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Welcome to the broad crypto ecosystem! Being a new investor, you are most likely looking at some great investment options to add to your portfolio. Many big investors would often point at Bitcoin. Bitcoin had an amazing run in the latter stages of 2024-the Bitcoin price broke its ATH to rise above $100,000, and some market analysts believe it can do even better than that this year.
Although these signals suggest positive long-term growth for some, the question persists regarding whether Bitcoin offers potential for new investors. Amidst the clamour of mainstream media, choosing to invest in Bitcoin involves significant volatility that will undoubtedly challenge the risk appetite of any investor.
Here we will guide you through several important factors to think about prior to entering the realm of Bitcoin: examining its possibilities, dangers, and essential points for novice investors contemplating their initial Bitcoin acquisition.
Why is Bitcoin Popular Among Investors?
Bitcoin is a trailblazer token in the crypto space, it is the largest cryptocurrency currently by market cap. If you talk to ten crypto whales, there’s a high probability that most of them have holdings in Bitcoin.
Bitcoin’s pioneering status gives it strong brand recognition and trust among investors. Many investors see Bitcoin as a great way to store their wealth, as it is seen as a hedge against inflation and currency devaluation, making it appealing during economic uncertainty.
Bitcoin is often called “digital gold” for its limited supply of 21 million coins, creating scarcity with high demand that can influence the asset with significant price appreciation potential driving wealth in the long run for holders.
Advantages of Buying Bitcoin for Beginners
Proven Track Record
Historically, Bitcoin tends to reward those willing to play the waiting game. One good example is how dramatically the token’s price rose in the 2017 bull run, from $1000 earlier in the year to nearly $20,000 toward its close.
Investors who had bought Bitcoin early in the year and held on to it throughout this period would have earned tremendous returns on their investments.
Hedging Against Inflation
Due to the fact that Bitcoin has a capped supply, it will appreciate in value over time, unlike other currencies where governments can print more money, making each individual currency less valuable.
This capped supply of Bitcoin means that it cannot be devalued by inflation, making it a haven for your assets when the economy is unpredictable or suffers from high inflation.
Low Entry Costs
The price of Bitcoin seems daunting at first sight, but as a new investor, you do not need to buy a thousand dollars worth of BTC. You can choose to buy in small chunks that allow you to gradually go into the market without having to buy a whole Bitcoin.
Potential Risks of Investing in Bitcoin
Financial Loss
Despite being a well-established stable cryptocurrency, Bitcoin is still prone to high volatility and can go through sharp declines during various market cycles which can result in substantial losses, especially if you’re investing with a short-term strategy.
Market Manipulation
The limited supply of Bitcoin, though a blessing, also has its downsides. Considering the relatively small supply, Bitcoin tends to be prone to some market manipulations, such as moving the market by whale investors or spreading misinformation to influence prices.
Lack of Consumer Protection
In the realm of crypto, the specifics are extremely important. Make sure to verify your address and the amounts each time you’re purchasing or selling Bitcoin. In contrast to conventional investments, Bitcoin transactions cannot be undone, and the decentralized aspect of Bitcoin implies that there is no central authority available for addressing fraud or conflicts should matters arise.
Key Factors to Consider Before Buying Bitcoin
Investment Goals
It’s essential to have a strategy in place prior to investing in any cryptocurrency. Are you intending to make a fast profit flip, or do you prefer to HODL your investment? Although bitcoin may exhibit significant volatility in the short run for gains, many individuals view it as a long-term investment, and therefore, it may not align with your strategy.
Risk Tolerance
The mantra for any investment is “Invest only what you can afford to lose.” The price of Bitcoin is extremely volatile and can fluctuate significantly; this implies that you could experience possible gains or losses based on market feelings. You should assess your comfort level regarding the significant risks and price volatility associated with cryptocurrency prior to investing in Bitcoin.
Market Trends
To be successful in the crypto market you need to understand the narrative at all times. Currently, expert asset managers advise that a portfolio with 1-2% of Bitcoin exposure is reasonable, but these figures could appreciate or depreciate depending on various factors.
Information is power, and you should always remain updated on the cryptocurrency market, Bitcoin’s price trends, and new developments. The greater your understanding of the asset, the more prepared you’ll be to make wise choices.
Should New Investors Start with Bitcoin?
Bitcoin can most definitely be a good starting point within the cryptocurrency world. It has built such a great reputation and has been held by many significant individuals worldwide.
Its capacity for sustained growth makes it an easy but appealing choice for those seeking to invest in digital assets.
For new investors, it’s essential to prioritize education and understand Bitcoin’s technology and market dynamics. Starting with a modest investment and progressively expanding your exposure is always the best approach as you develop a better comprehension of the cryptocurrency market.
