Bitcoin is one of the most exciting things to happen in the world of finance in a long, long time. The new digital currency is leading a wave of “cryptocurrencies” that may change the way we understand and use our money. For now, though, Bitcoin isn’t too popular as a currency: instead, it has drawn the attention of investors and speculators. Its massive increases in value have made millionaires out of some of its early adopters, and its plunges have afforded opportunities to skeptical investors, too. All of this has caught the attention of a new generation of investors — one that, by some measures, finds investing in bitcoin to be a more appealing prospect than investing in traditional stocks and bonds.
If you’re one of the people who is considering investing in bitcoin, read on. Below, we’ll lay out everything that you need to know about the exciting cryptocurrency, from the basics of how it works to how to buy and hold it — and even day trade it.
A brief history of Bitcoin
Bitcoin is not the first digital currency ever, but it is the first to gain major traction. Why?
The reason is security. In the past, cryptocurrencies were too vulnerable to hackers to be truly feasible for their intended purpose. Bitcoin, however, does not have such risks, at least not to nearly the same degree. That’s because it uses blockchain technology. The blockchain acts as a hyper-secure ledger that keeps track of which bitcoins belong to which people.
Bitcoin’s potential led to meteoric rises in value. It also led to plenty of imitators. There are a lot of blockchain-based cryptocurrencies on the market now, and you can invest in all of them.
To start investing, you’ll first need a cryptocurrency wallet. Cryptocurrency wallets are ways of holding your currency — including, but not limited to, bitcoin.
Buying bitcoin is like buying an asset. If and when you sell it, you’ll have to pay capital gains tax on your profits. For buy-and-hold investors, though, that reality is a long way off.
Speculation and more aggressive strategies
Do you believe in the future of Bitcoin? If so, you might want to buy some and hold onto it for the long term.
Even if you believe that Bitcoin’s value will go up in the long run, you should be aware that its value is likely to fluctuate in the short term. Bitcoin and other cryptocurrencies are fairly volatile and risky investments. But, in the world of investing, big risks can mean big opportunities.
Rather than simply holding onto bitcoin for the long term, you may decide to trade more aggressively. You may choose to sell and buy bitcoin and other cryptocurrencies frequently, attempting to dodge dips and ride big increases in value. Doing so will require you to really know your stuff — including knowledge about day trading and investing as well as the latest news about bitcoin and other cryptocurrencies.
Day trading bitcoin can be very lucrative. But do your research first: check out online guides on how to day trade bitcoin and be sure to read cryptocurrency news and financial ticker sites regularly. Get a sense for the market so that you can combine your practical knowledge with keen instincts, and you may just be able to time bitcoin’s market perfectly and make a tidy profit.
There’s a lot to know about bitcoin and other cryptocurrencies, but how involved you want to get with them is entirely up to you. From balanced portfolios and buy-and-hold strategies to high-risk, high-reward bitcoin day trading tactics, your financial future is yours to discover.