How much should you invest in Bitcoin? Here are some tips to help determine the amount of Bitcoin to invest.
Given the value of the digital currency has increased significantly over the past five years, bitcoin is among the most alluring asset classes.
Furthermore, Bitcoin is trading 70% below its previous top of $69,000, making it possible to buy virtual currency for a low price. But now you’re left wondering, “How much Bitcoin should I buy?” Continue reading to assess the available least risky route to exposure to Bitcoin.
Factors to Help You Decide How Much Bitcoin to Buy
Before you buy Bitcoin, you may have questions and considerations before making the decision.
- Discretionary Income: It should go without saying that the amount you purchase of bitcoin should never be greater than your discretionary income. And this is the money left after all essential costs, including debt, food, housing, and transportation, have been paid.
- Dollar-Cost Average: One notable risk-averse investment tactic is to add funds to Bitcoin after each week or month gradually. Dollar-cost averaging is a technique that makes sure investments are made gradually rather than all at once. Additionally, investors can avoid over-exposure to a particular cost price by using dollar-cost averaging (e.g., buying at the peak of the bull run).
- Be Ready for Volatility: Since its launch in 2009, Bitcoin has produced unheard-of returns, leading many investors to question if Bitcoin is a good investment. But because of its highly volatile market cycles, Bitcoin’s current prices are trading 70% below its previous all-time high. Investors should consider this when determining how much to invest in Bitcoin because the investment value may drop sharply soon.
- Risk tolerance: All investments have a certain amount of risk. However, Bitcoin is far riskier when compared to things like government bonds, blue-chip and dividend companies, and real estate. As a result, investors must consider the possibility that their Bitcoin investment could cause them to lose some or possibly all of their money.
- Don’t Put All Your Money in One Investment: Spreading your investments over various assets is one of the most significant ways to approach Bitcoin. Investing in the top cryptocurrencies, such as Ethereum, Litecoin, or Cardano, is a systematic diversification strategy. Many investors also take into account crypto presales, which provide access to a new digital asset before its exchange launch, for further upside potential.
How to Choose Your Bitcoin Investment Amount
It can be simple to figure out how to generate money with cryptocurrencies. A thorough analysis of how much to allocate is necessary for future investment decisions, not just Bitcoin.
Due to its extraordinary historical performance, it can be tempting to go all-in on Bitcoin, but there are more prudent courses of action. It is preferable to take a risk-averse stance while dealing with Bitcoin and other cryptocurrencies. However, some platforms like bitcoin-up.live enable you to manage your Bitcoin investment.
Understanding Bitcoin’s Volatility
It is practically impossible to predict BTC price changes with any degree of accuracy, but it is crucial to look into previous data and present signs. Despite trading in a very liquid market, Bitcoin remains a volatile asset class. Significantly more so than things like US Treasury bonds or stocks. Dollar-cost averaging always has the potential to weather turbulent crypto waves over the long term, but it’s crucial to be aware of the risks this invites.
Avoiding checking the price of Bitcoin is one of the most excellent strategies to deal with volatility. And this is a common practice among beginners, who frequently check their portfolio’s worth numerous times throughout the day. Instead, consider monitoring the Bitcoin price monthly, concurrent with the next dollar-cost-averaging investment.
