How Much Investment Should be Made in Bitcoins?
Due to the rapid strides made by Bitcoin (BTC) in the last ten years, many investors are waking up to the idea and consider investing their money in it. It has become a very good instrument for investment because of the swift value appreciation that it has received within a short time. Despite the volatility, people have even called it ‘digital gold’ at times due to its ability to retain the high price. But as an individual investor or as a beginner in this sector, it can always be baffling to find out the right investment amount that can be put into BTC.
There are many finance specialists and sites that can help an investor in solving out this question. The answer to the question will also depend from person to person. In the following sections, we take a look at some factors that can help in determining an investment that is to be done in Bitcoin and which can be helpful for any potential investor. Keep reading to know what is a cryptocurrency
There is a rule of thumb
For making Bitcoin investment, there is a general rule of thumb that can be followed as it has already helped some of the big investors in this business. Any investment capital’s five percent to 30 percent can easily be invested in BTC. It can even be more, to up to 50 percent, but for that, an investor should be ready for all consequences and also be aware of the Bitcoin market. The risk tolerance factor should also be taken into account so that a person should know the amount that can be afforded for losing in case the worst happens to the investment due to any reason.
Personal preferences also matter
An investor’s personal preferences has to be kept in mind while investing in Bitcoin. A lot of times, investors tend to think conventionally and want to keep off the risk factor, but it must be mentioned here that no investment is risk-free. Even an investment in gold can go awry if the global prices fall significantly due to some eventuality. Also, there is always a question of an investor’s personal choice and comfort with an investment.
Many investors are comfortable with investing in real estate as they feel that it is the safest bet available. The basic reasoning is that as they know the sector well, they feel comfortable with real estate and so on. Therefore, any investor who has a good comfort level with the cryptocurrency will always like to put his money in it.
A heavy investment can be risky
For any beginner, investing a heavy amount in cryptocurrency can be potentially dangerous. The market dynamics and trends of the market must be known in detail before investing a huge sum. In the majority of the cases, bulk investment without having an idea of the market fails to reap good returns. If at all, heavy investment in BTC has to be made, then it is always advisable to do so under the guidance of a financial expert who understands the cryptocurrency.
Very low investment may not be worthy
A lot of beginners think that BTC can make them millionaires overnight, which is also not true. Thus, they usually get into the business by investing in a very small amount. Investing a very small amount in BTC may not be of any use as the daily fluctuation of the cryptocurrency may keep it balanced at all times. Thus, even after a long period, there won’t be either significant profit or loss from it, and the person will always stay at the same level! Ultimately, it can lead to boredom and a negative feeling towards BTC.
Exchange platforms also charge
It should always be understood by an investor that BTC exchanges charge users for purchasing, selling, and transferring their cryptocurrencies. Thus, there is a charge that has to be paid by users to these exchanges for the service that they provide. Therefore, investing a small amount may not be of any purpose as that may get used up in paying for the services alone! Neither a very big investment always guarantees a good return.
Hence, considering all these factors, any investor should look at the amount that is available for investment and follow the thumb rule. Generally, anywhere around 20 percent of the investment can be put into BTC so that if it gains, an investor can get a good cushion, whereas if it fails, there won’t be much heartburn for the same.