Bitcoin has been on a wild ride lately, spiking up and down by over 20% in value just during the last few weeks. If you’re thinking of investing in the crypto-currency, then you’ve probably been following Bitcoin’s price fluctuations on polx coinmarketcap. But what most people don’t know is that COINMARKETCAP is much more than a price tracker; it actually allows anyone with an internet connection to invest in BTC at any time.
If you want to learn more about Bitcoin and other cryptocurrencies, there are plenty of resources out there on how to get into them.
1. What with all the fluctuation in Bitcoin’s value, is it worth investing?
Yes, and NO. When you look at the charts on COINMARKETCAP, one thing should be obvious: There are some massive fluctuations that happen over a period of minutes. The graph looks like a heart rate monitor hooked up to Charlie Sheen. One minute it’s down 50%, the next it’s up 300%.
The question is: What causes these erratic movements in value? The answer is that short-term price movements are caused by whales (which I will explain below). Over time the price will trend upwards because all the new entrants into the market have not yet sold their coins back to other investors.
But let’s say you invest in Bitcoin today, and it crashes next week.
If you are still optimistic about the long-term potential of Bitcoin, then hold onto your coins. There is no better investment than Bitcoin because of its potential as a global currency and its limited supply (only 21 million BTC will ever be mined). If you believe in the hype about “Bitcoin 2.0” (Ethereum, mastercoin etc), then hold onto your BTC and watch that specific coin rise in value. Even if BTC falls to $3 or lower, I would advise against selling any of your coins now; the future is too uncertain to get out at this point.
2. How do you invest in crypto-currencies?
We are not alone on the internet. There are companies that you can use to buy Bitcoin and other crypto-currencies. (Coinbase, Bitquick, Coinbase).
If you don’t want to buy Bitcoins directly, then look at the prices on exchanges like BTER and BTCChina which will let you sell your coins for US Dollars or Chinese Yuan. In short, it is possible to make profit on Bitcoin simply by buying low and selling high. Simple as that!
3. So what exactly is a whale?
A whale is someone who has a large amount of money to invest on any financial instrument. As much as it looks like the price is rising and falling by the minute, whales have a lot of power over the market.
They are often bitcoin mining companies that have enormous amounts of BTC to play with. They can either use their own money to buy BTC (i.e., they are accumulating coins), or they can use their large investments to cause the price to rise or fall on purpose. Whales aren’t only big investors, they also control other investment instruments like derivatives, futures and options. Bitcoin is no different in this respect: The whales are able to influence the prices in Bitcoin simply by buying (or selling) large quantities of coins through their large-scale operations.
4. How do you buy Bitcoin?
There are two ways to buy bitcoins. You can go to an exchange like Coinbase and buy a large amount of bitcoin (they charge a 3.75% fee for buying) or you can use your own private key to access your Bitcoin wallet and send it directly to another wallet service like Bitquick which will let you convert it into USD. Obviously, this is the safer option because the risk of losing your money is lower.
5. Why do people buy “Bitcoin 2.0”? What’s going on in crypto-currency land?
Most of these coins are scams, but Ethereum is one that I think has some real possibility. Even if you think Bitcoin is a good investment, Ethereum is an even better choice because it has the ability to act as a platform for other coins. It’s like making an investment with Apple; you aren’t just betting on iPhones, but also on Macbooks, iPads and even the iPhone that your neighbor will buy. You might want to wait before investing since Ethereum isn’t even out of its test phase yet.
6. Is there an app where I can track the prices?
Yes! There are many apps that you can use to keep track of the price. Check out this App Store and Google Play search results.
7. What should I do with my investment?
Buy and hold. That is, buy and don’t sell for at least a year no matter how much BTC goes up or down in value.
If you’re looking for a quick profit, then go for it! But if you want to make a small investment as part of your long-term portfolio, then hold onto the coins.
Summary:
There are many ways to invest in Bitcoin, and all of them have their own risks. If you want to play it safe, then buy Bitcoin, then hold it over the long-term because the price has to go up at some point.
If you want a quick profit and don’t mind taking on extra risk, then look at other crypto-currencies like Ethereum and Ripple. These coins are much less established and therefore could rise into the stratosphere or crash down to zero.
Good luck!
