MORE ABOUT HOW BITCOIN INVESTING WORKS
Investing in Bitcoin
You want to know more about investing in Bitcoin in a safe way? Then you are in the right place. We explain the working method and the various options and answer various important questions about Bitcoin investing
Are you thinking about investing in Bitcoin? That might be a good idea that could make you money. It can also be a bad decision, where you lose money. That’s the same as trading on the traditional stock market. The fact remains that you make a decision based on given data, which is why we will give you a brief introduction to Bitcoin and to investing and investing in this currency.
What is Bitcoin?
Bitcoin is a virtual currency, a so-called cryptocurrency. It is a fully-fledged digital means of payment, with which you can pay online and offline without the intervention of a bank. The difference with traditional currencies (such as euros or dollars) is that it is a decentralized currency. With the euro or the dollar, one party is in charge of the money. With Bitcoin, it’s not: it’s decentralized.
The developer behind Bitcoin saw that fewer and fewer people are paying with cash, and more and more people are using debit cards. This has made us more and more dependent on banks. According to the developer, this is a worrisome development, which drove him to start working with Bitcoin.
At Bitcoin, as said, there is no third party involved. There is no such thing as a European or national bank for Bitcoin. The coins do not exist physically, but only virtually. This works through thousands and millions of computers that work together to verify every transaction (so-called nodes). The network it is connected to is called the blockchain.
Any user can become a controller and keep a copy of a transaction. There are thousands of nodes all over the world. As a result, not one party owns Bitcoin, but the thousands of computers with the copy. That way, this currency is decentralized.
Bitcoin works like this: every transaction is checked by the nodes to see if there is enough balance. If there is, the transaction is processed and the balance is reduced. The recipient’s balance is increased. There is no bank to process or approve the transaction: you pay directly to the recipient.
How does investing in Bitcoin work?
Before we take a closer look at investing in Bitcoin, a warning is in order: investing involves risks. This is true for all forms of investment, including investing in Bitcoin. Only invest money that you can afford to lose: you can lose money. Turning your savings into cryptocurrency is not a good idea. Do you have some money you’d like to try investing with? Then read on.
In recent years, it has become clear that Bitcoin is a volatile currency. This means that the rates can fluctuate quite a bit. Sometimes this is a disadvantage, but in many cases it can also be an advantage: the currency can sometimes be worth a lot more than the euro. That’s why many people are interested in investing in Bitcoin, because its value increases significantly in the long run.
How to start investing in bitcoin?
First of all, it is possible to buy Bitcoin yourself and trade with it, or issue it to shares. In this way, you are a direct investor. You can also invest indirectly by investing in Bitcoin on the traditional stock exchange. It is also possible to buy so-called bitcoin futures through some Dutch brokers. In that case, the investor does not buy coins, but a contract with which the coin can be bought if certain conditions are met. This makes investing relatively simple.
The idea of a bitcoin future is that you make an agreement between yourself and the exchange, to buy the coins for a certain fixed price. In that case, for example, you agree that for the next three months, at the end of the contract, you can buy a bitcoin worth 7000 euros. Once the rate exceeds 7000 euros, your future will be worth more and, thanks to the contract, you will be able to buy the Bitcoin for a lower price than the current rate. Good to realize: investing in bitcoin future is something for advanced users. Otherwise, it quickly becomes complicated and expensive.
The easiest way to invest is to buy Bitcoin or other crypto coins yourself. The quickest way to do this is via a Dutch broker/exchange. Here you can also pay with iDEAL or Bancontact. Your euros are then immediately converted into Bitcoin. You can also buy crypto coins via an exchange, but it will take a few days before you receive them. Bitvavo is a good example of a Dutch exchange where you can buy Bitcoin directly using iDEAL and Bancontact.
Investing in Bitcoin: What are you really investing in?
Anyone who is new to the Bitcoin world would do well to ascertain the nature of the investment. What will you invest in if you decide to join? Many people think that investing is a way to get rich quickly. In some cases that’s true, in others it’s not. There is also a large group that sees this Bitcoin mainly as a new and exciting technology. They don’t want to get rich, they want to grow the currency, make the network more valuable, and promote the technology behind Bitcoin.
That’s what you really invest in: the technology. A large group of investors think that Bitcoin can really have a disruptive effect on the economy. The euro could become worthless, which could make everyone want to trade in Bitcoin. That’s acting from an ideological point of view.
So everyone has their own reasons to invest in Bitcoin. A higher market value is a good thing. For you, the reason to invest in Bitcoin is something to ask yourself. So you can make a considered decision to participate, or leave the coin behind.
Is Bitcoin worth investing in?
A lot of people wonder: “is Bitcoin worth investing in? That question can only be answered by looking in the mirror and asking yourself what kind of investor you are. When it comes to investments, fear is always a bad advisor. On the one hand, you can fear that the price will go down again quickly, causing you to lose money, but it can also go well for a long time and generate a lot of money.
To be able to answer the question, you can ask yourself whether you can afford to pay for a price drop of tens of percent, or whether you already have nightmares of a ten percent loss. If you don’t lie awake from a loss, or are overly euphoric about profit, you can certainly invest in Bitcoin. If you don’t feel comfortable with the chance of losing, it’s better not to invest. Investing is only interesting with money that you don’t need in the short term, in the end.
It’s a fact that after 2017, the currency will have collapsed sharply. Many investors had to watch as their investment became worth less and less. But those who did nothing were rewarded. The coin rose again and became worth more. You always have to ask yourself what is the right moment to take your chance: can things only get better from here on in, or will there be another fall coming?
In principle, you can take as a rule that the current price gives a clear signal. This is what experienced analysts believe: if the value of the currency is much lower than the average value over a period of 200 days, you could consider buying the currency. It’s not just about the value, it’s about the technical analysis and the Bitcoin news. Positive news causes a rise in prices on the stock market. That’s when you pay more.
With all these things in mind, you can make your own decisions about whether it makes sense to invest in Bitcoin. Do you dare to take the gamble? That’s a risk you have to weigh up and take.
Bitcoin’s price: trading never stops
Unlike the regular fair, where there is a start and end time, the Bitcoin fair is always open. Trading never stops. Not even on weekends or public holidays. That’s because the currency is decentralized: it’s not tied to opening hours, locations or organizations. As a result, the Bitcoin exchange rate can always fluctuate. It’s a wise idea to start with Bitcoin staking.
The long-term exchange rate of the currency depends on the use of the currency. With higher usage, the currency is scarce and the price increases. In the short term, positive news usually drives the price up.
Euro’s and dollars can be printed indefinitely, but this is not the case with Bitcoin. There is a maximum number of Bitcoin that can be put into circulation. The more people use Bitcoin, the scarcer they become and the higher the price will be.
How can you base your investment on Bitcoin’s price? You could use a technical analysis to predict the price. You can also read more about the developments and expectations around the crypto coin: what new developments are coming? How many more transactions are being done? How many wallets are still open worldwide? And what about the computing power?
By taking all these things into account and always keeping an eye on the stock market, you can define a strategy to trade better on the stock market for Bitcoin. It’s no different from the traditional stock market in this respect: you still have to make decisions based on predictions.