Cryptocurrency has been seeing an upward trend, and it continues. The price of bitcoin has jumped by nearly 100% as more and more people try to get their hands on digital currency. Despite bitcoin being popular, some people believe it is a risky investment as it is always experiencing price fluctuations.
If you are determined to invest in bitcoin, here are some ways you can limit your risk.
Invest Through an ETF
Even though investing in bitcoin directly is possible, it can be quite a hassle. Regular stocks trade differently from cryptocurrencies. For you to directly invest in bitcoin, you’ll have to create a digital wallet and sign up on a cryptocurrency exchange. If you are to lose your digital wallet password, then you won’t be able to access your investment.
A bitcoin ETF mimics the cryptocurrency, but you won’t be directly investing in bitcoin. ETF works to invest in bitcoin the same way you would do any other stock through a traditional exchange.
It is essential to have a diversified portfolio even if you’re investing in a bitcoin ETF. Make sure the majority of your money is spread throughout a variety of stocks in addition to Bitcoin ETF.
Consider “Crypto Stocks”
The safest way one can invest in bitcoin is not investing in bitcoin at all but through buying “crypto stocks.” A crypto stock refers to a company that is somehow involved in cryptocurrency.
Some great companies to invest in include:
Square allows cryptocurrencies as a form of payment. It has over $200 million worth of bitcoins.
Salesforce builds blockchains which is the technology behind cryptocurrencies.
Tesla CEO announced a $1.5 billion investment in bitcoin. Tesla also allows payments in bitcoin.
When investing in crypto stock, many do so because they are stable companies, not because they are involved in cryptocurrencies. Stable companies will survive long term, notwithstanding what happens to bitcoin.
Build a Well-Diversified Portfolio
Whichever area you want to invest in, make sure you have a diverse portfolio. When investing in bitcoin, having a healthy portfolio is essential in limiting your risk. The well diverse your portfolio is, the less effect bitcoin will have on your investment if things don’t work out.
Invest in at least 15 different stocks from various diverse industries if you choose to invest in individual industries. You could invest in ETFs, which will instantly provide you diversification. Always make sure that your key portfolio is as solid as possible.
According to the experts at SoFi, ‘SoFi is a different kind of finance company whose goal is to help people get their money right. Our products are built around our members—so that they have the tools they need to take control of their financial futures.’ You can invest in cryptocurrency by SoFi and learn how to invest, avoid high costs, invest in what you know, and diversify early.
The Bottom Line
Remember that bitcoin is a very high-risk investment and only invest money that you wouldn’t mind losing. Bitcoin has the possibility of being a profitable investment, but it might not be for everyone. Do your due diligence before investing in bitcoin.