Over time, people’s reliance on the internet to fulfill their necessities has increased dramatically. Undoubtedly, bitcoin a well-known and the most prominent cryptocurrency across the globe has managed to gain much traction from the investors.
Bitcoin is publicly accessible to all the retail investors across the globe and provides an opportunity for them to delve deeper into an entirely new asset world-class. Crypto investment may sound a bit scary to a newbie investor, but if you are completely aware of the bitcoin ecosystem you won’t find any trouble.
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Why Invest Your Money in Bitcoin?
It sounds a bit overwhelming and unbelievable to someone that bitcoin can be worth millions of dollars. The most obvious question that might ponder here what makes bitcoin so much valuable?
To be honest, to say, scarcity of bitcoin makes it valuable. To further elaborate this fact, let’s take an analogy of gold. The quantity of gold in this universe is limited. As the new gold is mined, the net reserves of gold become less thereby scarcity of gold reservoirs and the resources required to mine gold disappointed an individual or the government to mine more and more gold. Thus, we can say Gold is a deflationary asset instead of an inflationary asset the same goes for the bitcoin.
Whenever you were intending to invest your valuable money into crypto assets or bitcoin, you’ll most likely be overwhelmed by the question “How much should I invest in bitcoin?” or “Why should I invest my money in crypto-backed assets?” these sort of question might confuse you at the beginning. In order to secure yourself from the fear of risk and take the optimal margin of safety, you need to seek guidance from a mentor. Your mentor will walk you through all the core aspects of the crypto market and make you capable enough to make smart investment decisions in which the probability of losing money is minimum.
I expect most of my readers don’t have their mentors to teach them crypto investments. Keeping this fact in mind, I’ve decided to share my personal experience with all of my potential readers seeking to earn passive income via crypto trading.
Fundamental of Investments
Before starting our journey, I want to make you all understand the most fundamental principles of investment. These rules are valid for all investment vehicles.
Passive Stream of income
A wealthy person does not rely on a single stream of income, but instead he generates multiple passive streams of income. For instance, Warren Bufford, a multi-billionaire person has 82 streams of income. Whenever passive income exceeds your expenses, you can give up working and start relying entirely on the passive stream of income. Smart investors invest 50% of their capital in different investment vehicles.
Margin of Safety
Don’t borrow money from the creditors to invest it somewhere, unless it’s a safe investment vehicle that will generate recurring revenue for you just like real estate or rental property. Cryptocurrencies do not generate recurring revenue for you. So never borrow money on a fixed markup to invest in cryptocurrency, and stay away from investing money more than you afford to lose.
Investment Guide
Now let’s delve deeper into the crypto world. In this short and brief article, I’ll walk you through 5 factors that should be taken into account while deciding how much to invest in bitcoin.
Risk Assessment
Crypto assets are excessively volatile. Of course, many retail investors believe in the future of cryptocurrency. While making a decision how much should I invest in bitcoin think of an amount you feel comfortable losing.
Think of the money how much can you invest. Picture this amount and imagine your future.
- Let’s say you’ve invested $12,000, will you feel comfortable if you lose all of your investments?
- Will you criticize yourself in the upcoming future for your decision to invest money in cryptocurrency?
If the answer to any of the aforementioned questions is “maybe yes,” you need to lower the amount you’ve decided to invest in the crypto market and ask these questions again.
Profit Optimization
Even though it sounds a bit silly advice, but you need to take it into account before investing your spare money to buy bitcoin. If you invest an amount into the cryptocurrency that can make you feel disappointed what will happen if you get 20 times that amount?
Back in 2107, many retail investors experienced a sudden boom in the crypto market. Peoples become millionaires because they’ve decided to invest all their savings in bitcoin. After the sudden boom in the crypto prices in the year 2017, it experienced a recession period in the year 2018.
Only smart investors can end up making money with the crypto investment so think twice before devising your investment plan. Try to realize what will be your reaction if the amount you’ve invested in bitcoin has compounded 20 times.
- Will you purchase a bigger apartment, go for a holiday or purchase a luxury car
- Will you become bitcoin aficionado and never sell your crypto assets.
Try to stay ahead from the rest of the curve by avoiding speculative investment and emphasize on the smart investment.
Timing
I expect you’ve heard too much about bitcoin particularly during the era of the cryptocurrency boom. Mainstream media and the peoples pay special heed to the burning issues just like the bullish return of the crypto market.
Are you aware of the fact the cryptocurrency market is comprised of repetitive market cycles? These market cycles have a period of 1 to 2 years. During these market cycles prices appreciates, and then the prices enter into the bubble territory due to the bullish investments of the retail investors. After a certain period, the bubble burst and the prices will dramatically dropdown.
That’s why you need to pay special heed to the timing. Timing plays a significant role in transforming your journey and the way you perceive the crypto market. When devising an investment strategy how much should I invest in the crypto market, just have a deeper look at where we’re now in these crypto market cycles.
To find information regarding this, head over to the global market chart of CoinMarketCap and try to analyze it thoroughly. During analysis, try to figure out the answer to these questions:
- Are we heading towards the bullish return of the crypto market?
- How long will the market bullish trend will pursue?
As you get closer to the bullish market, you must invest the least amount in the bitcoin.
Transformation of Mind
I never saw any crypto analyst or any retail investor who stick to his opinion regarding the buying or selling of cryptocurrency. People change their perspective when they come across the ever-evolving market. So, before framing your investment strategy leave a room to change your investment methodology in the future. The most prominent way to go through this strategy is to divide your investment over time. Invest the amount you’ve decided within the next three, six, or twelve months.
Invest progressively will allow you to test your investment methodology. For instance, you want to invest $12,000 over the next couple of months. But currently, the market is getting closer to the all-time high. Instead of investing $1000 per month, you can optimize your investment amount so you can compensate for the expected loss.
Diversification
Cryptocurrencies do not have any direct or indirect relationship with any investment vehicle like gold, equities, bonds, and real estate. Do you know gold has a very strong correlation with the equity market? When the stock prices were drop-down, gold prices soar so both asset classes are negatively correlated. But bitcoin or any other cryptocurrency does not have a direct correlation with gold, bonds, or stocks.
Never keep your all eggs in one big. You’ll keep on winning consistently, but in case you lose you’ll be deprived of your whole assets.
Conclusion
Before start investing in bitcoin or cryptocurrency, it’s important to know how the bitcoin ecosystem works. In order to rescue yourself from financial calamity, try to understand how bitcoin works, how to secure it, and what differentiates it from the fiat currency.
