Dec 08, · One of the most important yet also the most overlooked reason why investing in gold and Bitcoin is smart is the fact that their amount is extremely limited. According to most estimates, there are , metric tons of gold on the planet, and it will be mined sooner than later. Oct 14, · Bitcoin has also benefited as a safe-haven investment in the wake of the coronavirus recession. With cash use discouraged due to possible virus transmission, a . Welcome to Smart Bitcoin Investments! We are dedicated to creating education that fulfills the public interest in bitcoin and alternative asset investments worldwide and helping investors make smart, well-informed decisions. While there is no best way to invest in bitcoin, there are different ways to make a bitcoin investment.
Smart bitcoin investment5 Things to Know Before Investing in Bitcoin ( Updated)
In addition to a store of value, Bitcoin was designed to be "a peer-to-peer electronic cash system. But that's not yet true. Bitcoin's current inability to scale effectively makes it largely unsuitable as a payments network.
New technologies, such as the Lightning Network, could help in this regard, but they're not ready for mass adoption just yet. As such, the need for more digital payment options is unlikely to boost Bitcoin's price any time soon. For these reasons, you may be best served by waiting to buy Bitcoin until it can better fulfill its primary use cases as a store of value and means of payment.
There are certainly some events that could help to drive the cryptocurrency's price higher in the future, such as the "halvening," which will cut Bitcoin's mining rewards in half and reduce its pace of new coin creation. But prices could also continue to fall, so there are plenty of risks to consider if you choose to buy today. Investing Best Accounts. Stock Market Basics. Stock Market. Industries to Invest In. Getting Started. Planning for Retirement.
Retired: What Now? Personal Finance. Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures. Search Search:. So you decide to borrow a single bitcoin from a broker , and you then sell the BTC on the markets. You are now able to pay the broker back what you owe them and make a profit from this price difference. If on the other hand, the markets increased, you would still need to purchase the BTC back in order to return the currency to the third party or broker that you originally borrowed from.
One of the major drawbacks of this shorting bitcoin method is the fact that to begin with, it is close to impossible even to find a broker or third-party that would also lend you BTC. In addition, even if you do find someone or a willing party, they might recall their bitcoin when they feel like it, meaning you would then need to accept what the current price is on the market.
The apparent drawback of the traditional short-selling method has brought about an interest that continues to grow in the derivative products which are one of the alternative techniques when it comes to short-selling bitcoin. The derivatives are explained as the financial instruments which take their prices from an underlying market, which in this case would be bitcoin. When it comes to derivatives, it does away with having to borrow BTC from a broker or third-party, as it only involves that you speculate the future direction of a market.
The derivatives that are the most popular at the moment include CFDs and spread betting. This involves an agreement to make an exchange in the price difference of a BTC from when its position opens to when it closes. This means you will open the position in order to sell a BTC when you believe it will decline in its price. This method allows for a way to place your bet on a direction that you believe the market for bitcoin is headed.
When you open a bet position short-spread , your loss or your profit will be dependent on the declining price of the bitcoin, which would give you a similar outcome to the traditional short-selling positions. The CFDs and spread bets are both leveraged. Even though short-selling on the margin might increase your profits when the markets do fall, it could also expose you to magnified losses, when the market has moved against you.
Here is an example: If you choose to open your position to short-sell bitcoin through a CFD. Because the CFDs are regarded as leveraged products, you would only be required to put a percentage down of the overall value to open the position. To calculate the profit, it just means taking the difference from the opening and the closing price.
It is important to know that any profits in your CFD trades will be calculated in the way of using the full value for the position and not only your deposit. Today there are many other types of fo derivative products which are now a popular method to use for shorting bitcoin, which includes future options and contracts.
An increase in the popularity associated with short-selling has placed an even more significant downward pressure over the bitcoin price, as an increase of people has started getting involved in the short-selling frenzy.
It is imperative that you know that there are risks involved when it comes to short-selling. The most significant risk when you start shorting markets is that the downsides are unlimited. When you purchase BTC, the loss will be capped at an amount that you bought the bitcoin for. When you decide to sell the BTC, there are no limits when it comes to how far the market can start to move against you, which also translates into an increase in a loss that you may incur.
This is the reason why it becomes essential that you learn about managing your risks before you begin trading. If you decide to use the derivative products, it is advisable to attach a stop that is guaranteed to the bitcoin position which will then protect your trades should the market start moving against you. There are also many factors involved which may cause the cryptocurrency price to change dramatically and quickly. Even though it is this type of volatility that attracts so many traders to these bitcoin markets, it can also result in a reason for concern when they have not implemented the right methodology when it comes to managing risks.
As soon as you have decided on how you will protect yourself, you are ready to start with your 1st short-selling position.
It is critical that you monitor anything which may cause the bitcoin price to move suddenly or erratically. This will give you access for free to handy expert information and analysis.