In the past few years, digital currency, such as Bitcoin (BTC), has become a popular topic with investors. Understanding more about how to trade Bitcoin and invest in cryptocurrency can help you become more educated and know if this new asset class is suitable for your portfolio.
The Popularity and Growth of Bitcoin
In 2009, a secret group or person using the pseudonym Satoshi Nakamoto created Bitcoin in response to the global economic crisis in 2008. This cryptocurrency provided an alternative asset that wasn’t connected to the central banking system.
Since then, knowledge of BTC has become more widespread, and the value of each coin has increased, which isn’t surprising. One of its main attributes, making it better than other investments, is its 21 million unit cap.
With a limited supply, each unit becomes more valuable as demand increases. In early 2013, one Bitcoin was worth about $13.50. However, this low value didn’t last long and escalated to over $1000 later that year due to increased mining operations.
A Quicker Rise in Value
The value for Bitcoin stayed stagnant for four more years until 2017 when it spiked to $20,000 per unit. In 2021, it made another quick move higher, reaching a value near $65,000 per unit.
Obviously, using BTC as an investment can be highly lucrative if you are proficient in picking the right entry point and know how to trade Bitcoin correctly. The key is determining the amount of exposure you would like for digital currency and simultaneously stay safe with your investment. Identifying the pros and cons of investing in BTC is essential before you get started.
Combating Currency Devaluation
One of the bright points for BTC is its limited supply. Unlike the United States dollar that can be printed excessively, there will never be more than 21 million units of Bitcoin. With this element in place, it’s more challenging to devalue each unit as it can only be completed by the natural market forces of buying and selling.
If there’s less demand for BTC, the value of each digital coin will fall. Over the long term, and as this digital currency gains even more popularity, it may rise in value due to its fixed supply. As investors look for cash alternatives, they may want to park their money in BTC as a hedge for inflation.
As a new asset class, cryptos, like Bitcoin, offer investors a new method for diversifying a portfolio. Limiting the risk and diversifying your investment in BTC can be done by learning how to trade Bitcoin with Capital.com or using a dollar-cost average method.
Taking the latter approach allows you to slowly ease into the asset without getting stuck at a high value and watching it drop. Choosing to purchase a specific amount each month is one way to complete this method. You can choose the timeframe meeting your financial expectations.
As a relatively new asset, Bitcoin has significant potential to have its value increase in the future. Staying patient and investing a suitable amount meeting your investment goals may be what your portfolio needs to take advantage of its growth and diversify your holdings.