Bitcoin: Different Methods To Invest On Bitcoin
What Is Bitcoin (BTC)?
Bitcoin functions as an alternative type of currency known as cryptocurrency that allows for transactions and acts as money without being governed by any single person, collective, or institution. This eradicates the dependence on third party engagement in financial transactions. Miners in blockchain receive rewards for verifying transactions and can purchase it on different exchanges.
Different Methods of Investing in Bitcoin
Investing in Bitcoin offers numerous avenues, both direct and indirect. Initially, you can choose to invest in a company that employs Bitcoin technology. While Bitcoin is a risky investment, many companies sell successful products that include Bitcoin and blockchain technologies. Several exchange traded funds (ETFs) exist which incorporate shares from various blockchain related companies like the Amplify Transformational Data Sharing ETF (BLOK). You are indirectly investing by choosing to invest in the corporate stocks of companies that utilize Bitcoin. Outperforming the market, most ETFs in this category make it a safer option.
Let’s see some popular ways you can invest in bitcoins;
Bitcoin Standalone Purchase
Purchasing standalone Bitcoin is the most evident strategy for investing in Bitcoin. By purchasing Bitcoin directly from an app like Coinbase, investors are able to have “physical” ownership of the asset. It is crucial to highlight that Coinbase enables investors to purchase Bitcoin and keep it in their own encrypted wallets. Through this approach, investors will have simultaneous access to the asset's price performance and can use it as a currency for later transactions. Owning standalone Bitcoin isn't really different from owning any other currency, except for the extremely unstable fluctuations in value.
Amplification of the Transformational Data Sharing ETF (BLOK)
Being an exchange traded fund, the Amplify Transformational Data Sharing ETF lives up to its name and can be found on the stock market, Therefore, investors may choose to purchase shares of BLOK on the secondary market to increase their exposure to Bitcoin. A more detailed description of BLOK as an actively managed ETF is that it focuses on blockchain technology.
That suggests fund managers are continuously seeking out businesses that prioritize blockchain technology and make investments in them. Thus anyone who decides to invest in BLOK will find themselves invested in a diverse range of businesses connected to blockchain technology.
Though BLOK does not enable investors to directly invest in Bitcoin by itself, it enables them to invest in companies utilizing blockchain technology and its game changing data sharing capabilities.
A private index fund managed by Bitwise 10 (BITW)
By investing in the Bitwise 10 Private Index Fund you are essentially investing in the Bitwise 10 Large Cap Crypto Index, which keeps tabs on how well the largest ten cryptocurrencies are doing. Accordingly, investors that opt to buy shares in this specific fund will be putting their money into the 10 most sizable “crypto assets,” which have been evaluated and weighted according to free float market capitalization. Proportional gains will be realized by investors based on the shares they own when the assets perform well.
Strategies For Investing In Bitcoin
Notwithstanding the many disparities between acquiring Bitcoin and acquiring other equities like stocks, it is crucial to acknowledge the fundamental similarities and to tell you the truth, the strategies for investing in Bitcoin aren't really that dissimilar from their stock counterparts. On that note, numerous strategies for buying Bitcoin are primarily based on investment timeframes. In particular, investors can pursue one of the three most widely adopted Bitcoin investment strategies:
Hold Bitcoin Long Term
Trade Bitcoin On Short-Term Volatility
Buy and Hodl Bitcoin
People who are knowledgeable about Bitcoin are likely to be familiar with the concept between Buy and Hodl, The Hodl stands for “hold on for dear life” and suggests that keeping hold of Bitcoin indefinitely constitutes an optimal investment strategy, while proponents recognize and accept the asset’s inherent volatility but remain confident in its future possibilities. Accordingly, investors must be prepared to handle the constant ups and downs of Bitcoin price fluctuations without selling.
Long term hold of Bitcoin
Investors who wish to keep Bitcoin for a prolonged duration firmly believe it will appreciate over long periods of time. However, unlike the ‘hodl’ strategy, some long term holders could consider selling when they are pleased with their returns. These investors have faith that Bitcoin will gain in value and act as a fresh store of value comparable to gold. Nonetheless, they wouldn't hesitate for selling it at a profit if the opportunity arises.
Invest in Bitcoin based on short term volatility
A popular strategy for investing in Bitcoin hinges on the asset's volatility, synonymous with Bitcoin are the wild price movements. By simply observing a one year chart, it becomes evident how volatile Bitcoin is, and this works to the advantage of short term traders. Additionally, investors can implement this tactic of capitalizing on market highs and lows. The difficulty level associated with this particular strategy is definitely higher than any other ones that were discussed, and it also brings about greater exposure to investors in terms of risks, however, on a brighter side, it can potentially lead to faster compounding gains compared to those mentioned earlier.
In conclusion
Bitcoin has gained popularity as it utilizes a large chain of interconnected computers to securely store and protect your valuable digital assets, and it is known for its high volatility which leads to large and fast shifts in value. While this presents an opportunity for significant returns, it also poses a considerable risk. It’s important to learn how to invest in Bitcoin before making any kinds of decisions. Also make sure to diversify your investment portfolio in order to safeguard against marketplace volatility.
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