So cryptocurrency doesn’t seem to go away any time soon, and even if it does, it would definitely not go away without a fight. You might remember when Jamie Dimon, the CEO of JPMorgan Chase, made a statement calling bitcoin a fraud. He said it is eventually going to blow up and make anybody who invested money in it look stupid. This certainly made a lot of people angry, but at the same time it was amusing, because right after he said this, his daughter emailed to him saying, “Dad, I actually own bitcoin and I’m making money on it.” This was definitely awkward for Dimon.
At the same time that Jamie made his statement, China announced that they are going to try to ban bitcoin. This news sent bitcoin plunging down to about $3,500 a coin. After that, just about a month and a half later, bitcoin shot up to $7,300 a coin, multiplying people’s money to more than two times in just a few weeks. That’s crazy! Even an average stock market would turn to about 10% a year, and to think the bitcoin investors were able to more than double their money in just a few weeks was insane! If you’re unfamiliar with what cryptocurrency and bitcoin is, you can read a beginner’s guide to the ‘Internet of value’.
Today I’m going to go through 4 things you need to know about bitcoin, before you invest your money in it. As always, you are never guaranteed to make money when you invest in anything. You might even lose money when you invest. So you should always speak to a professional in your area, so that you understand all the local laws and regulations, as well as the risks that govern investing.
Don’t invest on emotion
This one is more of a general investing advice. It doesn’t just apply to cryptocurrency. Do not invest on emotion! Invest on the financials. The most common argument these days on the dilemma to whether or not invest in cryptocurrency is that if you invested a 100 dollars in bitcoin today, it would be worth more than like 200 million dollars in a few years; so you don’t want to miss out on this opportunity. While that’s absolutely nuts that that has already happened, we can’t go back in time. It’s an emotional argument. It’s not a financial argument. The past performance of an asset or service does not indefinitely predict its future. So just remember that you’re buying bitcoin today, and not back in 2010. Nobody can predict if a cryptocurrency is destined to go to the moon or stumble back to earth. Since the crypto world is so new, the values are very volatile, which means it can shoot up very quickly as it happened in the past, and it can crash into a dip just as quickly as well.
Know what you’re buying
Bitcoin is a form of cryptocurrency. It is a decentralized digital currency traded on a distributed ledger. This means bitcoin is neither regulated nor controlled by the government. It is also not controlled by any private entities such as the Federal Reserve or the big banks. Now this is great news for the crypto enthusiasts, as they know these entities cannot influence cryptocurrency values, like they can do with fiat money by printing more of those. But this is sort of bad news for them as well, as they know these entities would certainly not want to lose their dominance. They are going to do whatever they can to block or ban cryptocurrency, as we observe that’s been happening in various countries from time to time.
Furthermore, bitcoin is traded in a peer-to-peer network, meaning the users of bitcoin monitor its activity. This peer-to-peer system is quite new, which makes it problematic to be used as a currency. Most places do not accept bitcoin yet. But at the same time, many people are excited because a couple of giant companies are considering investing in it for the past few years. For example, Amazon bought three crypto-related domain names in November 2017.
So what does this exactly mean? Only time will tell. But if companies like Amazon start using bitcoin as a means of payment in the future, that would definitely be a game-changing event in the crypto world.
You should also be aware of how bitcoin is valued. The price of bitcoin is based on what people are willing to pay for it. The concept goes back to supply and demand. One on hand, as more and more people hear about it through bitcoin brokers and crypto-related news portals, there is a huge influx of bitcoin buyers, which raise its demand. On the supply side, the bitcoin was produced with a cap. Originally, there could only be 21 million bitcoins in existence. Once those 21 million bitcoins are created or ‘mined’, nobody can produce any more of these coins. As we know, when the demand for something rises while there’s a limited supply of it, its price would go up.
Know how to buy bitcoin
If you decide to buy or invest in bitcoin, you have to use a cryptocurrency exchange that allows you to buy and sell bitcoin. Most regular exchanges don’t allow you to trade cryptocurrencies. Different countries have varying regulations. We have seen countries like China and Vietnam try to ban certain kind of exchanges. So you need to do your research on what’s allowed in your area.
If you’re interested to know about the challenges different countries have been facing in regulating bitcoin, you can read an article on it by clicking here.
Don’t get greedy
Yes, I know that bitcoin has gone up from 0.003 cents to over 7,000 dollars a coin, but remember what I said before. Its past performance cannot be the sole factor to determine its future value.
If you made a profit that you are happy with, it’s okay to take the profit and sell. I know a lot of times people might be thinking something like, “I don’t know if I should sell it right now. What if bitcoin jumps up to 20,000 dollars a coin? I’m going to miss out on so much of money!” Well, if that’s what you’re worried about, then you can sell in phases. This way if bitcoin does go down, you would have already sold some of your shares and captured some of the profits. If you think it’s a good buying opportunity, you can go ahead and buy in this dip. Now if bitcoin does end up going higher, you would have already taken some of your profits, and you still get to benefit from the continued game.
Get the Crypto Ultimatum Training System
If you are planning to step into the cryptocurrency world, I would highly recommend you to learn how successful crypto-preneurs manage to make big profits in a short span of time via crypto trading.
The simple fact is I cannot predict the future, and neither can anybody else in the world. So don’t believe somebody who tells you otherwise.
Let me make one last quick point before closing this piece. Historically in any asset class, the people who have been burned the most were the ones who believed that nothing could go wrong.