It is no wonder that you want to learn how to invest in Bitcoin.
After all, who wouldn’t be interested in an asset that has skyrocketed from $0.001 to close to $20,000 in less than 10 years?
Throughout this article you will not only learn why it’s not too late to buy Bitcoin yet, but also how you can invest in Bitcoin fast and how you can store Bitcoin you bought safely.
Let’s get started!
After springing up from seemingly nowhere in 2009, Bitcoin has experienced what can only be described as a price explosion, climbing from close to zero value in 2009, up to a maximum value of over $20,0000 less than a decade later in December 2017.
To put this into perspective, in the three year period between January 2016 and January 2019, Bitcoin witnessed close to 800% growth, while the market capitalization swelled to rival that of many fortune 500 corporations.
Owing to its incredible growth, Bitcoin has earned itself the nickname ‘digital gold’, and has gained huge adulation among investors as Bitcoin investments completely eclipsed the returns seen by other financial assets.
Throughout this time, perhaps hundreds of thousands of investors have benefited from Bitcoin’s price growth, while some people have sorely missed out — big time.
In May 2010, a programmer completed one of the first known purchases using Bitcoin, when he spent a whopping 10,000 BTC to buy two large Papa John’s pizzas. At today’s rate, this would be the equivalent of spending over 50 million dollars on pizza!
Besides this, there have been numerous stories about people who have accidentally lost access to vast troves of Bitcoin, including one man who accidentally threw out a hard drive containing 7,500 BTC, currently worth close to $40 million.
The man now plans to recover the lost hard drive by digging up the landfill where it was supposedly disposed of.
Part of the reason Bitcoin has achieved such phenomenal success is due to its controlled supply, which carefully limits the amount of new Bitcoins that enter circulation.
Initially, this rate was set to 50 new BTC minted every 10 minutes (per block), but has since been reduced to just 12.5 BTC per block since the reward is cut and half approximately every four years.
At the current rate, the next halving is due to occur sometime around mid-2020, which will see the block reward cut to just 6.25 BTC — an event widely expected to cause a huge price rally, similar to what occurred around the 2012 and 2016 halvings.
Why Invest in Bitcoin
If you are still unsure whether you should buy Bitcoin, then the first step is to do some research.
Bitcoin is arguably the successor to physical currencies, thanks to its superior speed, security and hardcoded monetary policy.
However, despite being technically superior to fiat currency, it will likely take mass adoption and acceptance by corporations and governments to reach its full potential.
The beginnings of this has already begun, with Bitcoin ATMs springing up all over the place, making buying and spending Bitcoin much more accessible even to those without in-depth knowledge on how cryptocurrencies work.
Besides this, institutional interest on Bitcoin and blockchain technology has massively increased as of late, with all of the top 10 largest corporations, including Berkshire Hathaway, Apple Corp and retail giant Walmart looking into the technology.
Before Bitcoin can realize its full potential, there will need to be significant demand for it, which implies that a large number of people use Bitcoin on a regular basis.
As it stands, we appear to be trending towards this path, with the number of daily Bitcoin transactions gradually increasing over the last several years, having recently broken the 400 million total transactions mark.
Many of these transactions are coming from those in countries with poor access to banking infrastructure, while another huge chunk comes from those looking to reduce their reliance on central banks, reducing their risk of being caught up in a recession, bank bailout or even worse — economic collapse, such as that seen in Venezuela.
Powerful store of value
Bitcoin is also an excellent store of value, being far easier to store than precious metals such as gold, while also being simple to trade and move.
Moreover, having a controlled supply ensures that you always know exactly how much Bitcoin exists in the world, unlike all other stores of value.
Operating as a completely parallel financial system, Bitcoin allows people to transfer value regardless what happens to the governments and banks.
While the decentralized blockchain makes Bitcoin extremely censorship resistant, ensuring your funds cannot be seized, blocked or intercepted. The same cannot be said for fiat currency.
Gold currently has a market capitalization of 7 Trillion USD, meaning that if Bitcoin were only to substitute Gold, BTC would be trading at a price of $350,000 per coin.
Some challenges remain
Although Bitcoin has witnessed incredible growth over the last decade, the road has been far from smooth, with a number of challenges cropping up along the way to slow its ascent.
Arguably the most important of these is Bitcoin’s scaling issue, since the Bitcoin blockchain can be overloaded in times of peak traffic.
While Bitcoin’s scaling limitation had been known for a long time, it really hit the news in late 2017 when competition for block space was so extreme the average transaction fee spiked to over $35 — a strong break away from the low fees promised by the technology.
However, since then a number of solutions have been implemented, including the SegWit soft fork which massively increased the throughput of the network.
Beyond this, a second layer scaling solution known as the Lightning Network has rapidly grown in popularity, and may just be the answer to all of Bitcoin’s scaling woes, without compromising on its promise of security and speed, though this still remains an experimental technology.
Best Bitcoin exchanges
Anybody looking to invest in Bitcoin for the first time will likely find themselves at a cryptocurrency exchange. These are essentially platforms that allow you to purchase cryptocurrencies, including Bitcoin using a variety of different payment methods.
Many Bitcoin exchanges also include trading features, allowing you to trade other cryptocurrencies for Bitcoin, and make use of charting, technical analysis and complex order types to help you purchase your desired cryptocurrency at the best rates.
When selecting the best Bitcoin exchange for you, you will usually want to consider the fees, available payment options, and the required verification options, as these can vary considerably between platforms.
Easily one of the most popular Bitcoin exchange platforms, Coinbase allows customers to buy Bitcoin with a variety of different payment options, including by bank transfer and credit card, while also providing customers the capacity to sell and withdraw their funds to PayPal.
Since its launch in 2012, Coinbase has become a global phenomenon and is easily one of the most recognizable exchanges today, with well over 25 million customers registered on the platform, and more than $150 billion traded to date.
- Suitable for less experienced traders
- Purchase BTC with credit card
- Great educational resources
- Slow customer support
- Higher fees than most exchanges
- Limited trading options
Buying Bitcoin on Coinbase is a relatively simple process, which first requires you to open an account on the platform and complete the mandatory KYC steps by providing your address, phone number and proof of identity.
Once registered, head over to the ‘Accounts’ tab to top up your account. Here, find the fiat currency you’re looking to deposit, e.g. EUR or USD, and click ‘Deposit’. Follow the on-screen instructions to deposit your funds.
Once your account has been funded, you’ll be able to buy Bitcoin (BTC) through the Coinbase Buy/Sell tab, where you can exchange your fiat balance for Bitcoin.
On this page, all you need to do is to type in the amount of USD/EUR/GBP worth of Bitcoin that you want to buy, and hit “Buy Bitcoin”!
Coinmama is what can be considered a basic exchange, since it lacks many of the complex features features seen at other more featureful exchanges.
Instead, Coinmama is designed as an easy way to invest in cryptocurrencies, allowing customers to buy bitcoin and other cryptocurrencies using their credit or debit card with as few technical steps as possible.
Recently, Coinmama also added sell functionality, allowing customers to exchange their BTC to EUR.
- Excellent customer support
- Extremely easy to use
- Orders are settled practically instantly
- Higher than average fees
- Limited supported cryptocurrencies
- Sell functionality only available for BTC
As one of the simpler exchange platforms around, Coinmama does what it can to ensure the purchase process is as fast and painless as possible.
To get started, simply create an account on the website using through the ‘Sign Up’ menu.
Once registered, you’ll need to verify your account by providing some personal info, including your name and address, as well as proof of your identity.
Once verified, you can quickly buy bitcoins by clicking the ‘Buy’ tab, selecting your payment method and choosing the amount you’re looking to purchase, before making your payment.
On this page, all you have to do is select the amount of Bitcoin you want to do, and then click “Buy BTC”.
Being one of the oldest exchanges still in operation, Kraken has managed to gather a reputation of trust and reliability over its long history, and to this day remains one of the most popular platforms for investing in Bitcoin.
Compared to many major exchanges, Kraken doesn’t have the largest selection of digital assets, but, for two dozen or so it does support, it offers great liquidity, with BTC/EUR and BTC/USD being its most popular trading pairs.
- Excellent liquidity for Bitcoin
- Impressive security features
- Relatively low fees
- KYC requirements can be extensive
- No mobile app
- Less convenient for new investors
If you’re simply looking to invest in Bitcoin using another cryptocurrency, then Kraken is an excellent choice since it typically doesn’t require KYC to do so.
Whereas buying BTC using fiat will require you to complete identity verification, with EUR exchanges requiring tier 2 verification, while US customers will need to complete tier 3 verification.
After creating and verifying your Kraken account to the appropriate level, you’ll need to head over to the ‘Deposit’ section where you’ll be able to deposit USD or EUR to your account.
After this, you’ll be able to exchange this for Bitcoin (listed as XBT), using the ‘New Order’ button under the ‘Trade’ tab.
Now simply hit “Buy XBT”, and that’s it!
CEX is a UK-based cryptocurrency exchange that was established in 2013 just as the Bitcoin hype train was just beginning to gain momentum.
The platform was designed to be user-friendly, and includes many of the common features you would expect from a top of the line cryptocurrency exchange platform, including advanced order matching, excellent security and several different order types.
Overall, CEX is best for less experienced traders, as while it does offer many features, it lacks the advanced trading tools some traders may expect.
- Easy to use
- Excellent security and reputation
- Handy mobile app
- Forced KYC even for small orders
- Fees are on the high side
- Limited digital assets supported
To use CEX to invest in cryptocurrencies such as Bitcoin or several others, you will first need to create and activate trading on your account by confirming your phone number and identity through the ‘START VERIFICATION’ menu.
Afterwards, simply head over to the section on CEX to “Buy Bitcoin Instantly”, where you will see the following interface.
Finally, now all you have to do is select how much Bitcoin you want to buy, the currency that you want to buy it with, and hit “BUY”!
Widely considered to be one of the leading cryptocurrency exchanges in Europe, Bitstamp has garnered an impressive reputation since its launch in 2011, thanks to the excellent liquidity it offers for Bitcoin/fiat trading pairs.
Currently, Bitstamp allows customers to trade just five different cryptocurrencies, with BTC/USD being its most popular pair, followed closely by ETH/USD.
To date, Bitstamp has maintained a flawless security record, and is renowned for operating some of the best customer support in the industry.
- Ideal for fiat traders
- High trade volume
- Market leading customer support
- Few digital assets supported
- Only fiat trade pairs available
- Limited trading tools
If you’re thinking of investing in Bitcoin, Bitstamp is an excellent choice if you’re looking to pay with EUR or USD.
To get started, simply create an account on the site and complete personal account verification by providing proof of your address and identity.
Once verified, you’ll be able to fund your account in the ‘Deposit’ section of the site, where all the available deposit methods will be shown.
Once funded, simply navigate to the ‘Buy / Sell’ section to place your Bitcoin buy order! We recommend using an instant order if you’re a new trader, or a limit order for advanced traders.
To place an instant order on Bitstamp, all you have to do is select the EUR/USD equivalent of Bitcoin that you want to buy, and then click “BUY BTC”.
Best Bitcoin wallets
Although many cryptocurrency exchange platforms also provide wallet services, others, such as Changelly and Coinmama do not, meaning you’ll need to create a wallet yourself if you want to store your Bitcoins.
Bitcoin wallets tend to come in one of three main flavors: hardware wallets, software wallets, and web wallets. In terms of security, hardware wallets are considered the gold standard, followed by software wallets, while web wallets are typically less secure, but often compensate for this by being much more user-friendly.
Which wallet you choose will likely depend on your circumstances, and which features you place the most emphasis on. That being said, here are some of the most popular Bitcoin wallets currently available to choose from.
As one of the oldest wallet providers still in operation, Blockchain.com has had the time to build and refine its service, and is currently one of the most popular web wallets among new Bitcoin adopters.
Beyond being a simple Bitcoin wallet, blockchain.com also offers a variety of other features to simplify the process of investing in Bitcoin, including both basic exchange tools and an easy way to invest in Bitcoin using funds from your bank account.
- Designed to be used by anyone
- Excellent reputation
- Supports several cryptocurrencies
- Limited additional features
- Web wallets are traditionally less secure
- Some features require KYC
Creating an account on blockchain.com is a simple process, only requiring an e-mail address and password to get started.
Once your account is created, you’ll then be able to access your wallet features, with your Bitcoin wallet address being available under the ‘TRANSACTIONS’ part of the dashboard.
Here you’ll also be able to access wallets for Ethereum (ETH), Bitcoin Cash (BCH) and Stellar (XLM).
After logging in, you will also be able to access the trading platform through the ‘Swap’ section, while the Buy & Sell feature will become available to you if you choose to completely identity verification.
In the swap section, you will be able to easily exchange the cryptocurrencies you hold for one another.
Ledger Nano S
Widely considered to be the gold standard in hardware wallets, the Ledger Nano S has risen to become far and away the most popular hardware wallet on the market.
Much of this popularity stems from the security of device, which is arguably best-in-class, thanks to a secure chip that physically isolates your wallet private key from any external threats.
Featuring support for over 1,000 digital assets, and offering easy access to your private keys, there is little not to like about the Ledger Nano S.
- Industry leading security
- Extensive digital asset selection
- Excellent support
- Less user-friendly than web wallets
- Can be expensive for casual investors
- Can be overkill for small portfolios
Since the Ledger Nano S is a hardware wallet, you’ll need to purchase one to secure your Bitcoins.
Once purchased, you’ll need to plug your Ledger Nano S into your computer and follow the on-screen instructions to choose your pin code and backup your recovery phrase.
Once you’ve got the device setup, you’ll be able to access your Bitcoin wallet address through the Wallet app in the home menu, your wallet address should be displayed on both the Ledger device, this is the address you use to deposit your BTC to.
If you’re feeling adventurous, why not install additional apps on your device and extend its functionality? These can be found in the app catalog on the device.
Like the Ledger Nano S, the Trezor One is a hardware wallet that allows you to store your Bitcoins and other cryptocurrencies in a safe offline environment.
Being an extremely portable device, the Trezor One is an excellent way to carry your portfolio around with you, and can even be attached to your keyring. However, if you’re someone who loses their keys often, maybe think twice before carrying it like this.
In total, the Trezor One supports well over 1,000 coins and tokens, and is also compatible with mobile devices using an OTG cable.
- Compatible with most operating systems
- Beginner friendly interface
- Huge list of supported cryptos
- Bigger than the Ledger Nano S
- Less convenient than web wallets
- Some major cryptocurrencies not supported
To get started with the Trezor One you’ll first need to purchase one.
Once received, plug your device into your computer and navigate to trezor.io/start, install your device firmware and Trezor bridge and follow the on-screen instructions to create your wallet and secure your device.
After everything is set up, you’ll be able to access your Bitcoin wallet from the device and the Trezor bridge software, which you can then use for your BTC deposits.
The Trezor wallet also has password management functionality, allowing you to safely store your passwords offline, and requiring your Trezor wallet to verify your logins.
Trust Wallet is a mobile cryptocurrency wallet with support for Bitcoin and a whole variety of other digital currencies, including all ERC20 and ERC223 tokens.
Besides being one of the most popular wallets for mobile users, Trust Wallet is renowned for its extensive feature-set, allowing users to interact with DApps directly within the wallet app.
Trust Wallet is currently available on both major mobile platforms: Android and iOS, and is an excellent choice for those looking to access their portfolio on the move.
- Excellent range of features
- Available for mobile devices
- Supports most cryptocurrencies
- Less secure than hardware wallets
- No stablecoin support
- No desktop application
Trust Wallet was designed to be accessible to everyone, regardless of experience level. To get started with the wallet, simply download it from the Google Play or Apple App Store, and install it to your device.
Once installed, simply click the ‘CREATE A NEW WALLET’ button, backup your recovery phrase and you’re done! After this, you can find your BTC address by clicking Bitcoin (BTC) and clicking the ‘RECEIVE’ button.
Trust Wallet is planning to integrate with the Binance DEX in 2019, which will allow users to trade cryptocurrencies within the app — definitely something worth waiting for!
Widely considered to be one of the biggest on-ramps to cryptocurrency investments, Coinbase has now also launched its own cryptocurrency wallet.
Part of its success stems from its goal of trying to become the most trustworthy place to buy Bitcoin and other cryptocurrencies, being a fully legally compliant and licensed exchange platform in the US.
- Extremely simple user interface
- Built-in trading platform
- Mobile app available
- Still relatively new and security is unproven
- Coinbase support is not very fast
To get started with the Coinbase Wallet, all you have to do is download the app. There are no identity verification requirements to use the app.
If you’re new to cryptocurrency, you may also want to try out the Coinbase Earn platform, which allows you to earn small amounts of cryptocurrency for watching some educational videos.
How to keep your Bitcoin safe?
Even if you are making use of a secure cryptocurrency wallet, or, even better, a hardware wallet, that does still not fully protect your Bitcoin.
To keep your Bitcoin safe at all time, you also need to be careful of scams that criminals use to steal your Bitcoin. Let’s explore some of the most common ones.
- Impersonation attacks: In an impersonation attack, the scammer will pretend to be a trustworthy person (maybe even somebody you know) and reach out in order to get you to send him your Bitcoins. To protect yourself from this attack, always verify the identity of your counterparty before making a large Bitcoin transaction. You can, for example, do this through a quick video call.
- Fake giveaways: In fake giveaways, the scammer will pretend to be a reputable company or famous person holding a “cryptocurrency giveaway”. These scam giveaways are usually held on social media, and the scammer will say that in order to enter the giveaway, participants need to deposit a small amount of cryptocurrency first.
- Fake wallet/exchange websites: Scammers create fake wallet/exchange websites that imitate a real one, like, for example, Binance.com, to trick people into typing their log-in credentials into the fraudulent site. Before logging into your Bitcoin wallet or Bitcoin exchange, always double-check that you are indeed on the right URL.
If you watch out for the above 3 scams and always stick to “Don’t trust, verify” as your mantra when dealing with Bitcoin-related matters, you will be safe in most situations.
How to invest in Bitcoin Indirectly
Since its launch more than ten years ago, Bitcoin and blockchain technology has worked its way into practically every industry, improving efficiency and opening up paths for companies that were previously unavailable.
Besides investing in Bitcoin directly by purchasing BTC, there are also several other ways to benefit from the growth of Bitcoin and most other cryptocurrencies, many of which don’t actually involve owning any BTC.
Interestingly, several of these alternative investment routes can actually allow you to profit even if Bitcoin’s value drops in the near future, giving you an excellent way to hedge your investments, ensuring that no matter what happens, you come out on top.
Buy Bitcoin-related stocks
Since Bitcoin is not a company there cannot be any Bitcoin shares, which means there technically aren’t any Bitcoin stocks contrary to popular belief. That being said, there are several companies that will stand to benefit if the Bitcoin price and/or adoption rockets.
The most obvious of these are companies that manufacture and develop hardware used for Bitcoin mining, such as AMD and NVIDIA Corporation, both of which have publicly traded shares. As you might expect, if the value of Bitcoin increases, the incentives to mine will also increase, hence mining hardware sales should grow accordingly.
Beyond this, companies that are directly involved in improving Bitcoin adoption could also stand to grow massively over the next several years, which is why shares in Bitcoin-enabled mobile payment firms such as Square could be an attractive investment choice if you anticipate future growth.
Several large companies with exposure to Bitcoin are also planning to go public in the near future, with cryptocurrency exchange Kraken reportedly planning its IPO in 2019, while Chinese exchange Bithumb looks to go public in the US through a reverse merger with Blockchain Industries Inc.
Overall, since Bitcoin and blockchain technology are widely expected to disrupt many industries, shares in companies benefiting from this technology could be expected to grow accordingly.
One potential example is Uber which plans to launch its IPO in 2019 and already uses blockchain technology to help match drivers to riders as quickly as possible.
Buy Bitcoin ETFs
Since late 2017, the Bitcoin community has been bustling in anticipation of Bitcoin Exchange Traded Funds (ETFs). Bitcoin ETFs are a type of investment fund that tracks the price of Bitcoin, without requiring that traders actually buy Bitcoin.
Because Bitcoin ETF holders do not actually own any Bitcoin, they don’t need to worry about storing, trading or cashing out their BTC. Similarly, because ETFs are traded on exchanges similar to stocks, they are a much more attractive investment option for fiat traders and investment firms.
As it stands, there are currently a number of Bitcoin ETFs waiting to be approved by the U.S. Securities and Exchange Commission (SEC), including one filed by the CBOE BZX Exchange and another filed by NYSA Arca. It is widely anticipated that the first Bitcoin ETF will be approved in late 2019, as the SEC continues to postpone rulings on the current applications.
Though there are no currently approved Bitcoin ETFs, there some exchange traded products (ETPs) available, which offer a similarly easy investment route. One of these are the Bitcoin Exchange Traded Notes (ETNs) offered by XBT Provider, who also offer several other crypto ETPs.
Similarly, Swiss exchange Amun also have several crypto ETPs, including a Bitcoin ETP which tracks the investment results of Bitcoin, as well as a crypto basket ETP known as the HODL5, which tracks the top five cryptocurrencies for added diversity.
Buy Bitcoin Futures
If you’re looking to benefit from the explosive growth of Bitcoin but aren’t looking to delve too far into how it works, setting up a wallet etc, you may instead be interested in investing in Bitcoin futures, which also allow you to benefit from Bitcoin price movements.
Futures are an agreement to buy or sell a specific asset at an agreed price at a specific date, irrespective of the market value of the asset at the contract execution date.
Futures can be taken as either long or short positions, with long positions being an agreement to buy bitcoin at a fixed price at a certain date, while short positions are an agreement sell sell Bitcoin at a specific price when the contract expires.
In essence, Bitcoin Futures provide an easy way for investors to speculate on Bitcoin price movements, without the hassles of actually buying or holding any BTC.
Currently, there are a handful of Bitcoin futures products available, with the most popular one available on the Chicago Mercantile Exchange (CME), which offers a 5 BTC futures contract which expire on the last Friday of the contract month.
It is expected that more Bitcoin futures will be unveiled in 2019, with the Intercontinental Exchange’s Bakkt platform expected to launch its physically delivered 1 BTC contracts this year, being much more accessible to smaller investors than current options.
If you already know how to invest in Bitcoin, and have an in-depth understanding of how the markets work, then Bitcoin options may be a suitable investment modality for you, as they are speculative instruments designed for advanced traders.
There are two types of Bitcoin options, these are called calls and puts, each of which have a different function. Call options give the holder the opportunity to purchase Bitcoin at a certain price, whereas puts allow the option holder to sell their Bitcoin at a certain price.
This opportunity is optional and occurs at a predefined time (expiry time), and are a great way to hedge against financial risks. Somebody buying a Bitcoin call option would expect Bitcoin to increase in value within the specified time window, whilst those buying a Bitcoin put option would expect Bitcoin to lose value in this time.
Options give traders an easy way to cap their losses when compared to futures, as the only potential loss is the cost of the option, while there can be virtually unlimited upside, making them an attractive investment choice.
Two of the major places to buy Bitcoin options are Deribit and LedgerX, with both offering a variety of options, with varied striked and expiry dates. Both are certainly worth a look if you’re itching to invest in Bitcoin options.
Invest in a Bitcoin mining operation
While choosing to simply invest in Bitcoins is one of the easiest ways to directly benefit from its growth, it is often not the most cost-effective way to get your hands on BTC.
Instead, many of you have likely heard of ‘Bitcoin mining’ which is the process of participating in the process of discovering blocks and verifying transactions. Besides being involved in securing the Bitcoin blockchain and helping it grow, Bitcoin mining can also be a profitable endeavor, since those involved are rewarded for their efforts by receiving BTC rewards.
To get involved in mining, you can either purchase and operate your own mining hardware, with Bitmain’s antminer hardware usually being the first port of call for investors. You will also need to work with a suitable pool and energy provider to ensure your venture is as profitable as possible.
Alternatively, you can invest in one of the increasing number of cloud mining operations, such as BitDeer, HashFlare and Genesis Mining, which removes some of the challenges involved with getting started, though is typically less profitable.
When is the right time to invest in Bitcoin?
As with any market, the absolute best time to buy an asset is at its lowest point before it experiences a large surge in value. However, actually recognizing this bottom, and reacting in time to benefit from it is easier said than done, and is certainly not worth the huge time investment this requires.
Instead, many investors simply purchase a fixed amount per month, usually some small percentage of their earnings, buying Bitcoins at whatever the price is during that period. By purchasing Bitcoin at regularly scheduled intervals, investors can reduce volatility in their portfolio, helping to manage risk when investing.
Unlike traditional financial markets, the Bitcoin price is largely driven by user and investor sentiment, which can be just as volatile as the price itself. Because of this, it is often quite difficult to predict exactly where the Bitcoin value is headed, particularly in the short-term.
Many short-term bitcoin price movements are instead driven by Fear, Uncertainty, and Doubt, or FUD, and the Fear of Missing Out, or FOMO.
Often times, a barrage of negative press can lead to a temporary price depression by causing mass FUD, whereas a large influx of positive news and social media attention can lead to FOMO, which can temporarily drive up the price.
As an investor, it is wise to avoid entering the market during these times, as it can be much more volatile than usual, and can lead to significant losses if you enter at the wrong moment.
Macro and micro cycles
Beyond the almost weekly FUD and FOMO events that often surround Bitcoin, its value typically moves in both macro and micro cycles. Since its release in 2009, Bitcoin has followed a typical long-term cycle typically centered around its halving schedule.
This cycle typically begins with a 1-2 year rally, followed by a 1 year bear market, with this cycle beginning around 12-14 months prior to a halving event. Based on this, the next optimal investment period will occur between April and June 2019.
Besides its 2-3 years macro cycles, Bitcoin also experiences seasonal price trends, tending to gain the majority of its value in Q2 and Q4 every year, while Q1 and Q3 are less exciting, though will still likely be profitable in the long-run.
Should you invest in Bitcoin or Bitcoin Cash?
Though Bitcoin is the most popular cryptocurrency by a large margin, its adoption hasn’t been completely smooth, since there have been several debates and conflicts surrounding how Bitcoin should grow as a cryptocurrency.
Perhaps the most important of these occurred in early 2017, when it became apparent that the Bitcoin network was struggling under the load of its own popularity, and teams began considering how to ensure that Bitcoin is able to cope with the expected demand in future, while keeping transactions fees down and maintaining speed.
One of the proposed solutions was the Segregated Witness (SegWit) soft fork, which saw signature data removed from Bitcoin transactions to reduce transaction size, hence increasing the number of transactions that can fit in a block, while also paving the way for second layer scaling solutions such as lightning.
On the other side of the fence was the proposed Bitcoin Cash hardfork, which argued that simply increasing the maximum block size was sufficient to allow Bitcoin to scale sufficiently. In the end, both the SegWit soft fork and Bitcoin Cash hard fork went ahead, leading Bitcoin to split off into two separate chains: Bitcoin (BTC) and Bitcoin Cash (BCH) respectively.
Technically, Bitcoin (BTC) and Bitcoin Cash (BCH) are very similar, both are designed to be decentralized payments systems, both have very similar technical specifications, and both are extremely popular digital currencies.
However, the main thing that distinguishes the two cryptocurrencies is what is known as the block size, with Bitcoin having a maximum block size of 2MB, while Bitcoin Cash has an adjustable block size, where miners can dynamically adjust the sizes of blocks they accept.
Though both Bitcoin and Bitcoin Cash will likely experience dramatic growth in future, Bitcoin is still the safer bet for most traders, with BCH still being considered an altcoin. That being said, if you are into high risk, high reward investments, then Bitcoin Cash could be an excellent bet, since BCH tends to perform remarkably well during bullish rallies.
What to do after investing in Bitcoin?
Now that you’ve got your hands on some Bitcoin, you might be thinking, OK… What now? Well, luckily for you, there is plenty to do with your Bitcoin, some of which might be even more profitable than simply holding onto your new investment.
Of course, depending on the size your portfolio, you may wish to diversify how you manage your funds, so we have outlined some of the most common next steps below:
Hold for the long-term
Since Bitcoin is a rather volatile financial instrument, holding for the long-term is an excellent way to ride out the storms, allowing you to benefit from the long-term growth of Bitcoin without being tempted to sell out during transient dips.
The process of holding Bitcoin for long periods, even through adverse periods has even derived its own meme known as “Hodling” — a misspelling of holding that is often used to signify that an investor will not be selling, no matter what the current market situation is like.
After all, with many experts predicting that Bitcoin can reach upwards of $100,000 within just a few years, why concern yourself with temporary losses, when these are inconsequential in the long run?
After all, had you sold out when Bitcoin lost 25% of its value in June 2016, you would have missed out on the almost 2,000% growth seen just a year later.
If you are looking to hold for the long-term, we recommend that you secure your Bitcoins using a hardware wallet such as the Ledger Nano S or Trezor One, since you might be surprised just how many web wallets and exchanges are compromised at one point or another.
It is also important to note that although Bitcoin is widely projected to explode in value over the coming years, it is quite possible that certain adverse news could dramatically affect the price.
That being said, we don’t recommend tracking the price on a daily basis, we do suggest keeping up to date on the latest happenings in the crypto world, checking out the news regularly to give you a chance to react if necessary.
Use it as currency and spend it
Although a large number of Bitcoin investors are tempted to simply hold or trade their BTC, its primary utility is as a currency, which means you can spend it in a large variety of places.
Since its inception in 2009, hundreds of retailers have begun accepting the cryptocurrency, while tens of thousands of individual merchants around the world have added Bitcoin to their accepted payment options.
That being said, the vast majority of retailers still do not accept Bitcoin, largely owing to the sometimes high fees and lengthy confirmation times the network experiences. However, a rapidly increasing number of merchants are beginning to make use of the Lightning Network, which largely eliminates these issues.
If you’re still struggling to find a suitable place to spend your Bitcoin, then check out our comprehensive list of the major companies that accept Bitcoin!
Lend it to generate an additional return
Even though most people invest in Bitcoin in anticipation of generating an excellent return on their investment, it is still possible to earn yet more, by putting your Bitcoin to work on Bitcoin lending sites.
These sites essentially offer peer-to-peer loans, which are usually backed by collateral, allowing those with sufficient collateral to request loans, while Bitcoin holders step in to fill the loan at an agreed interest rate, which typically ranges from 5-20% interest per year.
For the most part, lending your Bitcoin to generate an additional return is a relatively safe endeavor, since you are usually protected by the safety net of the collateral provided, and the vetting procedures offered by the lending site itself.
However, under certain, typically rare conditions, it is possible to lose money when lending, such as when the value of the collateral drops extremely quickly, preventing a margin call from liquidating the collateral in time.
Similarly, no collateral loans, are much higher risk, though this is typically countered with better interest rates.
Pascal Thellmann is an investor and marketer focused on the intersection of cryptocurrency and the legacy financial system. He co-founded Bounty0x, which at the time was the largest crypto freelance platform. Now Pascal dedicates his time to CoinDiligent and trading. You can get in touch with Pascal Thellmann on LinkedIn.