As Bitcoin nears the previous high value of almost $20,000 USD, speculation surrounding the future of the cryptocurrency is growing. Some investors believe the most recent sustained rally is unsustainable, some assume that the events of 2017 will repeat as Bitcoin sees another crash, and others are more optimistic, with goals as high as a Bitcoin value of $300,000 by the end of 2021.
Deciding on which stance to take is a difficult task - bitcoin is already unpredictable and volatile in nature, and the events of 2020 have only perpetuated this. Paired with widespread misconception and purposefully misleading news, it is difficult to decide whether or not investing is a good idea.
While the answer to whether or not you should invest in bitcoin will come down to your own personal beliefs, making this decision appropriately will require a better understanding of a few factors.
The Importance of Understanding the Bitcoin Fundamentals
The first and most obvious step is to develop your understanding of bitcoin, the way it operates, and the industry that it operates in. This will involve learning about things like blockchain technology, the application of bitcoin, past trends in value, and the altcoins on the market.
In learning about these aspects of bitcoin and crypto, you will be able to decide whether or not you see value in it as an investment - this is a crucial part of understanding whether or not investing in crypto suits you as an investor, depending on your personality, risk profile and values.
Knowing these crypto fundamentals will also allow you to consider whether you want to invest in altcoins - these alternative cryptocurrencies offer differentiated value and use, and there are thousands of them on the market.
Finally, be sure that you have the right approach to buying and selling crypto - if you are a beginner, online exchanges such as Independent Reserve are likely the most suitable option.
Identifying Misinformation and Misconceptions Surrounding Crypto
Once you have a good understanding of what bitcoin is and how it operates, the next step is to ensure you can identify exaggerated or incorrect information within reports and articles on crypto.
Given the extent to which crypto news will make unsubstantiated claims in order to drive speculation and reduce or raise confidence, this is key in making good investment decisions.
Ultimately, it can be difficult to identify the inaccurate information out there - ultimately, the most effective way to utilise accurate and reliable information is to become a more consistent reader of crypto news - getting involved in the industry and keeping up to date with the latest movements and trends will give you a better idea of what is reasonable, and what is less reliable.
Understanding What Type of Investor You Are and the Strategy You Want to Take
Finally, identifying the right opportunities to invest in bitcoin will come down to understanding your personality as an investor - this means knowing the risk you are comfortable with taking, whether you have short or long term goals, and how comfortable you are with crypto and investing as a whole.
Start with your investor risk profile - knowing whether you are a more conservative investor or one that is more aggressive will help you in deciding whether you should make investments for the long or short term, and will determine the confidence you have in making investments at certain times.
After this stage, you will have an understanding of why many potential bitcoin investors decide not to get involved within the crypto market - conservative investors with more long term goals are often unenthusiastic in regard to the highly volatile crypto market. With this being said, many conservative investors will hold Bitcoin or another cryptocurrency as a smaller percentage of their overall investment portfolio.
Taking the Unexpected Nature of Crypto Into Account
When it comes to knowing when to invest, 2020 is strong proof as to why a decisive choice is impossible to make. The immense volatility of crypto, and the speculation looking forward are both indicative of the unstable nature of cryptocurrency.
In addition to this being demonstrated in 2020, looking back at past scandals and controversies paints a similar picture. Historically, examples of Bitconnect and OneCoin clearly demonstrate the hype that can easily surround what is not a sure way to make a profit.
Ultimately, the understanding the right time to invest in crypto (and Bitcoin in particular) will come down to understanding the cryptocurrency, how it works and the market that it is in, as well as keeping up to date with crypto knowledge, having the ability to identify misleading and overhyped information, and knowing how your investor personality suits the volatility of bitcoin.