The Bitcoin Investment: What Could Have Been?

Bitcoin is a popular type of cryptocurrency that has seen a surge in interest and investment in recent years. With its value increasing by more than 763% in a year, it has outpaced traditional gains in the stock market. However, it is a highly volatile asset, prone to large and fast swings in value, presenting both an opportunity for large returns and a significant risk of loss.

Bitcoin's value comes from its finite supply, its use as a payment system, and its store of value. The anonymity and security of transactions, enabled by blockchain technology, have also made it an appealing alternative to fiat currencies.

Investing in Bitcoin is relatively simple and can be done through cryptocurrency exchanges, payment services like PayPal, and mainstream brokerage firms. However, it is crucial to understand the risks involved and to carefully assess one's financial situation and goals before investing.

Bitcoin's value and volatility

Bitcoins Value and Volatility

Bitcoin's value comes from its finite supply, its store of value and its payment system. Bitcoin is still a nascent asset class and is still in the price discovery phase. Its value is derived from its decentralised network, meaning there is no central authority to intervene in the market. Bitcoin's value is heavily influenced by supply and demand. As a finite resource, the closer the circulating supply gets to the limit of 21 million coins, the higher the price is likely to climb.

Bitcoin's volatility is caused by several factors. The cryptocurrency industry is based on speculation, with investors betting on whether Bitcoin's price will rise or fall. This causes sudden price increases or decreases, leading to volatility. Volatility is a measure of how much the price of a financial asset varies over time.

Volatility means that an asset is risky to hold, as its value may go up or down substantially. The more volatile an asset, the more people will want to limit their exposure to it. Volatility also increases the cost of hedging, which is a major contributor to the price of merchant services. If Bitcoin volatility decreases, the cost of converting into and out of Bitcoin will also decrease.

Bitcoin's volatility is also influenced by media outlets and industry influencers, whose comments and predictions can create investor concerns, leading to price fluctuations. Rumours about regulations can also impact Bitcoin's price in the short term.

Bitcoin's value is also influenced by government agency views. For example, the Internal Revenue Service (IRS) considers Bitcoin a convertible virtual currency because you can convert it to cash. The IRS also considers Bitcoin a capital asset if it's used as an investment instrument.

Bitcoin's value is also impacted by its limited trading history. As a new asset, it doesn't have much of a trading history, making it difficult to evaluate.

Bitcoin's volatility is also driven by investors, particularly those with large holdings. If these investors were to liquidate their holdings, it could cause a panic that would see prices plummet.

Fear and greed are two primary drivers behind Bitcoin's volatility. Because of its well-known volatility, investors fear missing out on big upswings or falling victim to large downswings. This causes panic buying or selling, influencing demand and prices.

How to buy Bitcoin

There are several ways to buy Bitcoin, each with its own pros and cons. Here is a step-by-step guide on how to buy Bitcoin:

Step 1: Choose a Crypto-Trading Service or Venue

You can purchase Bitcoin from cryptocurrency exchanges such as Gemini, Kraken, Coinbase, Crypto.com, and Binance. These exchanges offer a range of cryptocurrencies and features, and some also allow users to remain anonymous. It is important to do your research and compare the fees and consumer protections offered by each exchange before choosing one.

Step 2: Connect Your Exchange to a Payment Option

Once you have chosen an exchange, you will need to connect it to a payment method. Most exchanges allow you to connect your bank account directly or link a debit or credit card. However, using a credit card to purchase Bitcoin is not recommended due to the high transaction fees and interest charges.

Step 3: Place an Order

After funding your account, you can place your first order to buy Bitcoin. Depending on the platform, you may be able to purchase Bitcoin by tapping a button or entering Bitcoin's ticker symbol: BTC. Remember that you don't have to buy a whole Bitcoin; you can invest as little as $25 or $30.

Step 4: Safe Storage

Finally, you will need to store your Bitcoin in a secure location. There are several options for storing your Bitcoin, including hot wallets and cold wallets. Hot wallets are online wallets that are connected to the internet, while cold wallets are offline storage methods such as hardware wallets or paper wallets. It is generally recommended to use a cold wallet for more secure storage of your Bitcoin.

Bitcoin wallets

If you're thinking about investing in Bitcoin, you'll need a Bitcoin wallet. A Bitcoin wallet is a place to store your digital assets more securely. There are several types of Bitcoin wallets, each with its own advantages and disadvantages. Here are some key considerations to help you choose the right Bitcoin wallet:

• Hot Wallets vs. Cold Wallets: Hot wallets are connected to the internet, making it easy to carry out transactions. However, they may be more vulnerable to hackers. On the other hand, cold wallets are offline and not connected to the internet, making them less susceptible to hacking attempts but harder to access.
• Device Compatibility: Ensure that the Bitcoin wallet you choose is compatible with your device's operating system. Some wallets are designed for mobile devices, while others are designed for desktop computers.
• Security: The level of security offered by different Bitcoin wallets varies. Some wallets offer two-factor authentication and advanced encryption protocols to protect your private keys. Others may offer hardware wallet support, allowing you to store your funds offline.
• Ease of Use: Consider a wallet with a user-friendly interface, especially if you're new to Bitcoin. Look for features like QR code support and integration with popular exchanges or platforms.
• Asset Support: Different Bitcoin wallets support different types and numbers of digital assets. Ensure that the wallet you choose supports the cryptocurrencies you want to invest in.
• Transaction Fees: Transaction fees vary among wallets and can add up over time. Compare the fees charged by different wallets before making your decision.
• Additional Features: Some Bitcoin wallets offer advanced features like staking, rewards programs, and integration with decentralised finance (DeFi) platforms. Choose a wallet that aligns with your investment goals and strategies.
• Trust Wallet: A self-custody wallet that supports multiple blockchains and millions of digital assets. It offers a user-friendly mobile app and strong security features.
• Exodus: A free wallet with a solid set of tools, including a mobile app, desktop app, and browser extension. It also has an integration with the Trezor cold wallet for easy transfer between hot and cold storage.
• Coinbase Wallet: A separate product from the popular Coinbase exchange, allowing users to store their crypto independently. It integrates easily with the Coinbase exchange and supports thousands of digital assets.
• MetaMask: A free and open-source wallet built specifically for Ethereum and ERC-20 tokens. It integrates with many "Web3" applications and offers staking and DeFi features.
• Ledger: One of the most well-known hardware wallets, offering strong security features, a mobile app, and educational resources. It integrates with popular software wallets and supports thousands of digital assets.
• Trezor: A high-end hardware wallet offering a touch screen interface and built-in features like staking and crypto purchases. It integrates with software platforms like Exodus and offers a mobile app and desktop app.

Bitcoin's future

In the short term, crypto analysts predict that the price of Bitcoin will continue to increase throughout the rest of 2024, with a potential peak of around $74,000 by the end of the year.

Looking further ahead, the minimum price of Bitcoin is expected to be around $100,000 in 2025, with a maximum of around $121,000. These predictions are based on technical analysis and the assumption that Bitcoin's value will continue to increase over time.

By 2026, the minimum and maximum prices of Bitcoin are expected to be around $143,000 and $175,000, respectively. And by 2027, the minimum BTC price might drop to $204,000, while its maximum can reach $249,000. These forecasts suggest that Bitcoin will continue to be a volatile asset, with significant price fluctuations in the coming years.

Bitcoin has become an increasingly integrated and accepted form of payment, with growing adoption by individuals and businesses. This trend is expected to continue, with more people recognizing it as a store of value and a means of payment.

However, it's important to remember that investing in cryptocurrencies carries risks due to their volatile nature. The price of Bitcoin can be influenced by various factors, including regulatory changes, economic conditions, and market sentiment.

Therefore, while Bitcoin's future looks promising in terms of price appreciation and adoption, it's essential to approach any investment in this asset with caution and a thorough understanding of the risks involved.

Bitcoin investment strategies

Bitcoin is a well-known cryptocurrency that offers an alternative form of money. It is important to note that Bitcoin investments are extremely risky and volatile.

• Buy and Hold Bitcoin Long Term: This strategy suggests holding onto Bitcoin for the long term, with the belief that it will appreciate in value over time. Investors may be inclined to sell once they are satisfied with the returns.
• Trade Bitcoin on Short-Term Volatility: This strategy involves riding the ups and downs of Bitcoin's price fluctuations, selling at the peaks and buying on the dips. It is a challenging strategy that exposes investors to significant risk but may compound gains faster.
• Diversification: Diversifying your investment portfolio is essential to protect against marketplace volatility. Bitcoin should be a small part of your overall investments, and you should only invest what you can afford to lose.
• Dollar-Cost Averaging: This strategy involves buying a fixed amount of Bitcoin at regular intervals, regardless of the price. By doing this, you can smooth out the volatility and enhance returns over time.
• Timing the Market: This strategy involves buying Bitcoin when the price is low and selling when it is high. However, it is a difficult and generally ill-advised strategy as it is challenging to time the market correctly.
• Alternative Investment Options: Instead of buying Bitcoin directly, you can invest in companies that utilize Bitcoin technology or blockchain-related exchange-traded funds (ETFs). This approach provides exposure to the industry while potentially reducing risk.
• Bitcoin Mining: Bitcoin mining involves allowing your computer to be used as a node for the public ledger, and miners are rewarded with actual Bitcoin for their contributions.
• Cold Wallets: Storing your Bitcoin offline in a cold wallet, such as a hardware device or paper wallet, is considered the safest way to protect your investment from potential hacks or losses.
• Understanding Risk Tolerance: Before investing in Bitcoin, carefully assess your risk tolerance and financial goals. Bitcoin is a high-risk, volatile asset, and you should only invest what you are comfortable losing.
• Starting Small: If you are new to Bitcoin investing, consider starting with a small amount, such as $10 per week. This approach allows you to gain exposure without taking on too much risk.

Frequently asked questions