Is investing all about timing the market? Perhaps this isn’t the case for the stock market, but it sure seems to be the case for the crypto market.
Most investors and traders concern themselves with long-term investments. These are usually investments that companies or individuals can hold for more than a couple of years (depending on the performance of the stock). This type of investment works because there’s an assumption that the capital will appreciate over time. Therefore, it’s critical for you to study market trends and historical data before locking in your purchase.
Market timing, on the other hand, is a bit more spontaneous and high-risk. This is mainly seen in cryptocurrency investments due to its volatility. But that means the returns can be much larger as well. This isn’t to say that there’s no analysis involved in this technique—the right timing can be deduced by looking at past data too.
Take Bitcoin, for example. Its prices have ballooned since its inception and public introduction ten years ago. What if you purchased $10 worth of Bitcoin back then? Let’s take a look at what would’ve happened.
What did Bitcoin prices look like over the years?
Would you believe that one Bitcoin was only worth $0.5 back in July 2010? This means that if you bought $10 worth of Bitcoin then, it would amount to 202 BTC today, or approximately $1,612,335.1. Yep, you would be a millionaire!
Source: CoinDesk as of May 22, 2019
Bitcoin has gone through some major ups and downs in the last ten years. Here are the most prominent price fluctuations (USD):
- 2011 – Bitcoin was slowly making itself known and already displayed higher spikes in prices due to the curiosity of both public and private consumers. In June 2011, BTC prices reached a high of $31.91, up from 5 cents a piece in 2010. However, prices dropped back down to $4.62 in December 2011.
- 2012 – The currency was showing a steady upwards incline. Rates were around the $13.5 mark, and a $10 investment would have translated to $450.33. But only a few businesses were accepting Bitcoin as payment at this point.
- 2013 – This year was huge in the Bitcoin industry, as security issues and scams were at the center stage of cryptocurrency news. However, when the Chinese company Baidu started to accept the altcoin as “real money,” the price shot up to a high of $1,147.25. At the end of the year, prices closed at $757.50.
- 2014 – More companies started to adopt Bitcoin. However, prices continued to plummet until the end of the year. Prices closed at $309.87.
- 2015 – Prices mostly continued at the $300 range, but the year ended strong with $413.51 per coin.
- 2016 – Once again, with the influence of Chinese companies, Bitcoin prices spiked and reached the $700 mark. The decreased demand later on in the year made prices close at $638.22.
- 2017 – This was a rollercoaster of a year for Bitcoin! In February, it broke its 2013 record and went on to have a value of $1169.04. With a steady upwards pace, it crossed the $10,000 mark in November and hit an all-time high of $19,783 at the end of the year. Along with several investors and cryptocurrencies being pointed as the cause of this spike, there was also speculation that this was caused by market manipulation.
- 2018 – The rapid price hike was also quick to drop, and in February, Bitcoin amounted to $10,074. Still high compared to its history but had an almost 50% price drop in a matter of months. It continued to plummet to $6,166 at the end of the year.
- 2019 – Bitcoin is continuing to experience a mostly bullish trend for the year and currently amounts to almost $8,000.
Why is Bitcoin (and other cryptocurrencies) so volatile?
Bitcoin prices have been known to fluctuate over the years. Why is this the case? It turns out there are logical reasons as to why the market is volatile.
News can affect the adoption rate
Blockchain technology is still relatively new to the market, and with such a short history, many people are still unsure about how secure it is. Is owning digital currency any safer than Fiat? Will your assets be easily hacked? Then, there’s also news of governments regulating Bitcoin and accepting it as a currency for payments for different goods and services. These bits of good and bad news affect the adoption rate of the coin, and therefore either scare or entice investors, affecting prices as a result.
The future of cryptocurrency is unsure
Who knows what will happen to altcoins in another ten years? They could keep growing, or crash altogether, and the latter is the fear lording over hesitant investors. The general question is, “Why would you put your money on something so risky when there are plenty of other (more sustainable) avenues you can earn from?”
High risk, high reward system instills fear
Some investors like to gamble on such huge stakes, others don’t. While there have been stories of successful cryptocurrency investors who grew their money in a short period, there were many others who were negatively affected by unexpected price crashes. Some don’t like the instability, which again affects the demand and supply that are factored in pricing.
Is it too late to invest in Bitcoin today?
While the price of Bitcoin now is not as low as it was before, it’s probably not a bad idea to still take a shot at investing in it. As of writing, there are only about 17.7 million BTC mined out of 21 million, with an estimated 1,800 BTC mined every day. However, mining isn’t as simple as this as you think.
In an analysis by CryptoCoin Mastery, the Bitcoin reward from mining blocks was previously at 50 coins, and it’s dropped in halves every four years all the way now to 12.5 BTC. In 2020, it’ll drop to 6.25 BTC. At this rate, all Bitcoin should have been mined by the year 2140.
That said, you’re not limited to investing in Bitcoin alone. The crypto business is booming, and other coins such as Ethereum (ETH), Ripple (XRP), and Litecoin (LTC) are topping the charts for promising altcoins you can invest in. As they say, don’t put all your eggs in one basket.
The key to taking the first step in investing is finding a crypto exchange that you can trust. BXB Exchange offers a smooth user experience and a reliable platform right at your fingertips. Sign up today and begin your investment journey!
The rise of cryptocurrency has had its fair share of controversy. It’s rarely met with high regards, especially with news like hacking, ransomware attacks, and investment frauds making rounds now and then. However, this isn’t to say that its investors aren’t making bad decisions themselves.
Admittedly, hooks like high returns in a matter of days can mislead people into thinking that they can be overnight millionaires through crypto. However, simple research will tell you that much like any other investment, cryptocurrencies should be tread on cautiously.
For instance, a crypto user deposited his Bitcoin into QuadrigaCX, a Canadian crypto exchange platform, and liquidated the coins for $560,000. Unfortunately, when it came time for him to withdraw the money from QuadrigaCX, the company failed to pay its dues, with Ethereum and Bitcoin both speculating that the company never held coins in their cold storage wallets.
In another story, a Japanese employee living in Tokyo who initially invested only ¥100,000 got excited when his funds grew by 150% in a month—which made him shell out an additional ¥1 million. Sadly, the second investment failed due to a crash, and he ended up losing half of his life savings.
Conversely, there were also success stories from those who put their life savings on the line and saw it grew thanks to crypto. But what could be the differentiators that made other investors successful from those who regretted it?
Here‘s how you can invest in crypto in the smartest ways possible:
1. Do your homework
It’s not that hard to find resources about crypto—in fact, if you have a stable internet connection and a desktop/laptop/mobile device, not only can you read and learn more about altcoins but also transact with or exchange it. There is no excuse for not being enlightened about its underlying asset.
Before putting your money down, make sure to understand enough about a cryptocurrency. Look at not only its market cap, but also other aspects like types, plans, and management. Almost every single kind of coin has available whitepapers online—check out sites like All Crypto Whitepapers and brush up on knowledge about potential investments.
In addition, blogs like Cointelegraph, CoinDesk, CCN, The Coinbase Blog, and many others can serve not just as supplemental learning sites but also as sources for the latest crypto news, recommendations, and stories that may affect your decision to invest.
A good rule of thumb is to invest only in what you understand. If you feel like you’re having a hard time grasping how crypto operates and make money, it may be wise for you to seek other investment opportunities.
2. Learn with practice
Reading is good, but to apply this knowledge means you actually have to invest in something. You don’t have to go all out at the onset—start small and study the environment first. Whether you earn or lose, at least you have learned some more from experience.
Repeat the elements that made it happen and apply the lessons you learned from any of the mistakes you did. Over time, you’ll build up enough knowledge and confidence to make a considerable investment in your cryptocurrency of choice.
One of the lessons that you can apply right away is that like other investments, diversification is key. A healthy cryptocurrency portfolio means investing in different coins, which may serve different use cases. It can help you realize potential future cryptocurrency gains.
3. Be wary of scams and gurus
If you’re not adequately educated about crypto before getting into it, you’re likely to fall for scams perpetrated by those who want to take advantage of the newbies in the game.
Pump and dump groups, which work like a pyramid scheme, are among the most common forms of fraud in crypto. It starts with a person who wants to move up the ranks and get trade signals ahead of other people inviting you to a group. If you’re going to achieve the same goal, you’d have to attract people, too, but soon it will be difficult to increase your rank because there are not enough people that you can invite.
There are also so-called gurus who give investment tips regarding a particular coin. Unless you have done due diligence yourself, don’t heedlessly follow their suggestions. In addition, try to find out more about the gurus you choose to follow—more often than not, most of them are in it just to fool people into handing over their life savings.
4. Never invest more than you can afford to lose
There are many reasons why you shouldn’t invest too much on crypto. First and foremost is the volatility of the market—it’s very vulnerable to huge price swings that don’t often happen in traditional finance. Investing just the right amount is a security blanket against an unexpected crash.
Of course, if you like living dangerously, you can turn crypto’s high volatility to your advantage through crypto trading. But you can only find success in this strategy if you do your due diligence and consistently educate yourself on the ins and outs of each cryptocurrency.
The second read why you should avoid investing too much on crypto is similar to why you shouldn’t put all of your eggs in one basket. You can spend on other altcoins, and should one experience a crash, you have at least an assurance that you didn’t put everything you have on it.
5. Find Success in Crypto
Investing in altcoins entails being aware of the risk. Anything is possible: it may be successful today, but it can all come crashing down tomorrow. Buy responsibly and be mindful of volatility. Invest your life savings only in cryptocurrencies you understand fully.
Keeping yourself educated is essential to achieving success in crypto investing. Check out our blog to learn and better understand cryptocurrencies before you start spending your hard-earned money on it.