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Looking to enter into bitcoin? Here is what you need to know

Last Updated on March 1, 2024 by

With every passing year, Bitcoin and cryptocurrencies continue to grow in popularity. This hype is not in the least surprising for several reasons. First, the decentralised feature of Bitcoin appeals to many people since central banks do not control transactions. Additionally, data privacy makes Bitcoin and other cryptocurrencies safer, providing a great sense of security to its users. However, the biggest factor behind the increased adoption of Bitcoin is the prospects of making a considerable profit. 

Current trends show that bitcoin is not slowing down anytime soon. More and more countries in the Middle East are increasingly embracing cryptocurrency. For instance, Dubai alone is expecting to have more than 1,000 cryptocurrency businesses by 2022. With this level of traction, more people are looking to get into Bitcoin. 

If you happen to be an interested new-joiner, here are some things to keep in mind:

Determine your investment strategy

There are diverse tactics one can adopt when investing in Bitcoin. Some investors truly believe in the prospects of Bitcoin and are prepared to hold for a long time. These investors are less bothered by whatever short-term volatility the cryptocurrency may experience. An additional tactic that you can adopt is to capitalise on the volatile nature of Bitcoin. Investors who adopt this strategy look for short-term opportunities in the price changes of Bitcoin to make a profit.

Additionally, some investors take a detour and invest in Bitcoin Futures instead of investing in Bitcoin directly. Therefore, you can take some courses online to better understand the different existing trading strategies. This way, you would be able to select a strategy that closely aligns with your investment goals.

Pay attention to market trends.

Once you have invested your money in Bitcoin, it is crucial that you pay attention to relevant news and keep track of market trends to make the best of your investment. Bitcoin, like other cryptocurrencies, tends to fluctuate based on trends and public perception. Binance, Coinbase and other exchanges always display records of a coin’s performance, just like the stock market. Thus, you should study the pattern of events and news that impact Bitcoin’s price. An example is the news of a country banning or legalizing cryptocurrency. This way, you can gain an edge by predicting trends or reacting quickly to them. 

Manage your trading risks

With Bitcoin, volatility is the name of the game. However, you do not necessarily have to expose yourself to every risk that comes with trading Bitcoin. One way you can limit your trading risks is by being disciplined. This means that you should not open or close trades on impulse. Instead, you should critically analyse the situation before making any move. Furthermore, it helps to use tools such as stop-loss and automated sell orders to limit your exposure to Bitcoin’s volatility. At any point, a stop-loss order could be the only thing standing between you and liquidation. 

Diversify your portfolio

While Bitcoin might be your main investment, diversification is almost always a good idea. 

Diversification is a great way to maximise your returns while keeping your risks in check. There are several ways you can go about diversifying your portfolio. You can invest in other high-performing cryptocurrencies that are powered by technologies different from Bitcoin’s. You could also invest in cryptocurrencies that serve different industries. The goal is to simply limit the correlation of your other cryptocurrencies with Bitcoin price movements. Now diversification might not protect your investment from market-wide trends. However, it is certainly better than putting all your eggs in one basket. 

Conclusion

Bitcoin is undoubtedly an incredible opportunity for many who seek to make a profit. It is, however, an investment that one must take cautiously for it to be worthwhile.

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