Why does Bitcoin is volatility? - Grand Forex Systems

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Why does Bitcoin is volatility?

 



The first thing that you need to know is that Bitcoin is volatile. The value of a single Bitcoin has gone up and down over the years. This is not particularly a bad thing as other investments go up and down too. You need to be a smart investor with Bitcoin.


Why does Bitcoin enjoy Value Jumps?


So many people are reliant on the Internet these days. People get very frustrated if they are out and about and cannot find a WiFi connection to use the Internet with their mobile devices. Whether this is a good or bad thing is of no consequence when it comes to Bitcoin investing. The important thing is that growing use of the Internet is good for Bitcoin.


Over the years since the launch of Bitcoin it has attracted investors from all corners of the world.


Being a true global digital currency that is available to all (in theory) it is no surprise that it has generated a lot of excitement.


Another good reason why the value of Bitcoin has risen so rapidly is because it is a scarce resource that is actually useful. Most people know that there is only so much gold that we can mine. Each year there is less and less gold left in the Earth. Therefore it has great value.


You can apply the same logic to Bitcoin. There will only ever be 21 million Bitcoin. As time passes this number will dwindle and the value increases. It is now very hard to mine Bitcoin and this is only going to get tougher.


Investors really like the fact that Bitcoin represents predictable and sound monetary policy that all can verify. At any time you can see how many Bitcoins are in circulation and how many new ones have been created.


You can easily trade Bitcoin for some products and services. If you have a gold investment then this is not a liquid asset. You would have to sell some of your gold stock for cash before you could purchase anything.


It is very easy to make cross border transactions using Bitcoin. There are no governments or banks involved. You can send Bitcoin securely in minutes to anywhere in the world. Transaction fees are very low compared to fiat currency transactions.






We really have the Internet to thank for the rise in popularity and value of Bitcoin. The Internet has made the sharing of information easy wherever you are and this concept will underpin the success of Bitcoin as a global and verifiable currency.


The Price of Bitcoin


You will not find an official price for Bitcoin anywhere. It is not the same as fiat currencies. It is all about how much someone is willing to pay for a Bitcoin or fraction of a Bitcoin. A good reference for this price is the Bitcoin Price Index provided by CoinDesk which you can find here.


You will usually see the price as the estimate of the value of one Bitcoin. Most cryptocurrency exchanges will let you buy as many Bitcoins as you want and even offer fractions of Bitcoins for sale.


When should you buy Bitcoins?


There are no guarantees with any investments. The history of Bitcoin shows that it tends to increase in value really fast and then slow down and fall until it is stable. This is a cycle that you need to learn and understand.






There are some great tools available that you can use to analyze the price history of Bitcoin. Probably the best two are:


1. Cryptowat.ch

2. BitcoinWisdom


One thing about Bitcoin that is really attractive to investors is that it is never affected by the financial stability of a country. So if there is speculation that a major currency will fall, such as the UK Pound with all of the Brexit issues, then if the currency devalues this will have an impact on other world currencies.


So you need to think globally with Bitcoin. Don’t just look at what is happening in the United States, or Europe or China. How is the economy of the world changing?


Go for Long Term Bitcoin Investment


You may have read that there are people making excellent short term gains trading Bitcoin. While this may be true you need expert knowledge and it is a risky strategy. We strongly recommend that you go for a long term Bitcoin investment strategy.


Here is why. If you invested $1000 in Bitcoin in October 2017, two years later in October 2019 you would have made a profit of more than $700 providing you with a return on investment of over 70%.


That is a staggering return.


Despite these kinds of returns being possible you should still treat Bitcoin as a risky asset to invest in.


If you are not prepared to make high risk investments then maybe Bitcoin is not for you. You have seen an example of the kind of rewards that are possible so you need to decide if it is right for you.






Bitcoin Investment Strategies


There are different ways that you can invest in Bitcoin. We will look at the most popular ways here:


Long Term Buying and Holding


This is the Bitcoin investment strategy that we recommend. Here you will buy Bitcoin at a certain price and hold on to it for a period of time in the hope that the value will increase. You may also see this strategy called “hodling”.


When you decide to buy and hold it is very important that you do not just take anyone’s advice on whether Bitcoin will rise or fall. You need to know how Bitcoin works and do your homework using the tools available to come to a decision yourself.


If you are going to adopt a buy and hold Bitcoin investment strategy then we suggest that you do the following:


1. Do not invest more than you can comfortably afford to lose. As we said earlier, Bitcoin is a high risk investment and this should be in your thoughts at all times.


2. When you have purchased Bitcoins don’t leave them in an exchange wallet. Get your own wallet and move them there. 


3. Use a reputable exchange to make your Bitcoin purchases. This may cost you a bit more but it is better to be safe than sorry.


4. Don’t purchase all of your Bitcoins in just one trade. Use the principle of Dollar cost averaging (DCA) and commit to purchasing a certain amount every month (or more frequently) throughout the course of the year. When you do this you pay average prices during the year.


Short Term Bitcoin Trading


As we said before this is where you buy Bitcoins at a low price and then sell them at a higher price to realize a profit. The time frame for these investments is short. We do not recommend that you start out with short term Bitcoin trading.


As you learn more about Bitcoin you can move to a shorter term trading strategy. It is certainly possible and there are some very large players in the Bitcoin market making profits regularly on short term Bitcoin trades. You need to learn how to trade properly to make this work which takes time and practice.


Mining for Bitcoins


In order to make any kind of profit with Bitcoin mining you need to invest in a lot of high end computer equipment and get the cheapest electricity that you can find. And then there are no guarantees!


Mining has become a lot harder over the years. There are less and less Bitcoins to find and more and more people mining. It is just not a cost effective way to invest in Bitcoin in our opinion. Use the money you would spend on equipment and electricity to buy and hold Bitcoin instead.


You may have heard of cloud mining for Bitcoin. The idea here is that you pay for a service that will mine on your behalf using the web. In our experience these are either scams or so expensive an investment that you might as well just use the money to purchase your Bitcoins.


Doubling your Bitcoins


Have you seen websites that claim that they can double your Bitcoin holdings? Or maybe you have come across sites that claim they will pay you high levels of interest every day on your Bitcoins? We have one word for these kinds of websites:


                                           SCAM!


There are lots of websites that offer high yield investment programs (HYIP) and almost all of these are scams too. What happens here is that these sites take money from people all round the Internet in exchange for high returns. They use the money that they get from new people signing up to pay high returns to the initial investors which creates a buzz.


Then guess what? A few months later the website simply disappears! Most people lose their money and they have no way to get it back. Don’t fall for these Ponzi scheme type scams. You cannot double the amount of Bitcoins that you have using these sites. It is more likely that you will lose all of your Bitcoins.