional stocks, bonds, and other investment vehicles by its perceived value in exchange for something else. It is, in effect, an agreed amount between the buyer and seller.

Like any investment vehicle, you should not even begin to invest in something if you don’t really understand it or have a plan. While becoming a crypto expert is probably a bit OTT, you should garner a thorough understanding of what you are getting in to.

“You need to understand how it works as an investment, how liquid it is (ie, can you get out when you want to), the level of risk and what can drive the price up to and down.” – Martin Lewis of the Money Saving Expert.

If you want to speculate on the price of Bitcoin in the future, you should also be aware that this is actually a form of gambling. Especially if you don’t know what you are doing.

You should also be made aware that Bitcoin exchanges often have fees associated with them and mining bitcoin attracts overheads from electrical consumption.

The same is true for more traditional FOREX (Foreign Exchange). This can be the ruin of many a want-to-be investor the world over.

But that is not to say you can’t make a lot of money doing it. So long as you are aux fait with what drives changes (geopolitics etc) in relative values of currencies (and cryptocurrencies) you might want to risk a small amount of your actual cash.

But, ultimately, make sure you only invest, or risk, as much money as you can afford to lose. After all, history is filled with similar economic bubbles – – “tulip fever” anyone?

Is Bitcoin a good investment?

As nobody can actually see the future this is not an easy question to answer. In hindsight, if you’d invested early then yes Bitcoin has been a good investment, but what about the future?

Whether or not Bitcoin will continue to rise over time is anyone’s guess. There are many experts on both sides of the argument who will make well researched and constructed arguments to support their claims.

But, at the end of the day, none of them are able to actually see into the future. Anything can, and usually does happen.

When it comes to investing in anything, the golden rules of the game are to do your due diligence on the potential investment at hand. You must also develop an entry and exit strategy for your investment.

But something that does go in Bitcoin’s favor is the fact that it is a limited resource by design. With a total pot of 21,000,000 tokens built into the system, it should mean that it at least holds its value over the long run.

The main problem with traditional currencies is that central banks can, and usually will, create (print) more of them over time. This is the main driver for inflation and currency’s erosion in buying power over time.

With there being a cap on the total of Bitcoins that will ever be “mined”, their relative value against a constantly devaluing fiat currency should be a safe bet.

However, as economists like Carl Menger and Eugen von Boehm-Bawrk believed, the value of anything in this world is subjective. If nobody wants something, it doesn’t have any real tangible value to them – – they’d rather keep their cash in their pocket.

If someone values, or perceives the value of, their dollar or pound over something as ethereal as Bitcoin they won’t make an exchange. It is for this reason that many people have not signed up for Bitcoins, or other cryptocurrencies for that matter.

They simply either don’t understand it or would rather put their trust, rightly or wrongly, in more traditional backed currencies by institutions like banks and governments.

Is Bitcoin money?

If by “money” you mean fiat currency like pounds or dollars, then no it is not. Bitcoin was designed from the outset to be an alternative and replacement for, not another example of, fiat currency.

But Bitcoin could be considered a form of “money” called commodity money. This form of “money” is one of the one’s oldest with gold being a prime example.

But it should be noted this is hotly debated. For this reason, the very term cryptocurrency has been widely adopted to differentiate things like Bitcoin from other means of exchange.

Bitcoin is, by definition, a decentralized digital means of exchange. It has no central bank or administrator as fiat currencies or what most people understand as “money” do.

Bitcoin and other cryptocurrencies are a peer-to-peer system that cuts out any “middle men.” Transactions between peers are made using a node of networks where all transactions are recorded on a distributed, or shared ledger.

While, as we have seen, they can be exchanged for regular fiat currencies, their intended purpose was to be exchanged for goods and services between peers on their own.

But, like anything in life, cryptocurrencies’ perceived value is just that, at least when compared to alternatives like currencies. It is unclear if they have tangible value in and of themselves like, say, a ton of raw material or gold.

At the end of the day, what will determine Bitcoin’s future are, to name but a few concerns: –

1. Peoples trust, adoption, and acceptance of it.

2. That its finite nature is maintained at 21 million Bitcoins and perceived value against a tangible good or service.

3. How the electrical cost of bitcoin will affect its future in an ever-increasing environmentally friendly conscious society.

Ultimately, we’ll let you decide what you think about the future of this most famous of cryptocurrencies.

Should You Invest in Bitcoin? An Ultimate Beginner’s Guide

Contents

However, with a great investment strategy, anyone can enter the industry and earn profits from day one. Just know that there is no promise that you will reap any benefits. Therefore, the key is to invest an amount that you are comfortable losing as a way of incentivizing yourself to the market.

Is Bitcoin a Good Investment?

As with any other investment, nothing is ever for sure. There is no simple answer to this question. For instance, in 2020, Bitcoin’s value quickly spiked to an all-time high of $20,000 in December. For those who had previously invested in bitcoin, this was a great moment for them to cash in their large returns. However, since then, bitcoin’s value has slowly and steadily fallen lingering at lows of about $5,000. Those who bought bitcoin at a higher price before have admitted to making great losses today. However, the question of whether bitcoin is a good investment or not depends on how you choose to invest.

Bitcoin investing covers several activities such as buying and holding, bitcoin mining, and bitcoin trading. Buying and holding, otherwise known as ‘hodling,’ is the most common way of investing in bitcoin. If you intend on pursuing this strategy, only do it when there are clear facts that the prices will rise. Mining, on the other hand, has become extremely expensive and you should consider doing large scale mining for profit. Trading, on the other hand, gives you the ability to actively buy bitcoins at a low price and sell it at a higher price at short time intervals.

Why Invest in Bitcoin?

By now, you must have already decided to invest in bitcoin, or you are highly considering it. Below we list out reasons why you should invest in bitcoin.

  • Despite mass criticism over the years, bitcoin has proven that it’s highly scalable and reliable. Despite harsh criticism, bitcoin has managed to stay put in the industry with its fundamentals growing even stronger.
  • Bitcoin is extremely scarce. It has earned the name digital gold. It’s challenging and expensive to mine gold, which is true with bitcoin today. Moreover, there will only be 21 million bitcoins in existence ever, which makes mining the remaining ones extremely difficult.
  • Bitcoin is an excellent store of value. Bitcoin is becoming extremely popular in countries plagued by economic woes. Although it’s not a good hedge given its excessive price volatility, many tend to turn to it in times of economic uncertainty as a source of stability.
  • Cryptocurrencies are going mainstream and bitcoin is at the forefront of the revolution. It remains the most popular cryptocurrency with several real use applications under its belt. It’s the most reliable as most other cryptocurrencies trade to and from bitcoin.
  • The current market sentiment is low, which is the best time to invest in bitcoin. As Warren Buffet best puts it, “be fearful when others are greedy and greedy when others are fearful.” It’s the best time to invest in bitcoin.

Best Way to Invest in Bitcoin

While bitcoin access is still a ways off from becoming ideal, the investment options available today are more excellent than they were before.

Therefore, it’s imperative that you give these options your time and effort to evaluate what works best for you. The best technique of doing this is to play around with the options. For instance, you can start small like learning how to use a crypto wallet or buying bitcoin off an exchange. At this moment it’s a wise idea to spend extremely affordable amounts of cash that you would be comfortable losing.

Later on, when you are confident and ready, you can start investing more substantial amounts in bitcoin. Hodling is the most popular and best investment strategy for bitcoin. It’s also the best strategy for investing in bitcoin. You purchase bitcoin, whether it’s on a weekly, monthly, or yearly basis, wait for the value to rise significantly, and then sell. Selling when the prices are high is a great exit strategy. The challenging part lies in knowing when to enter and when to exist. The current bear market trend is a safe time to invest in bitcoin before the market potentially shifts to a bull market.

How Much to Invest in Bitcoin

As pointed out earlier in the text, bitcoin is a very volatile asset, and thus, you should never invest more cash than you can afford to lose. BTC investing is like playing the lottery; there is no guarantee that you will make any profits. Therefore, a good hack is to assume that any money you invest in bitcoin will you might lose forever. If at any one time that thought makes you nervous, then reduce your investment amount until you are comfortable. If you are intent on investing a more substantial amount into bitcoin, then start by trying to own a whole bitcoin first and then work your way to more considerable investments.

Should I Invest in Bitcoin?

Before you make any jump into investing in bitcoin, remember that bitcoin should be part of a proper financial strategy based on your goals, objectives, and current situation. If you decide to become a bitcoin investor, we recommend that you fit bitcoin as an alternative investment in your investment portfolio. With other asset classes such as bonds, stock, and cash, you can significantly reduce the portfolio’s overall risk through diversification.

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By Gabor Gurbacs, Director of Digital Assets Strategy, Kyle DaCruz, Product Manager, Active Strategies, and Denis Zinoviev.

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