When it comes to cryptocurrency, the first thing that stands out is Bitcoin. BTC was the beginning of the crypto era and the revolution of the global financial system. Therefore, it comes as no surprise that Bitcoin dominates the cryptocurrency market. According to CoinMarketCap statistics, the total market cap of cryptocurrencies as of March 29, 2022, stands at about $2.1 trillion, with BTC accounting for almost 42%.
Investing in Bitcoin turned out to be more than worthwhile for most investors, especially those who believed in the early prospects of digital assets. It would be hard to downplay the profits made by those who invested in Bitcoin, for example, back in 2015, when the value of BTC was no higher than $411. In 2020, Bitcoin grew by 346%, by 53% in 2021, and by 10,000% since 2015. So, investing in Bitcoin remains profitable with a proper approach.
Let’s take a look at what profit opportunities exist when investing in your first cryptocurrency.
Long-Term Investments
The most common way to make money from Bitcoin is through long-term investments. The idea behind this method is simple: buy the asset and hold it, as you wait for the value to rise. However, the difficulty of this method for a beginner is that it requires patience and the ability to cope with emotions — value fluctuations can keep you on edge because crypto assets are highly volatile.
There are two ways to invest in Bitcoin for the long term:
- HODL strategy. This method involves allocating a certain amount of money that an investor is willing to invest in digital assets. Then, the investor buys BTC for this entire amount. Once this is done, the tactic is simple: keep the asset and don’t sell it for as long as possible.
- Averaging. This strategy consists of buying an asset for a certain period of time for the same amount every day. This way of investing involves dividing the initial capital into equal parts. Buying BTC for the same amount every day averages the value of the entire asset.
Many experts believe that investing in Bitcoin is worth considering for the long term. For example, Kraken CEO, Jesse Powell, sees Bitcoin as an investment for at least five years. Goldman Sachs analyst, Zach Pandl, agrees with his point of view, and in early January 2022, he suggested that in the next five years, Bitcoin’s value may reach $100,000.
Short-Term Investments
A short-term investment option is speculative BTC trading on the exchange. The value of the first cryptocurrency can fluctuate significantly during short periods of time. This can see price changes reach 10% in both positive and negative directions.
First of all, BTC exchange trading requires a deep understanding of the cryptocurrency market as a whole. Beginners should master the basic methods of crypto asset analysis, namely:
- Fundamental analysis. This assumes the evaluation of assets in accordance with market realities at a particular moment. This method includes an analysis of the news feed, market sentiment, and many other factors that can affect the price of BTC.
- Technical analysis. This method involves asset assessment based on forecasting tools. It is based on the ability to analyze price charts and market depth.
In this way, a trader’s analytical skills are important for short-term investments in Bitcoin. The ability to correctly interpret news feeds and stock market summaries will determine the profitability of operations.
There are factors that make the BTC exchange rate rise or fall. The main ones are:
- Opinions of industry experts, politicians, and public figures. Positive statements about Bitcoin or the crypto industry in general by opinion leaders cause the value of BTC to rise. Likewise, the Bitcoin exchange rate reacts with a decline to criticism or negative statements.
- Acceptance and distribution. Bitcoin’s popularity has grown considerably over the years, and thanks to the spread of cryptocurrencies in general, its demand is also gaining momentum. The more attention BTC attracts, the higher its exchange rate will be.
- Fear factor. BTC rate fluctuations make inexperienced traders succumb to the influence of the FUD factor. The more people hope to buy BTC at the moment of its growth, the more its value, fueled by this demand, begins to soar.
- The impact of government regulators. As various governments are continually trying to regulate the digital asset market, any state bills and regulations related to cryptocurrencies directly affect the BTC rate.
Therefore, short-term investments in Bitcoin involve the constant study of the crypto market and the work of traders. Many factors can affect the value of BTC in the short term, and the success of investment only depends on the trader’s experience and ability to “read the market.”
