Vital Questions to Ask Before Buying Bitcoin
By asking yourself the right questions and finding answers to them, buying Bitcoin will be a decision that enables you to boost your finances.
Statistics show that there have been lots of first-time Bitcoin buyers in the last year, even if the market is in the bear run, and it’s safe to assume that many more will come in the next year. A survey estimates that 19 million investors may start buying cryptocurrencies in 2023. Since Bitcoin is the market’s most well-known asset, many of these investors will gravitate toward it.
If you’re new to the crypto market, you might fear investing in Bitcoin due to its high volatility. However, seasoned investors like it especially for this feature because it allows them to register high returns on investment. While digital currencies’ prices fluctuate rapidly and wildly, Bitcoin’s value remains above average. However, before adding it to your portfolio, you should answer some vital questions.
What is Bitcoin?
Bitcoin is the oldest digital currency, created in 2009 by an anonymous developer or group of developers under the name Satoshi Nakamoto. Bitcoin is the most well-known asset in the crypto sector that uses cryptography to control the creation of new blocks and secure transactions.
Why do you want to invest in Bitcoin?
Whether investing in Bitcoin is a good idea or not depends on your objectives and crypto trading skills. According to seasoned investors, there are several great reasons to buy Bitcoin, the current bitcoin price being one of them. However, you have to decide if adding crypto to your investment portfolio is a sound idea and if you want to buy Bitcoin to support the sector’s advancement.
Nevertheless, suppose you decided to join the crypto market out of fear of missing out or because you want to get rich overnight; you should reconsider your decision. Bitcoin and all the other altcoins are quite volatile, and it’s impossible to predict their evolutions. Crypto experts state that the investors who jump into buying Bitcoin because everyone is doing it or making quick money often end up panicking and selling when the market enters a bear phase. Buy Bitcoin only if you’re looking for a long-term investment.
How do I purchase Bitcoin?
Once you decide you want to buy Bitcoin, it’s crucial to pick a safe way to purchase it because the crypto market isn’t immune to scams, and you can lose your money if you don’t choose a reliable exchange.
If you want to buy Bitcoin, set up a digital wallet via a cryptocurrency exchange. Before using an exchange, please make a list of the most popular services on the market, and compare their advantages to choose the one that best fits your needs.
What crypto investing strategy do you use?
Your crypto investing strategy is your plan to buy and sell Bitcoin, and you should focus on developing one. Regardless of your preferred tactic, figure out how much you want to spend on buying Bitcoin and how often you want to purchase new coins. Experienced investors recommend not putting a big chunk of money all at once but establishing a long-term investment plan. Decide how much you want to spend over an extended period and divide the amount into a series of purchases. Depending on your objectives and budget, you could buy $500 of Bitcoin every month or $500 weekly. Spreading out your money this way will work well, especially because you can buy crypto when the prices drop and sell it when they spike again.
Your strategy should also include circumstances on when to sell Bitcoin. Establish a timeframe or price target, so you don’t sell as a result of panic or other external factors.
Do you afford to lose money?
Because of the market’s volatility, cryptocurrency (Bitcoin or another) isn’t the place to invest money if you intend to use the finances any time soon. Investors prefer to approach Bitcoin and other digital currencies carefully and put in only the amount they’re comfortable losing. To decide how much you afford to lose, you should do the following:
– Create a balanced investment portfolio that contains no more than 5-10% of high-risk assets, like Bitcoin. In case your Bitcoin investing strategy fails to work, it’ll be only a minor setback that won’t obliterate your portfolio.
– Create an emergency fund with enough money to cover 4-6 months of living expenses. If you experience financial issues due to your crypto spending, you’ll still be able to pay your expenses.
How are you going to deal with price swings?
As mentioned earlier, cryptocurrencies are volatile assets, and you should be ready to deal with some price swings if you invest in Bitcoin in the long run. Take a closer look at Bitcoin’s evolution, and you’ll notice that the token went from $50,000 to $60,000 and then to $30,000 in a couple of weeks.
Before adding cryptocurrency to your investment portfolio, decide how to deal with dramatic price swings. One morning, you might find out that Bitcoin’s price dropped 50% or spiked 40%. What will you do? Will you sell, or will you wait to see where the market is heading?
Situations like these happen regularly when buying cryptocurrencies, and that’s why you need to approach Bitcoin as a long-term investment and create a strategy to support your efforts.
What should you do before buying Bitcoin?
Before putting your money in Bitcoin, ensure you understand how the crypto market functions and the risks associated with the oldest cryptocurrency. Bitcoin is a speculative investment, and its value experiences drastic fluctuations. However, you can predict some market changes if you research it and stay up to date with the events that could impact its movements. Knowing the factors that could affect Bitcoin’s price (like Ethereum’s Merge) is crucial before buying any coins to identify the ideal moment to purchase them. And finally, decide what digital wallet works best for the investment strategy you want to employ.
The above questions should help you figure out how to buy Bitcoin to gain a return on your investment.
