Bitcoin investment or any other cryptocurrency investment is not safe- we all know this fact. Though, there is a debate among investors about it. In general, no investment is safe. If you talk about traditional stock trading, it doesn’t also generate an assured profit amount. Actually, in the case of bitcoin, the risk is higher. But, what is the debate about? It is actually about the amount of risk and safety that varies from person to person and majorly for the ever-changing bitcoin market situation. Immediate Profit, a platform for trading bitcoin that has been profitable for years, is relied upon heavily by many users.
Here is a brief discussion about what experts say about bitcoin investment risks as well as what are their opinions on making safe investments in this field.
Risk factors in the bitcoin market:
In the market of bitcoin, in fact, the cryptocurrency market is full of risks. The main reason for that risk is its volatile price. The price of bitcoin is continuously changing. At the time of the beginning, its price was close to zero. Day after day as its demand increased the price started increasing as well. In 2021 bitcoin reached its topmost price as of now which was over $65,000. However, bitcoin’s current price is lower than $17,000 as of December 2022.
But. It is a bigger scenario. If you focus on the daily price graph, you will clearly see a dangerous roller-coaster-like structure. The price of bitcoin moves ups and downs multiple times in a day. So, risk in this field is a fact.
But, if your goal is to be a better investor here, you have to know what kind of risks you can face. Here are some examples-
1. You can face a sudden loss in the price of the cryptocurrency in which you have put your money.
2. You might have chosen a diversified portfolio but, for maximum cryptos, there is a downfall. The result could be negative. The total amount of loss could be higher than the total amount of gain. However, for a well-diversified portfolio, such situations are not very common.
3. If you have invested in a cryptocurrency at the wrong time, we mean, if you have invested paying a high price when the price was not at its lowest, but, you thought it to be higher in the upcoming future, and what happened was the complete opposite of your thought. The price might decrease even further and in that case, you will lose.
4. You can invest for the long term by analyzing the market and depending on the predictions that market experts often make. But, as they are barely predictions, they must not be true every time. Therefore, you can lose in the long run.
Such, or even more types of risks people often face while investing in the crypto market.
However, the debate is about how to mitigate it. So, let’s move on to the strategy that we can adopt.
Face the risk and minimize it:
After long practice and trial, investors think that short-term trading is a better idea rather than having a long-term investment plan in the cryptocurrency market. See, the risk factors will always be there till the market is fluctuating.
When you do long-term planning, you barely have an idea of what the market is going to look like after 2-3 years. For example, at the end of 2021, it was said that bitcoin’s price would reach $100,000 in 2022. But, the year is going to end now and in December 2022 the price of bitcoin is below $17,000. So, when you think long, you can’t have a clear picture of the market. It is comparatively better to have short-term planning.
When you analyze the market depending on the short-term movement, you have an idea of what it is going to be like the next day. Even if it is not possible to be 100% sure, the predictions are stronger here. The price can move to an extent but, it will not be drastic, at least, the chances are low. Therefore, maximum investors now prefer short-term trading. The most practiced trading strategy nowadays is day trading. Most investors also trade multiple times in a single day. As the price changing range is low here because you are holding the fund for just one day or several hours, the amount of profit will be low also. Therefore, your focus should be on how to make multiple profits. Thus, you can actually make bigger profits than one time long term as well as uncertain profit.
So, to make a secured profit it is better to avail short-term strategy. You can also trade some other fruitful assets like oil. Otherwise, bitcoin is always a good asset for investment as well as to utilize in this modern world.