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Should I Invest in Bitcoin?

Should I Invest in Bitcoin?
Asked by
Karl Test categorie-icon time-icon5 months ago
1 Answer Answer Question

Justin Freeman
Answered time-icon5 months ago

The price history of Bitcoin shows dramatic moves to the upside, and downside, and this signifies an opportunity to make, or lose, money. Whilst other crypto currencies have gained some ground, Bitcoin remains the number one.  The sector as a whole is relatively new so choosing Bitcoin will provide access to an extended price history and greater amount of research materials.  If you’re new to trading crypto then Bitcoin would be a good place to start.

The price volatility stems from market participants having such a wide range of opinion on what Bitcoins true value really is.  Being a ‘disrupter,’ some of these participants have a vested interest in seeing its value and reputation diminished.  In the other corner, we have risk taking early adopters who sense a new paradigm will soon be with us and are able and willing to dismiss the negative reports against it.  Somewhere in between we have traders looking to profit from short term price moves or investors looking to take a longer term view in case Bitcoin does turn out to be the game-changer some see it to be.

Step one would be establish whether you want to invest or trade Bitcoin.  The former would involve holding for a longer period and be based on analysis of the fundamentals.  Trading of Bitcoin would be more short term in nature and involve treating it like any other asset available on broker platforms.

Step two would be ensuring you use a reputable broker.  Any confusion surrounding new and exciting developments in the market can act as a magnet to the unscrupulous and fraudulent. The investment approach will involve research and analysis that is itself intrinsically interesting.  To what extent will Bitcoin become part of or replace established centralized banking?  What does the scarcity of supply mean for prices?  Why has it fallen in price by 75% in the last twelve months? If after getting up to speed you decide to not take a long term position at least you’ll have got up to speed with a significant market event.  If you do decide to get involved you’ll have an asset in your portfolio that is likely to be very different in nature to the others assets you hold.  There could be some value in this diversification of your total holdings and you’ll always be able to use Bitcoin as a currency in its own right.

Trading price moves in Bitcoin involves trying to benefit from the confusion caused by the two different viewpoints not being able to reach a consensus.  You won’t even need to take sides as using a brokerage account also allows you to sell short as well as buy long.  Trading opportunities such as seasonal trends, including the ‘Bitcoin Santa Rally’ might make you a quick profit.  If this is the approach you take then, as previously mentioned, be sure to use a reputable broker platform, check the bid-offer spreads on price and keep an eye on the financing charges.

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