Are you a long-term thinker when it comes to finances? Looking for more to do with your crypto assets? Hodl onto it with the right Bitcoin investment strategy.
HODLing onto the future with the right Bitcoin investment strategy
Are you a long-term thinker when it comes to finances? Looking for more to do with your crypto assets? Hodl onto it with the right Bitcoin investment strategy.
Don’t worry if you don’t know too much about finance. We will take you through saving options that could help you decide how you want to save.
Conventional savings funds
Savings funds, traditionally, are the oldest and most popular way to save and invest your money. There are two main ways that they work.
The college fund example
With conventional savings funds, you put your money in the bank account, and the bank puts that money to work. They invest it to make money for the bank and even use it to lend out to other people. In exchange, they pay you interest.
From there, it can get a little complicated. How much money you get from the bank can depend on a number of factors. Current interest rates, who you bank with and how you bank with them, can all determine the kind of interest rates you can earn.
Most arrangements also have contracts in which you agree to leave the money untouched. The longer you let the bank hold the money, the more you’ll make on it when you do take it out.
Here is an example of how this may work. A parent may deposit X amount of money into an account for you when you are born. By the time you turn eighteen, that money has grown exponentially.
The retirement fund example
The common retirement fund example works a little differently.
With this kind of fund, which can be its own thing or a part of something like a life insurance policy, you pay into the fund over time. After a certain time or a certain dollar amount, you get the money back.
So, in the retirement fund example, you pay a little bit of money into the account regularly over many years. Then, when you decide that you need the money, it’s there for you. It’s important to note that, depending on the set up of the fund, you might need to pay some taxes.
Bitcoin investment strategy – BTC savings funds
So, what’s a Bitcoin savings fund?
The idea is that you set aside a certain amount (whether an amount in your local currency, also known as fiat, or any other crypto) and you invest that amount into digital currency. You then decide to leave that deposit until a specific date.
There are no contracts regarding interest amounts, you are simply banking on the price of Bitcoin to increase or decrease based on demand. Also, as there is no agreement or contract with a financial institution regarding the investment, there aren’t any guarantees that your investment will increase in value as this is all based on the demand and supply within the crypto market. So, how does this type of Bitcoin investment strategy compare with a regular savings fund?
The idea of Bitcoin funds – not surprisingly – seems to be younger than cryptocurrencies themselves. But there are people who have done it and have seen it pay off. Want to keep your spending coin different from your fund coin? Just keep them in separate Bitcoin wallets.
When a Bitcoin investment strategy pays off
Londoner Peter Bowles recently told Forbes about his daughter’s Bitcoin College fund. Despite some tumultuous periods for the Bitcoin price and the bear market, the “fund” outperformed many conventional funds in terms of gains. The fund was started a year ago by Peter on the occasion of his daughter’s birth like many conventional college funds. Who’s to say how much the fund will be worth when she comes of age?
According to a local report, Australians at, or approaching retirement age, are increasingly interested in one specific Bitcoin investment strategy. That is, putting their money into cryptocurrencies as a form of retirement investment. Cryptocurrencies, in addition to outperforming some conventional assets, are easier to invest in and easier to withdraw from, if necessary.
The side by side
The benefit of a Bitcoin saving fund is that there are no contracts. If something happens, you can withdraw your cryptocurrency investment at any time without forfeiting your gains. Suppose you lose your job or have a medical emergency. If you have a conventional savings account, you might be able to withdraw your investment – depending on the terms and conditions of the contract and the type of account – but there may be penalties associated with the transaction as you may not the interest earned. If you have a Bitcoin fund and need your money, you can get the current market value.
A downside is that cryptocurrency markets are unpredictable.
We’re talking about funds here. This is about the long-term Bitcoin investment strategy. The day-to-day volatility that’s associated with cryptocurrencies, melts away when you’re looking at longer periods of investment.
As with any investment, the market is dictated by supply and demand, therefore it is impossible to predict the growth of the market. However the same could be said for any investment or stock listed on any exchange.
With most conventional savings funds, you lock in the interest rate when you sign the papers. That way, you can safely predict the total gain over a 5, 10 or 20 year period.
Is a Bitcoin fund right for you?
Think about this long and hard. Talk to some financial advisors in your area, about both the conventional and cryptocurrency investments. Know your options.
Not all cryptocurrencies are created equally. They work differently and follow different trends. However, the biggest names – Bitcoin and Ethereum – are currently outperforming altcoins in terms of return on investment, topping the list of the most profitable investments of the decade.
Also, know your financial position. If you’re living paycheck to paycheck, you probably wouldn’t put thousands of dollars into a fund to use in 20 years. The same goes for Bitcoin investment strategies mentioned here. Granted, you can always withdraw, but that still doesn’t mean that putting all of your eggs into one basket is a good idea.
