The following are 5 things you need to be aware of before buying Bitcoin for the first time.
1. Find out the local aws and regulations on Bitcoin
Different governments have different stances on Bitcoin. Countries like South Africa are opening their doors to blockchain companies and allowing citizens to freely trade in cryptocurrencies. However, other nations such as Zimbabwe, Kenya, and Nigeria have banned Bitcoin transactions within their respective borders.
There is speculation that Russia is drawing up a plan to ban Bitcoin. If and when it does, this should have a severe impact on the value of the coins.
2. Prepare for drastic Bitcoin price movements
Unlike normal shares and commodity investments, which can give you 10% to 20% annual return, the Bitcoin market is highly volatile. There have been several instances where values of coins have doubled or lost half of its value within a matter of weeks.
That kind of drastic market movement was previously unheard of. If you decide to invest in Bitcoin, you should expect the value of your purchased coin to go up or down drastically without any warning.
3. Understand that this is a high-risk investment
The money you invest in Bitcoin should be an amount that you are prepared to lose. Make sure your investment portfolio includes a range of safe investments that guarantee positive annual returns. Mark Cuban, the famous billionaire told reporters that investing 10% of the total savings in cryptocurrency is for “adventurers.”
With major governments up in arms against Bitcoin, the future of the currency can be on shaky ground. This is why it’s best not to assume any returns. Instead, the best approach is to remain patient and see where the market takes you.
Also, it’s important to set a target. When the value of the coin reaches your target value, be sure to sell your coins without hesitation.
4. Keep an eye on China
One of the best ways to try and predict the movement of Bitcoin is to look for live bitcoin news that involves China. Recently, the Chinese government’s announcement to ban Bitcoin caused the coin to drastically lose its value.
Now, because Bitcoin market movements are heavily influenced by speculations and news, any major government-level announcement from China on Bitcoin should impact the value of the coin.
5. Don’t fall prey to hype
You may have heard people say that investing a few thousand dollars in Bitcoin back in 2010 would have made you a millionaire by now. While that’s mathematically true, there is no saying that Bitcoin is going to keep on growing like that.
It’s juvenile to assume that putting in a few thousand dollars now will guarantee a double return by the end of the month or even a year. The value of Bitcoin can very easily drop. After a fantastic run which saw Bitcoin's value go as high up as $19,783.06 (an all-time high) on 17 December 2017, the price of the coins came crashing down. This means people who invested back then have lost almost two-thirds of their money.