Bitcoin, one of the most popular cryptocurrencies in the world, has been making all the waves over the past few months. The meteoric rise of Bitcoin has attracted attention from investors and individuals from all over the globe, with companies scrambling to figure out how to channel their fiat assets into this cryptocurrency. Needless to say, many people have been looking at how to buy Bitcoin as well. After all, it’s a great way to increase your savings, right? It seems easy to generate a quick profit, but there are a few important things that you should keep in mind before you put your savings into Bitcoin. Here are seven factors to consider before you decide to invest.
- The Volatility
Bitcoin is a digital asset, and is subject to extremely high levels of volatility. Within a few months, the value of the currency breached the $60,000 mark, and within a couple of weeks, it crashed down to $30,000. Such high levels of volatility may make your palms sweaty, especially if you have invested all of your life savings into Bitcoin. The volatility is something that you will have to learn how to deal with. Almost all cryptocurrencies are this volatile, so it’s important to factor this in.
- Finding an Exchange
You can buy cryptocurrencies from an online exchange. There are several crypto exchanges, but you need to make sure that you do your research carefully. Several exchanges have shut down in the past, or have been subject to serious investigations. You don’t want to lose your money from an online exchange within a few days. That’s why research is necessary before you make a decision to invest. If you are wondering how to buy Bitcoin, the best way to begin is by looking for a reliable exchange.
- Hard or Soft Wallet?
The cryptocurrency can be stored either in a hard wallet or a soft wallet. Soft wallets are digital addresses assigned to you by the crypto exchange you choose. The money is subject to risks; the exchange may demand additional documents before releasing your money, or they may block your withdrawals subject to an investigation. That’s a major risk when you have a sizeable investment, and it could give you a mini heart attack if that warning pops up on your screen.
On the other hand, a hard wallet is a physical wallet with a digital address that stores your crypto. There are several manufacturers out there that offer different wallets, so you may want to choose that if you want your crypto in your own hands.
There have been plenty of cases where money has been stolen and digital wallets have been emptied. Security is a serious concern that you need to evaluate. The digital address is critical to the safety of your wallet, and you can also choose a hard wallet with a strong key to make sure that your crypto remains safe. This is something that you cannot take lightly, and it’s a genuine headache for most people.
- How Much Can You Put in?
You also need to figure out the maximum amount of money that you can afford to put into the cryptocurrency. While it may seem appealing to put all of your savings into crypto, you should know that it could leave you with nothing in your pocket. There have been multiple cases where people have lost everything because they invested in cryptocurrency. It’s imperative that you start with a small amount and then build your portfolio accordingly. Don’t go gung-ho right off the bat if you don’t want to end up with a significant loss.
- Your Risk Exposure
There are now digital funds as well. This is where you can deposit your crypto and they give you a return depending on your risk profile. It’s important for you to establish your risk profile and figure out how much exposure you can stomach. This will make it easy for you to decide just how much money you should put in.
- Other Cryptocurrencies
Bitcoin isn’t everything; there are other cryptocurrencies that are also making waves. You might want to think about investing in those to diversify your portfolio as well.