Bitcoin is the most volatile asset in the history of finance. Surpassing gold, surpassing oil, surpassing even the tulip buds, Bitcoin boasted an annualized volatility rating of 81% in 2022, sometimes even 100% in intraday trading. Such values make the asset ideal as both a trading instrument and as a means of storing value for future gains. Indeed, volatile assets are intended to appreciate over time, just like assets of luxury that gain value over time by virtue of the compounded history and rarity they exhibit, like pieces of art or antiquities.
Bitcoin can best be approximated to gold in its ability to retain and accumulate value, since, like gold, it is an asset with a high entry threshold and one that is prone to extreme price fluctuations. In fact, the fluctuations in price were so severe that many investors decided to take advantage of Bitcoin long before it had become restrictive for the vast majority of retail investors and average users that it was intended for in the first place at the stage of its inception. Having risen from a few dollars to an all-time-high of over $64,000 in 2021, and then plummeted to around $16,000 by the end of 2022, Bitcoin is a high-risk asset capable of making considerable gains and leaving one threadbare, depending on the entry point.
Bitcoin was initially designed as a means of value transfer and transacting for average people on the internet through a decentralized economy that was intended to be a free and trustless environment. Since then, the reality of the decentralized market has changed dramatically and altered Bitcoin’s intended purpose. True, there are over 17,000 retail outlets and online merchants on the global market who accept Bitcoin as payment, but one has to be fair regarding the actual number of users capable of and willing to make such transactions.
The price of Bitcoin, even at its lowest point in 2022, which stood at around $15,000, makes it unattainable for the vast majority of users who enter the crypto market in search of profitable investments. The same price factor is an impediment for holders of Bitcoin to part with it. Considering the possibility of appreciation that Bitcoin holds, it is unlikely that investors who spent thousands of dollars to buy the asset will part with it lightly for a purchase in an online store.
Gone are the days when Bitcoin could have been used to purchase a pizza or a cup of coffee, since the asset has turned into a purely investment instrument that is being accumulated by the so-called “whales” – wealthy investors who stock up on the asset in expectation of its appreciation. Thousands of Bitcoins are currently locked up on the wallets of said whales, essentially thinning supplies and maintaining the asset’s demand at a relatively high enough level to maintain prices at their meager level.
The price of Bitcoin is severely correlated with events around the world and the happenings of the decentralized market as a whole. The conflict raging in Eastern Europe is having a detrimental effect on the global economy, driving inflation in the world to double digits, energy prices sky-high, and cryptocurrency prices to the bottom of the last two years. The reasons for cryptocurrency price collapses are rooted in a two-pronged assault on the industry that is affecting Bitcoin as well.
The first factor is the political pressure being exerted on the cryptocurrency exchange industry, which is being forced to limit operations with users of sanctioned countries. Such an unfair state of things that contradicts the core virtues of a decentralized economy is detracting millions of users and the influx of their funds into the market.
The second factor is also connected with the exchanges and related platforms, which have lost much of their credibility in light of the loss of trust on the part of users after the failure of such platforms as Terra/Luna, FTX, AAX, Hoo and others. As millions of users were left with no ability to withdraw their funds, the remaining market participants started withdrawing their funds in a bank run that has already slashed billions off the capitalization of the cryptocurrency market at large.
In light of such a sad state of affairs, one might wonder whether your bank account is a safer place for your capital and savings. But just like stock brokers who believe in the possibility of asset rebounds and look for potential in commodities, cryptocurrency investors believe in Bitcoin and its ability to remain a promising asset capable of retaining and accumulating in value.
How to Invest in Bitcoin and Make Money Wisely
An investment strategy is more than just an approach to handling money. It is a whole system of personal values and convictions stemming from the individual’s risk appetite, level of market knowledge, financial education, experience, and intuition. Many starting investors believe that once they decide to enter the market, the first thing they should do is simply head off to the Internet and enter the search query “guide to crypto investing how” and they will find a ready-made playbook that will lead them to success and fortune.
Unfortunately, the reality of the cryptocurrency market quickly weeds out anyone who is naïve enough to believe in the existence of such a playbook. The cryptocurrency market is too dynamic to abide by any rules and the most users and newcomers can hope to gain the moment they sign up for the first time to an exchange is a first deposit bonus to start trading and venturing on the long and arduous path of cobbling together their capital.
Queries on “what is Bitcoin” will not help much either, since they merely give a general explanation of the technical aspects of the technology backing the coin, not its real potential or the way it accumulates value. What users should really look for is the ability to learn how to invest in Bitcoin and retain their capital while trying to increase it. The fact of the matter is that Bitcoin is severely overrated by virtue of it being the first ever cryptocurrency, but that does not make it an ideal asset.
Experienced cryptocurrency market investors and users will concur that Bitcoin is reserved for the heavyweights of investing – institutions and major companies that have both the resources and the time to accumulate considerable reserves of the asset and wait for it to appreciate. Average users who need to make a living and wield small amounts of deposits need not bother trying to save up to buy their first Bitcoin. What they should really start looking at is starting small to eventually grow to become Bitcoin holders.
True, some cryptocurrency market participants will claim that buying on the lows, as is the case on the current market, is the best approach for stocking up on Bitcoin, but the reality of the matter is that few actually have $16,000 available for making such a purchase. The prudent and more experienced investors will recommend a more diversified and coherent strategy of starting with investing into altcoins that are known to generate much higher yields than Bitcoin and are more accessible in terms of pricing.
Ethereum and Bitcoin Classic are examples of assets that have been known to outstrip Bitcoin in terms of profitability and price gains in percentage terms. In addition, both are more accessible in price terms and are more practical as expendable assets within various cryptocurrency, Non-Fungible Token and metaverse ecosystems. Some assets like Doge should not be disregarded, as they are also volatile and highly dependent on the opinions of their major holders like Elon Musk. It should also be noted that any engagement in such assets is a great risk in itself and any investor willing to step on that path must keep their eyes on the price charts at all time to promptly identify profitable entry and exit points so as to fix profits momentarily.
Stablecoins should be considered as well, if one is thinking of retaining value rather than increasing capital. Stablecoins like Tether are ideal for such purposes for a two-pronged reason. First, they retain value at a very high stability rate. Second – they can be used freely as a means of transacting and are accepted at a very large number of outlets and online merchant stores as a means of payment.
Wary and wise investors will always start small when taking on the path to greatness and accumulating capital. Few will have funds available to stock up on a significant number of Bitcoins, since acquiring even two will equal a ten-years’ worth salary for an average Nigerian at current prices on the market. As such, the best approach to investing in Bitcoin is starting small by accumulating capital through trading altcoins and various tokens.
Identifying potentially profitable tokens and altcoins is an art, but the broad availability of multiple educational and analytical resources on the market make it possible to heed the opinions of unbiased experts who share their visions and forecasts on the traction of specific assets. Though investors should approach such forecasts with caution as well, they are good starting points for the journey to the first Bitcoin.
Selecting the right approach to trading is just as vital, since some trading strategies are not suitable for everyone. Scalping is one example that is extremely intense and requires considerable personal courage and resilience to stress. Arbitrage is best suited for investors who know price ranges and have the ability and skill to maintain accounts across various exchanges. Long and short strategies depend on the grit of the investor in question and their willingness to exhibit patience.
Key Takeaways
Having one Bitcoin is not an end goal, but one of the stepping stones in the path to cryptocurrency market success or failure. There are numerous assets on the cryptocurrency market that have the same level of volatility as Bitcoin, but are much more affordable for the average investor. As such, every individual must decide for themselves if they have the necessary risk appetite, patience and desire to chase a Bitcoin and risk everything they have in the process.
