How to Get Started Investing in Bitcoin Pt.3: The Best Bitcoin Investing Strategy

In this article I’ll talk about my favorite bitcoin investing strategy.

Investing in bitcoin is actually pretty simple.

Here’s the summary:

Buy and hold.

Many beginners think that investing in bitcoin is difficult and complicated. But it’s not, and I’ll explain why in just a minute. You don’t need to be an expert, become a trader or learn how to read charts. All you have to do is invest some money into bitcoin and hold on to them.

The Buy and Hold Bitcoin Investing Strategy that I Personally Use

The buy and hold bitcoin investing strategy is very simple.

Instead of trying to time the market, or day trade, you buy some bitcoin and hold on to it. Buy and hold is a long-term investment strategy rather than aimed at making short-term gains.

What’s the difference?

Some people trade bitcoin.

Day trading or minute trading is when you take advantage of a market’s volatility in order to make money. You buy when something is low and you sell when it’s higher. During the day, there’s usually times when bitcoin is lower and times when it’s higher. If you perfectly time when to buy and sell, you can make a few dollars or even thousands of dollars profit.

The aim of day trading is to make a small profit every few minutes or every day.

This is a short-term bitcoin investing strategy.

A friend of mine even programmed a bot to minute trade different cryptocurrencies on auto-pilot. He once set up one of hits bots incorrectly and it sold all of his bitcoins in one second. When day trading or minute trading you look at short-term market fluctuations and take advantage of them. However, you’re mostly making small gains.

Let me share a dramatic example with you:

I know a guy who mined 500 bitcoins a few years ago.

When the price of bitcoin hit $1 he got very excited and sold all his bitcoins for $500. Seems like a good deal right? He didn’t spend a lot of money to mine those bitcoins. He sold all his bitcoins thinking he was smart. Had he held on to those 500 bitcoins for two years they would be worth $7,500,000 today. That’s the difference between playing for the quick win or the long run.

Now of course, back then nobody knew how big bitcoin would get. A lot of people had dozens or even hundreds of bitcoins and sold them years ago. Most of these people would be millionaires by now had they held on to their bitcoins rather than trying to make a quick win.

When it comes to my bitcoin investing strategy, I solely play for the long run. My goal isn’t to make a few hundred dollars here and a few thousand dollars there. My goal is seven figures.

This requires a different type of thinking.

Instead of trying to figure out how the market will change on a minute to minute or day to day basis, I’m concerned about how the market will change in the next two to five years. I don’t care about volatility, daily fluctuations and even big corrections and bear markets. What I do is look at long-term bitcoin market predictions. I look at the underlying technology of bitcoin and determine its value and likely hood of mainstream adoption in the coming years.

Since I believe the price of bitcoin will reach $500,000 or even $1,000,000 within the next few years, I religiously hold on to my bitcoins. Even when the price plummets, I hold.

I recommend the same buy and hold bitcoin investing strategy to anyone starting out.

How to Get Started Investing in Bitcoin and Avoid Pitfalls

Buying and holding simply involves getting some bitcoin, storing them safely in a bitcoin wallet and then not touching them for the next couple of years. Don’t even check the news or excessively track bitcoin price charts. All of this will make you emotional.

You’ll panic and sell when the next correction comes.

Buying and holding requires staying unemotional and “icy” in the face of fluctuations.

I expect the bitcoin price to see many hikes and drops in the coming years. And every once in a while there will be a big correction. All markets correct periodically. But I’m “betting” that bitcoin’s adoption will raise over the next few years, creating a consistent price increase despite corrections and bear markets. Again, I’m thinking long term and not short term here.

If you’re interested in learning how to stay calm in the face of corrections, I recommend you read Tony Robbin’s book “Unshakeable”. Most amateur investors respond emotionally to market changes. During a bull market, they get excited. And they sell during corrections.

This is a recipe to lose money.

The bitcoin investing strategy that I personally use is simple: Buy some bitcoin. Act like you don’t have that money anymore. It’s gone. Let go of it. Forget about your investment for the next two to five years. Don’t obsessively check bitcoin news, reports, “expert opinions” and charts.

As the strategy implies, just buy and hold no matter what.

How much Should You Invest in Bitcoin?

This is a tricky question.

I think the best answer is that you should invest as much as you’re willing to lose.

There’s a family that sold everything they had to buy bitcoin. That’s the equivalent of putting all your eggs into one basket. It could go extremely well or ruin the family’s life.

Not a good idea to take this much risk.

Bitcoin is still a speculative investment. This means it’s far from guaranteed or safe. Your investment could go either way. It could make you tens of thousands, hundreds of thousands or even millions of dollars. Or it could go to zero and you lose your initial investment.

Both scenarios are absolutely possible.

That’s why you should never invest more than you’re willing to lose.

And you shouldn’t be willing to lose everything like the family who sold everything.

As a general rule of thumb:

Don’t invest more than 5-10% of your money into bitcoin.

That’s especially important for larger sums. If all you have is $100 or $1,000, and you’re willing to lose your savings and skip next year’s vacation, you could invest it all. That’s up to you. I have friends who took all their savings, around $2,000, and invested it into bitcoin. They’re willing to lose those $2,000 in order to turn it into $20,000 or even $200,000.

Personally, I have invested about $12,000 into bitcoin at the time of writing this article.

That’s a small fraction of my money and I would never invest the majority of what I have into bitcoin. As I said, it’s a speculative investment. And I’m not interested in losing all my money.

But I am definitively willing to bet some of it for a big win in the future.

So ask yourself:

What are you comfortable loosing?

Whatever that number is for you, take that amount of money and buy bitcoin. Lose it already. Forget that it ever existed. Act like it vanished. And then just forget and hold on to it.

And by the way, you don’t need to buy a whole bitcoin. You can buy a fraction of a bitcoin. If you invest $100 you’ll get an extremely tiny fraction of a bitcoin. If you invest $1,000 you’ll maybe get 0.07 bitcoin. Let go of the idea that you need to buy whole bitcoins. A bitcoin doesn’t equal a dollar. The word “coin” implies that it’s a small amount and that you need to own many.

That’s misleading.

Let’s talk about the most important part of any bitcoin investing strategy.

How Do You Buy Bitcoin?

I personally buy most of my bitcoins on online exchanges.

The one I currently use is Bitstamp.

All you have to do is sign up for an account, submit some documents like your passport or ID, and wait for them to approve your account. In some cases it can take up to a few days.

There are many other bitcoin online exchanges:

• Kraken
• GDAX
• Bitfinex
• Okcoin
• Bitpay
• Gemini
• Coinbase
• Coindesk
• Poloniex
• Bittrex

The reason I use Bitstamp is because you can buy bitcoin with credit card. When I first started investing in bitcoin, I wanted to buy fast. I didn’t want to wait for the price to increase more. So I was specifically looking for an online exchange that allowed credit card payments.

The fees when buying with credit card are relatively high.

But I didn’t care.

The losses from waiting one or two days are often greater than the credit card fees.

You can also do bank transfers on Bitstamp. It’s free of charge but takes longer. All you have to do is transfer the money to the Bitstamp’s bank account and within a few days your dollar balance will show up in Bitstamp. And then you can use that money to buy bitcoins. Whatever option you choose is up to you, I have used both in the past.

Here’s how the buying process works:

1. You sign up for one of the online bitcoin exchanges above
2. You submit all the documentation and wait for to get approved
3. You deposit money via bank transfer or buy bitcoin directly with your credit card
4. Once you bought some bitcoin it shows up in the online exchange wallet
5. From your online exchange wallet you can transfer it to any wallet

There are a few more things that are important to keep in mind. First of all, every online bitcoin exchange provides you with a bitcoin wallet. This is directly built into the exchange. When you buy bitcoin, your bitcoins will show up in your bitcoin wallet on the exchange. You can then withdraw your bitcoins and send them to a different wallet, which I recommend doing.

Which wallet do I recommend?

If you’re investing large amounts of money into bitcoin, I recommend getting a secure hardware wallet such as the Ledger Nano S. That’s what I personally use and I’m really happy with it.

From your bitcoin exchange you can send money to your hardware wallet.

I won’t get into the details of how to do this, but it’s pretty easy and self explanatory. Your hardware wallet comes with a bitcoin address. And when you withdraw bitcoins from your exchange wallet, you simply enter your hardware wallet address as the receiver of the bitcoin. Make sure you double check the address is correct because if you make a mistake you lose all the money. Once the transfer is initiated, your bitcoins will show up within about ten minutes.

Once the bitcoins are on your hardware wallet, store it safely. When setting up your hardware wallet, you’ll be given a secret recovery phrase. If you lose your hardware wallet or you forget your pin, you’ll have to use this secret phrase to access and recovery your bitcoins.

So store this secret phrase securely and treat it like gold.

Anyone who controls or has access to your secret phrase can access your bitcoins.

It might be a good idea to store both in a bank safe.

In a nutshell, that’s my bitcoin investing strategy. Make sure you also read: How to Get Started Investing in Bitcoin and Understanding Cryptocurrency and Blockchain.