Bitcoin’s growing popularity and value since its inception in 2009 is a curious case for many investors. Like the Internet boom, cryptocurrency also took just a few years to become a mainstream topic and is growing now more than ever. Many investors, as well as professionals, have made investing in cryptocurrencies part of their portfolio. But Bitcoin and other cryptocurrencies, unlike fiat money, are not a physical asset. These digital currencies do not follow a centralized system and are not dependent on banks. Your transactions take place through a decentralized computer network.
So are we investing in something? Or are we just speculating some returns that might just happen in the distant future?
In 2018, tycoon Warren Buffett publicly denounced Bitcoin as not being an investment. Three years later, the world saw many things happening in front of the cryptocurrency. On the one hand, there are corporate giants that invest in these digital assets. On the other hand, encryption scams left debris behind.
Perhaps we should stop asking whether Bitcoin buying is speculation. Instead, let’s focus on the simple rules to follow in the cryptocurrency market for those who want to turn it into a real investment.
1) Long or short term profits
Speculation is when we are engaging in a risky transaction, expecting a short-term profit. Instead of being a speculator, become a true investor by focusing on long-term goals. It is a golden rule not to invest an amount that we cannot afford to lose. The cryptocurrency risks are as real as they can be. Therefore, we must weigh the risks and goals that best suit us.
2) Quality of cryptocurrency
It’s best to stay away from flashy and risky projects when buying coins. The promise of a quick profit can often leave us hoping for returns for eternity. But if we really want to invest in a currency, we should check out the red flags. Profits may not be so fast, but they will save us in the long run. The price of Bitcoin in India has increased a lot since its inception.
3) Diversify stakes
Don’t put all your eggs in one basket. Diversify your portfolio so that if a currency fails in the market, all is not lost. This is better than stocking up on a cryptocurrency and speculating that things will get better. The real investment is when we prudently choose safe ground in a volatile market.