How to invest in Bitcoin effectively? Several ways to invest in Bitcoin

Abstract of this article

• Passive observers are those who want to invest in cryptocurrencies but do not want to be an active participant in the market, so they are best suited to use a fixed investment strategy (DCA) .

• Using DCA to buy Bitcoin means buying Bitcoin for a fixed dollar amount and at fixed intervals, such as buying $100 of Bitcoin every month.

• DCA is a superior strategy because you never risk too much, you get the best average Bitcoin price and still outperform in the long run most traders.

• Using DCA to invest in BTC avoids falling into the round-trip profit trap of other coins because Bitcoin is the most resilient: it survives every bear market and becomes stronger .

People who aren’t into crypto full time often ask me for advice on what they should buy.

The fact is that if you are not going to spend time researching cryptocurrencies, the best strategy that has been proven over time is to invest in Bitcoin using a fixed investment strategy (DCA).

Why did I write this article?

Interest in the cryptocurrency continues to grow as the price of Bitcoin floats around $70,000, close to its all-time high, and with Bitcoin’s halving approaching in about eight days.

Rising cryptocurrency prices serve as a growth mechanism attracting more and more people into the field. Some of them became very interested and decided to stay, but most just became passive observers.

This article is written for those who are mostly passive observers!

These are people who typically want to test the waters and invest in cryptocurrencies, but don't want to become a full-time Web3 player and spend all their time learning about different currencies, projects, and going down countless rabbit holes.

In the beginning, passive observers often get too excited and buy a bunch of crap coins that their friends told them to buy, only to find themselves losing a lot of money and losing most of the money they invested.

This is a very common path for newcomers in cryptocurrency.

If you don't want to go through this, and your only goal is to invest passively and make a profit, then you should probably use "fixed investing".

Fixed investment

Fixed investment is one of the simplest investment strategies, which basically involves investing a fixed amount in Bitcoin (or any other asset) at fixed intervals.

Most people only receive a paycheck once a month, so often people choose a fixed amount they feel comfortable with, such as $100 a month, and save it. Regularly investing in Bitcoin means taking that $100 each month and using it to buy Bitcoin, although you can also do it daily, weekly, or bi-weekly, whichever you prefer.

DCA is a strategy of making purchases at fixed intervals. It removes all risk of investing more than you can afford, and you'll buy at the average Bitcoin price over time.

In fact, it is so easy to get into Bitcoin that most people simply don’t believe it will work and decide not to do it and instead try some more complex strategies that will probably make They lose money.

(1) Fixed investment methods mainly include the following types

Currently, the fixed investment methods that can be used mainly include the following types

1) Manual fixed investment

The main disadvantage of manual fixed investment is that it is cumbersome and forgetful. You have to prepare Excel sheets to make various records. Every fixed investment cycle requires logging into the exchange and placing orders. Basically, few people can persist in this for a long time. It is the biggest obstacle on the road to fixed investment.

Not to mention that many people also use daily fixed investment, daily, every day. Anyway, no one in the currency circle around me can do this.

2) Find someone else or a big V to help you decide on your investment

Finding someone to invest on your behalf is a superfluous way of setting up your investment, and it also risks others running away. Compared with manual fixed investment, you also need to manually transfer money to the big V every time, and then worry about whether the virtual currency in the wallet has arrived.

It is said that it is unnecessary because this method of finding someone to invest on your behalf only solves the shortcoming of "forgetting" manual fixed investment. There is no difference between manual fixed investment and manual monthly payment to big V. At this point, you might as well log in to the exchange yourself and place an order.

This editor strongly does not recommend this method. There are too many examples of fresh students having their money taken away. It’s already 2019, why are there still people looking for others to invest on their behalf?

3) Altcoin fixed investment

Altcoin fixed investment refers to some apps that promote a currency and allow users to invest in this currency. Then this currency will be linked to the mainstream currency according to a certain ratio. I don’t know whether it is actually converted according to this ratio. This is basically a hypothetical investment. Whether the purchased cryptocurrency can actually be deposited into your wallet is a question. What you pay is real cryptocurrency, and what you get back may just be an altcoin.

There is also a variant of the fixed investment altcoin ETF, which is actually a variant of the altcoin fixed investment, but it no longer corresponds to a single currency, but a combination of several currencies. You can put this ETF It is regarded as a combination of altcoins, but in fact it is still an altcoin.

The standard for this type of anti-counterfeiting is very simple. Bitcoin fixed investment is to buy Bitcoin. There is no need to go through so many detours. Anyone who does not buy and sell Bitcoin directly, no matter how well packaged it is, there are other Investors should keep their eyes open.

4) Fixed investment in altcoin exchanges

Similarly, what is mentioned above allows you to invest in altcoins.

There is also a website or APP that helps you buy Bitcoin and then transfers it to your wallet. It is essentially a small exchange, or a copycat exchange. If we have to buy Bitcoin from exchanges anyway, why don’t we choose major mainstream exchanges?

5) API cloud managed fixed investment

Now each exchange has its own trading API. If you are a coder, the most suitable fixed investment method is of course to combine the exchange’s API and then do it yourself Write some code, and then find a server to deploy the fixed investment script, and let it help you decide on the investment day and night.

Unfortunately, most Bitcoin investors cannot write code, so the third-party API cloud hosting fixed investment method was born. API cloud hosting means that you host the exchange's API KEY to a third-party website like Bimao ​​Fixed Investment. Once you set up the fixed investment plan, you don't need to worry about it. When the fixed investment time comes, the platform will help you place the order.

We strongly recommend this method of fixed investment, so we need to focus on its advantages and disadvantages.

(2) Advantages of API cloud hosting

The advantages of API cloud hosting are trouble-saving and asset security.

Easy to worry

The one-click API cloud hosting method means that all the user has to do is add the API Key of the corresponding exchange, and then set up the fixed investment plan. Compared with the manual fixed investment method, the efficiency is improved dozens of times. There is no need to be afraid that you will forget to place your bet when the date comes. The machine will not forget it. Moreover, it can be easily executed on a daily, weekly, and monthly basis, and can be paused and resumed at any time. It also supports smart investment and fixed redemption functions, so you no longer need to use Excel to record.

Asset Security

Asset security is compared to the fixed investment methods of other altcoins and altcoin exchanges. The Bitcoins purchased after the fixed investment in API Cloud Hosting are still in the user's exchange account. There will be no problem of assets not being accounted for after the fixed investment. You don't have to worry about others taking the money away if you don't give it to others. The API KEY used by users for custody usually does not have permission to withdraw coins, so there is no need to worry about security issues such as the transfer of the user's digital assets. The cloud platform only provides cloud computing capabilities, and orders and transaction results are traceable on the exchange.

(3) Disadvantages of API cloud hosting

It saves trouble, but there are still disadvantages. The main disadvantage is of course the risk of KEY leakage.

Risk of KEY leakage

Regarding the risk of KEY leakage, both the custody platform and the exchange have corresponding measures to ensure the security of KEY.

On the exchange side, we recommend that users do the following three things when applying for exchange APIs.

1) Do not add currency withdrawal permissions when applying for API

Now the standard configuration of exchanges in the industry is to separate API permissions for reading, trading, and currency withdrawal. When users apply for an API for custody from an exchange, they only check the read and transaction permissions. In this way, the applied API does not involve currency withdrawal permissions, and assets cannot be transferred out of the exchange.

2) Only use sub-accounts to apply for API

Taking Huobi.com as an example, you can also apply for a dedicated sub-account under a general account. Sub-accounts are the same as ordinary accounts, and separate logins can be enabled. The difference is that the assets of the sub-account can only be transferred through the ordinary account (i.e. the parent account). The assets of the sub-account cannot be transferred out and can only be transferred back to the parent account.

Both ordinary accounts and sub-accounts can be used for cloud hosting.

But if the total amount of fixed investment you plan to invest is very large, our suggestion is to open an independent sub-account specifically for fixed investment, and then transfer assets from the parent account into it. In this way, even if the API Key of the sub-account is leaked, the assets of the parent account will not be affected.

3) Bind IP

When applying for an API, you can bind it to the IP of the cloud platform. The benefits of binding are

First, make the API KEY valid for a long time. According to the regulations of Huobi.com, if the IP is not bound, the API KEY needs to be updated every three months;

The second is to prevent the API Key from being used fraudulently after being leaked. Since the IP is bound, even if The API KEY is also unavailable if it is leaked.

Why fixed investing is a superior strategy

Nowadays you can simply put $100 per month into a savings account, which is what most people do. However, all currencies are by definition inflationary because all global central banks provide for a small amount of inflation, meaning that the same $100 you save will buy you less over time. thing.

At the same time, since the total supply of Bitcoin is fixed at only 21 million coins in total, it is deflationary in the long term. Therefore, the same $100 of Bitcoin purchased today will be worth more over a long enough period of time, as the price of Bitcoin tends to increase.

Simply put, Bitcoin is a hedge against inflation because although prices fluctuate wildly, it has a fixed supply meaning that as more people get into Bitcoin, the price The trend is upward.

The next question is why not buy as much Bitcoin as possible now?

Well, since the price of Bitcoin is extremely volatile, if you buy right out of the gate, you may end up buying at a local top and end up paying more than you need to for Bitcoin. By buying a fixed dollar amount each month, you'll pay an average price over months or even years, and tend to get better prices. We can illustrate this below.

On the website dcabtc.com, you can estimate the returns of different fixed investment strategies. By default, we can see here that investing $10 per week will increase your total investment of $1,570 by 112.7% over 3 years, to a total of $3,339.

At the same time, if you only bought $1,570 three years ago instead of investing $10 every week, you would only get about 20% of the income instead of the above A gain of 112.7% shown, and you would only have about $1,890 today, far less than $3,339.

Importantly, as I discussed in the previous section, if the amount you invest regularly doesn’t have much of an impact on your financial situation, then you will be able to extend the time of this process. So not only will you get the best average price, but you'll never take too much risk, and even if prices fluctuate too much, you won't be able to sleep at night afraid of losing money.

Bitcoin enthusiasts are so encouraged to invest in Bitcoin that they even have a name for it: "stacking sats." Since the smallest divisible unit of Bitcoin is called a satoshi, or "sat," if you invest a fixed amount on a regular basis, you'll be piling up those sats on a regular basis!

Bitcoin is Built Differently

When I tell most people to commit to Bitcoin, they either feel like they’re missing out or think it’s too easy and insist they should Buy a bunch of other tokens.

As a passive observer, this is usually a mistake. The reason is that while many coins may gain more than Bitcoin does in a bull market, they also lose more in a bear market, and they typically don't recover to their previous highs.

It’s very common for people to “round trip” their profits because they buy a coin, see the price spike, and then even when a bear market hits they see the coin’s price drop more than Bitcoin, they I will continue to hold this token. They would hold on to that token in the hope that it would come back, but ultimately it never came back and they lost more than if they had just held Bitcoin.

Bitcoin is built differently.

There are many reasons why Bitcoin is given more fundamental value, which I can discuss in a future post. Bitcoin's price tends to be the main driver of market rises and falls, and although it doesn't yield as much as other coins, it continues to rise even after other coins exit the market.

Therefore, Bitcoin is the safest haven for passive observers who want to invest in cryptocurrencies but do not intend to follow the market regularly.

Although I primarily recommend Bitcoin, you could argue that Ethereum has also become a pretty good safe haven today, and Solana may reach that point as well. However, I still recommend that passive investors make a fixed investment strategy in Bitcoin first, and if they really want to, then they can put a fixed investment in Ethereum second.

Importantly, both of these have fixed or reduced supply, while SOL does not. There will always be only 21 million Bitcoins in circulation, and Ethereum is currently actively burning ETH within its algorithm, so the supply is actively decreasing. This is an important factor in long-term value appreciation. Of course, there are other factors for price increases.

As an active market participant cycle

This article is mainly for passive observers, but even if you Hopefully it's not just that, and hopefully more opportunities to participate in the crypto market, betting on Bitcoin is still a good strategy, but maybe you can do better by taking on more risk.

As mentioned above, most tokens and NFTs tend to lose to Bitcoin in the long term, however during the peak of a bull market many tokens and NFTs may outperform Bitcoin. Choosing the right tokens and NFTs during the cycle remains an obvious challenge, but it might be a smart idea to risk a certain percentage of the narrative of the current cycle.

For example, it’s now clear that there’s a lot of money to be made related to artificial intelligence, meme coins, and Bitcoin’s Ordinals and runes, so taking a certain amount of risk in these narratives may pay off more than Greater returns from just holding Bitcoin.

However, the big problem here is that most people don’t understand the four-year cycle of cryptocurrencies and can lose those profits as mentioned earlier.

Therefore, if you want to be an active market participant, then make sure to sell your positions promptly before the end of the cycle because it is impossible to accurately predict when it will end. Possibly, but when it ends, the prices of these tokens will not return to their previous highs.

It’s important to end this article now and state that this advice is simply my personal opinion as someone who has participated in and observed the markets for over 8 years.

As is often said in cryptocurrency, none of this is financial advice, please make sure you do your own research. In other words, treat my opinion as just another point of view in online content, don't treat it as the bible of truth, I'm sure you won't do that. Please make sure to read up and do your own research before investing your own money!

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