Investing in cryptocurrencies is extremely interesting because of the immense options. In traditional investing of stocks and shares two basic analysis were done, the technical analysis where we charted the price movements and the fundamental analysis where we looked at the health and profitability of the company and the return on investment. Both are still applicable for Bitcoins.
However, when you invest in cryptocurrencies you will find that you must do a multi-dimensional study of the subject. The type of blockchain you want to invest, the exchange from where you want to buy, the way you want to store – your personal wallets, the way you want to trade, the way you want to secure, and finally the way you want to sell and book profits. We will talk about all the above one by one, but we will start with the last and the most important thing first.
When to book profits?
As an investor, you can always make money if you stay focused on your prime objective. To book profits at the first opportunity. Never wait, for profit maximization is the first rule of the game. If you wait you will always find that your dream of becoming super rich turns into an illusion. You keep chasing a mirage and the waterhole of profits shifts further. You can either stay rich on paper or stay rich in real time by booking profits. You can’t do both simultaneously.
Also, you must understand your cryptocurrency and the challenges it faces and the opportunities it provides. First and foremost, you must understand that a block chain investment is tailor made to suit a specific purpose. There are blockchains for geeks, blockchains to suit bankers and also for speculators. As a matter of fact, all of them are designed specifically.
Like oil Bitcoin is a speculator’s darling
Bitcoin is not like regular currency. It is not recognized by all nations. It is mined steadily by a network of computers worldwide. It resembles a commodity like oil in letter and spirit. The limited capacity of 21 million that will last just around 150 years, high investment cost and volatile demand. Anybody with a 60 Mbps connectivity and adequate computing power can mine bitcoins. But like oil, its supply cannot be increased overnight. Investors will pump in that amount of computing power only if it is profitable. The moment the price jumps they will book profits and supply of bitcoins will flood the markets. Then when they have booked the profits they will start mining again till the next price peak occurs.
Bitcoin prices fluctuate on demand and supply. It is not really an ideal cryptocurrency for investors but one that is designed for speculation. Yet, a lot of investors want to get into mining because they feel that they can mine Bitcoins round the clock. However, it is more fun to invest as a speculator than as a miner.
But for that, you must understand technical analysis and the price movements of the cryptocurrencies. If you study the three-month price chart of Bitcoin you will find that you would have made far more profits if you had disinvested in the second week of August and reinvested in the second week of September.