How Much Should You Invest in Bitcoin? [Factors to Consider]
Last Updated: February 2, 2023
The idea of investing in bitcoin may seem a bit intimidating. But the bitcoin market is ever-growing, with increasingly more people becoming investors. Are you asking yourself “how much should I invest in bitcoin”? This article addresses the issues of bitcoin investment and how to be an intelligent investor.
Is Bitcoin a Smart Investment?
Let’s check all the reasons about investing in BTC:
Starting With Bitcoin
Bitcoin is a powerful digital currency. It controls more than half of the cryptocurrency market capitalization. The cumulative market value of all bitcoins worldwide was $653 billion on May 30, 2021.
Bitcoins, recorded in a blockchain, are stored in a digital wallet, transferred to and from your wallet to another person. Like any other investment, if you wish to buy bitcoin, it comes with several risks. For example, the price of bitcoin might plummet, or a single online hacker or hard drive malfunction could wipe out your entire bitcoin holdings.
Bitcoin was the first virtual currency to give birth to the existing crypto ecosystem. It has had tremendous price increases, followed by brutal drops; yet, it has continually kept a significant amount of its prior gains.
Even though your choice of investing in bitcoin depends on your appetite for risk, consider the following reasons to invest in bitcoin.
Inexpensive and Quick
Sending any amount of credit takes only a few minutes. It doesn’t matter how much money you have or the destination of the transaction. Using your bank to transfer funds to another region of the world might be costly. The cost is either low or non-existent when done in bitcoins. Plus, there are zero geographical limitations, one of the top reasons to start investing in cryptocurrency.
Decreased Fraudulent Transfers
Bitcoins allow purchasers to conduct deals without providing the vendor with any private financial information. Bitcoins are similar to digital assets in that hackers are unable to access them. Simultaneously, your genuine identity is permanently concealed, helping to prevent targeted data intrusions.
Even though your data is wholly protected, the transactions are blockchains and, so, transparent to everyone. Each bitcoin transaction is visible, verifiable in the bitcoin network records, as well as irreversible.
Governments or central banks cannot generate, value, regulate, or distribute bitcoin. Since bitcoin is a product of the people, it is apolitical. It doesn’t have the same influence that FIAT money—government-issued currency not backed by a commodity, such as gold—has over the populace. There is no intervention from a third party.
|NOTE: According to a study conducted by the Kaspersky Lab, 19% of people worldwide have invested in at least one form of cryptocurrency. There are various forms of cryptocurrencies. To find out the best crypto investment, read more at bitcoin vs. Ethereum.|
Where to Invest in Bitcoin
Investing in bitcoin is similar to stock investments but significantly more volatile because of its immaturity. The following basic steps will help you with how to buy bitcoin:
- Create an account with a cryptocurrency exchange that allows you to invest in cryptocurrencies;
- Purchase Bitcoin (BTC);
- Deposit into your account;
- Sell your cryptocurrency.
These steps can vary, depending on the trading platform that you use. The following trading platforms are high on investors’ lists because they are the easiest way to invest in bitcoin.
Coinbase makes buying, selling, and holding bitcoin straightforward and safe. The $0.00 minimum deposit for a fraction of bitcoin contributes to the fastest way to buy bitcoin. In addition, you can use your bank account or debit card. It’s as simple as opening an account, validating your identification, and purchasing bitcoin on this exchange.
Coinbase also provides a Coinbase Earn program that pays you if you are ready to learn about cryptocurrency. Coinbase Earn is a terrific method to diversify your crypto holdings without having to invest any of your own money. With the Coinbase mobile app, you can track your bitcoin investment anywhere you go. Additionally, it allows you to keep your bitcoin, convert it into another cryptocurrency, use it on expenditures, and send it to others.
According to CoinMarketCap (a market analysis website), Binance is among the top 10 largest exchanges by trading volume. It’s a risk-free way to buy bitcoin. In addition, Binance has a more extensive assortment of cryptocurrencies and crypto-to-crypto trading pairs (nearly 50+) than its parent firm.
Binance provides a basic and advanced version to trade bitcoin. The critical difference between the basic and advanced versions is that the advanced version includes a more technical study of the value of digital currencies over time. The basic version’s dashboard includes many graphs and charts for the pairs you’re trading, as well as order books and transaction history.
The exchange, however, does not provide enough data to consumers about how their assets are protected. But it is possible to use two-factor authentication. Even if it isn’t the safest way to buy bitcoin, it’s still considered secure with its multi-tier system design.
The Gemini cryptocurrency exchange is one of the most popular platforms to buy, hold, and sell cryptocurrencies. It has over two dozen cryptocurrencies to choose from, as well as some interesting features. For example, customers in the US can trade a variety of cryptocurrencies on it.
Gemini has a minimum bitcoin investment, but it’s extremely low. The smallest amount of bitcoin one can purchase is 0.00001 BTC. Other digital coins have low investment restrictions as well. When new Gemini users deposit a minimum of $1,000 in bitcoin within 30 days, they receive a bonus of $150.00 in bitcoin. This is the easiest way to buy bitcoin and profit from it. While numerous cryptocurrency exchanges offer incentives, Gemini is a bit more substantial and easy to acquire. The platform has a mobile app, a desktop app for advanced features, and such features as Gemini Pay and Gemini Earn.
Although this platform is an excellent tool that allows cryptocurrencies to be used as a payment method at many shops, it isn’t quite as widespread. The charge structure of Gemini is competitive, especially for larger trades. On minor transactions, though, the costs can add up quickly.
|NOTE: Bitcoin is available on more than 200 trading platforms. So which is the top-rated bitcoin trading platform? We have an article that answers that question.|
Bitcoins are kept in a digital wallet. A hardware-based digital wallet or a web-based digital wallet are two possible places to store your bitcoins. You can store the wallet on a device or print it on paper, which will ensure that your private keys and addresses are secure while purchasing bitcoin.
The bitcoin owner cannot access the currency without private keys, which are stored in each wallet. Therefore, the most significant threat to bitcoin security is when an individual user loses or has their private key stolen. A user can also potentially lose bitcoins due to computer faults, hacking, or losing the device physically.
To ensure the most secure and safest way to buy bitcoin, consider the following bitcoin wallet options.
Hot wallets are another term for digital wallets that operate on such internet-based devices as PCs, smartphones, and tablets. Because they establish the private keys to your money on your devices, this could pose a risk. While a hot wallet can be helpful in immediately accessing and transacting your funds, it can also be inconvenient for storage after buying bitcoin.
A blockchain wallet is a type of cryptocurrency wallet that allows users to manage several cryptocurrencies. Blockchain Wallet is a virtual wallet platform created by Blockchain (a Luxembourg-based application development firm). Blockchain Wallet—available on mobile and desktop devices—makes it simple for anyone to interact securely with bitcoin and Ether using a clean, straightforward user experience. A blockchain wallet makes it simple to swap money. They are safe because transactions are cryptographically signed.
When investing in bitcoin, some choose Coinbase as a secure platform to make buying, selling and storing such cryptocurrency as bitcoin, Ethereum, etc. easier.
Cold wallets are the safest alternative for storage. These are wallets not linked to the internet; therefore, they are less likely to get hacked.
Trezor was the first cryptocurrency hardware wallet, allowing you to store, send, and receive various coins. It is is a multi-currency wallet, which means it can hold a variety of different cryptocurrencies. It’s the most secure method of storing your cryptocurrency. Your private key is always stored offline, which means it’s never connected to the internet directly.
While bitcoin is worth investing in, it must be safely stored—in stark contrast to holding your bitcoins on a desktop, mobile, or web wallet, where hackers are constantly devising ways to infect them with malware or viruses. This platform is helpful if you have a portfolio with a broad range of cryptos.
Read our full review of Trezor.
A secure chip and a proprietary operating system provide high-level security for the Ledger Nano S hardware cryptocurrency wallet. On the Ledger Nano S, traders can store over 1,100 coins and tokens—with Ledger supporting 23 of them directly and the rest through third-party applications.
The Ledger Nano S is less expensive than some other hardware wallets at $59.00, making it an excellent low-cost, high-security choice while buying bitcoin. The device’s private keys are never removed. Nano S users keep their private keys, unlike those who use hot wallets through cryptocurrency exchanges.
Read our full review of Ledger here.
|NOTE: Bitcoin lending is also a popular concept, where the lender lends bitcoin to the borrower and then receives it back with interest. Bitcoin lending and bitcoin storage are interlinked, as you must approve the transaction from your wallet. These are some of the bitcoin lending sites you should check out.|
How Much Should I Invest in Bitcoin?
How much should you invest in bitcoin or any cryptocurrency? The first step is to educate yourself about cryptocurrencies. Knowing the market and your limits, as well as possibilities, is essential.
Bitcoin should account for 5% to 30% of your entire investment capital—5% is regarded to be safe and 30% quite risky. The following bitcoin investment tips should ultimately decide your limit of investment.
The amount of money you are comfortable losing in the bitcoin market depicts your risk tolerance level. This amount should reflect the total monetary worth of your cryptocurrency investment portfolio, not a proportion of your entire market investment.
Typically, investing experts will tell you that it isn’t a loss unless you sell because the market always returns and that economic downturns are the ideal moments to invest more in anticipation of the inevitable surge. Unfortunately, while this principle may be true for the conventional financial market, the same cannot be applied to the cryptocurrency market.
As a result, the total risk tolerance debate in the crypto market boils down to how much an individual can lose collectively with bitcoin investment. Each investment is made with the understanding that it could go in a flash. While many precautions could be implemented, the reality is that any investment in the crypto market currently runs the danger of disappearing without warning. collectively.
A well-balanced crypto portfolio includes more than just bitcoin. By diversifying your portfolio and investing in various cryptocurrencies, you can mitigate the risks of investing. You won’t be overly reliant on any one investment. One of the wisest methods to invest in bitcoin is through diversification, which can stabilize gains.
There isn’t a straight answer for when to buy bitcoin because of the risky and volatile market. This is typically the case with budding industries with high prospective growth trajectories, which is why you want to be exposed to them in the future. The most practical technique is to gradually acclimate to your new role over months. It’s much more pleasant to ease into the market because this is a long-term game.
Once your portfolio exposure to cryptos and blockchain has achieved your set risk appetite, it’s time to feel more at ease. Because you’re making at least a 5- to 10-year commitment, it’s critical to be actively patient.
|NOTE: According to financial experts and bitcoin investment tips, you should follow the 50-30-20 rule, which states that you should spend 50% of your money on needs, 30% on discretionary spending, and 20% on savings. So rather than investing the entire 10% of your salary, you can consider investing a portion of the 20% you’re saving.|
Is it too late to invest in bitcoin? It’s never too late. The issue with bitcoin is that you can never get a fair deal. Each year, bitcoin is the best-performing asset, presently surpassing gold as the best-performing asset of the decade. It makes no difference when you buy it—only that you buy it.
The biggest threat to buying bitcoin has always been the possibility of it being legally prohibited, which was almost realized in 2017. With more and more adopters of the technology—such as PayPal and Square—the risk has diminished over time. Bitcoin’s chances of being banned are almost nil. But its chances of always being a big player in the cryptocurrency market are quite high.
The top bitcoins that you should think of investing in are Bitcoin (BTC), Bitcoin Cash (BCH), Etherium (ETH), Cardano (ADA), Dogecoin (DOGE), Binance Coin (BNB), and Polkadot (DOT).
You don’t need to purchase a complete bitcoin. You can acquire bitcoin in one-hundred-millionth of a coin amount—it’s divisible up to eight decimal points.
You have several options when investing money in bitcoin. You can invest in bitcoin startups, enterprises, bonds, or even develop a blockchain. Blockchain-based businesses are popular choices.
While neither of these cryptocurrencies is guaranteed to be a safe investment, bitcoin may be less risky than Ethereum due to its long history and broader brand awareness. Ethereum, however, may have more room for growth in the future.
There are many factors to consider before investing in bitcoin, but the safest is to invest 5% of your portfolio.