If you’ve followed the developments in the crypto world for the past few years, you would know that Bitcoin is the only cryptocurrency that consistently ranked at the top among the list of most desirable or popular cryptocurrencies. It even accounts for a significantly high percentage of the entire cryptocurrency market share. Bitcoin is also known infamously for its price volatility.
While the coin reached the $1000 mark in 2017, it hovered around $69,000 in November 2021. It is considered to be Bitcoin’s all-time high. But a quick look at the Bitcoin graph will show you how the same price came crashing to $35,000 in January 2022 before rebounding in the following months. Despite the substantial price fluctuations, it couldn’t scare the investors away from getting their share in this incredibly popular cryptocurrency.
If you’re planning to invest in Bitcoin anytime soon, there is a lot you will have to consider, not just the price history and future predictions. To ensure the basics are covered, we’ve listed five essential points you should know before investing in Bitcoin. So let’s quickly head to the points shared below.
Investing in One Whole Bitcoin is Not Necessary
A common misconception some new traders and investors have regarding Bitcoin is it should be purchased as a whole. In reality, you can own even a fraction of this cryptocurrency. Since Bitcoin generally has sky-high prices, it isn’t feasible for everyone to buy one entire Bitcoin. Luckily, Bitcoin is highly divisible. It can be divided easily up to eight decimal places. These small units are referred to as ‘Satoshi.’ So if you have limited investing power, you can also purchase a fraction of Bitcoin. Some crypto exchanges have a minimum purchase limit set for Bitcoin, but it is generally in the $5 to $10 range, making it reasonably affordable for most.
You Will Incur a Fee on Every Purchase
Crypto exchanges that buy and sell Bitcoin profit from ‘spread.’ It is the difference between the price crypto exchanges pay for Bitcoin and the price they sell it for. This difference is mainly in the range of 1% to 2%. Even if some crypto exchanges explicitly mention that they don’t charge any transaction fee, it doesn’t make your Bitcoin purchase free of a fee. But some crypto exchange platforms additionally charge a transaction fee, which can increase your investment cost. The additional cost shouldn’t scare you away from buying Bitcoin, but it should form part of your decision-making.
Bitcoin Can be Stored in Multiple Ways
Many traders and investors prefer to store their purchased Bitcoin in the default wallet made available by a crypto exchange platform. Although exchanges make a special effort to safeguard peoples’ owned cryptocurrency, chances of account hacking cannot be entirely overruled. If the account is hacked once and your Bitcoin is transferred elsewhere, there is no way you can get it back.
Hence, as a wise investor, you should either look for crypto exchanges with a strong reputation for securing cryptocurrency or look for other places to store the Bitcoin you’re planning to purchase. You should exercise extra caution while storing Bitcoin to prevent any instance of losses arising from hacking. Cold wallets, also known as hardware wallets, are popular and safe choices, as they store cryptocurrency in an offline mode.
Learn the Difference Between Bitcoin Trading and Bitcoin Investing
Before you buy Bitcoin, you should have a clear understanding of Bitcoin trading and Bitcoin investing. Bitcoin trading refers to the event wherein you buy Bitcoin thinking its price will go up in the coming days, and you will sell it off for quick profits. Bitcoin investing, on the other hand, refers to the event wherein you buy Bitcoin intending to hold it for an extended period, say a year or more. Investing can help you build a well-diversified portfolio, while trading should be approached with extreme caution. People should pick between Bitcoin trading and investing based on their personal finance goals and risk appetite.
Bitcoin Experiences Huge Price Volatility
Although Bitcoin enjoys the reputation of a top cryptocurrency, it doesn’t imply it is safe from extreme price fluctuations. Bitcoin has witnessed a colossal price rollercoaster ride since its launch. It started gaining attention when the price first crossed the $1000 mark. It later reached an all-time high of $69,000 in the following years and later rebounded after crashing to an all-time low. Hence, you should be extra careful while investing in Bitcoin.
Cryptocurrencies have always been a point of discussion among all classes of people. And with Bitcoin dominating the space, you cannot ignore it at any point. If you have always wanted to invest in Bitcoin, you can now make informed decisions by considering the aspects discussed in this guide.