Best Place To Buy Bitcoin For Long Term Investment
So you want to know how to invest in bitcoins. Good. Taking into account developments around bitcoin, you'd be crazy not to want to invest in bitcoins. This article will explain why the best place to buy bitcoin is through a forex broker such as eToro.
Looking at bitcoin's history, people who were lucky enough to obtain sufficient number bitcoins when they were worth almost nothing in 2009, became overnight millionaires when the price skyrocketed in 2014.
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In spite of the massive bitcoin price growth over the past few years; bitcoin entrepreneurs believe there’s still a lot of room for bitcoin prices to grow even more.
This article will also explain how to invest in bitcoin by leveraging your limited cash with eToro Social Trading. This will help you take advantage of the anticipated bitcoin price increase over the next few years.
1. How To Invest In Bitcoins?
Ever since bitcoin was established as the leading cryptocurrency in 2013, several ways to invest in it have emerged.
The easiest and the most appropriate method for most people is simply to buy them at your local bitcoin exchange. In contrast, Bitcoin mining is the dumbest way to invest in bitcoin for an average investor.
Unless you're a bitcoin expert with a big bank balance, do not invest in bitcoins through mining them. Practically all bitcoin mining companies out there are scams or pyramid schemes in disguise, those which are not, are not profitable for investors.
Besides physically buying bitcoins, my favourite method to invest in bitcoins at the moment is buying them through a forex broker to take advantage of the leverage principle.
2. Buying Bitcoins from a Forex Broker
The first step in investing bitcoins through forex trading is to identify a licensed forex broker which trades in bitcoins as well. I currently use eToro for buying or investing in bitcoins.
The next step is to create an account, load your KYC documents, and transfer funds to your account and open (buy) a bitcoin position.
The advantage of buying from a forex broker is that you won’t need a bitcoin wallet to manage. You won’t even need to worry about securing your bitcoin wallet through 2nd-factor authentication (2FA).
However, the ability to leverage your limited cash is the key benefit to investing in bitcoins through a forex broker.
3. What is Leverage?
Investopedia defines leverage as the use of various financial instruments or borrowed capital to increase the potential return on an investment.
I will use Tom and Mary as an example to demonstrate how leverage works when investing in bitcoins. Let us assume a price of $700 per bitcoin.
Both Tom and Mary have $700 each in their trading accounts for buying bitcoins.
Tom is happy to proceed and buy 1 bitcoin with his $700. Mary, on the other hand, wants to buy 4 extra bitcoins, so she borrows 4 X $700 = $2800 to have a total of $3500, enabling her to buy a total of 5 bitcoins.
Now let’s see what happens when the price increase to $1000 per bitcoin after 2 months. Tom has only 1 bitcoin, so now his trading account will be worth $1000.
Mary on the other hand has 5 bitcoins, whose value would have increased from $3500 (5 x $700) to $5000 (5 x $1000) in total.
In summary, Tom has $1000 worth of bitcoins, whereas Mary has $5000 worth of bitcoins. But Mary has to pay back the $2800 (4 x $700) she borrowed, so she will be left with $2200 ($5000 - $2800) in her account.
Now let us look at how much profit each person generated. Tom started with $700, but ended up with $1000, so he made $1000 - $700 = $300 profit.
Mary, on the other hand, started off with $700 as well but ended up with $2200 after paying back the loan. So she made $2200 - $700 = $1500 profit. Because of 5 to 1 leverage, Mary’s profit ($1500) is 5 times Tom’s profit ($300).
However, there’s a caveat. If instead of increasing, the bitcoin price had dropped by say $100 to $600 per bitcoin, then Tom would have lost just $100, whereas Mary would have lost a total of $500 after paying back the loan.
Leverage is a powerful investment tool, but can also work against you if things don’t go as planned. If you did not understand the preceding example 100%, then watch the video below. It explains how leverage works .
4. How To Buy Bitcoins with eToro Social Trading
After you have created your eToro account, verified it and loaded funds, go to the search button on top and type bitcoin. A bitcoin icon with the ‘trade’ button will appear below the search bar, click the 'trade' tab.
Type in the value of the amount of bitcoins you want to buy in the 'amount' space. I have used $700 as an example.
Next, click the 'leverage' tab and select 'X5' leverage. Meaning whatever trader amount you have chosen, its value will be multiplied by 5 when trading.
Then click the ‘take profit’ tab and type $1200 in rate for taking profit position.
Finally, click the ‘stop loss’ tab and type $590 in rate for stop loss position.
A rate of $590 for stop loss means the bitcoin position will be closed once the bitcoin price drops to $590.
A rate of $1200 for profit taking means the bitcoin position will be closed once the bitcoin price risen to $1200.
Having done that, click ‘set order’ to finalise your order. Well done!! You have just opened a position for bitcoins at a leverage value of 5.
Note that the stop loss level you will be able to set will depend on the trading amount. The higher the amount on the trade, the lower the stop loss you can set. Ideally, you should set the bitcoin stop loss at below $500 (definitely not more than $600) to protect yourself against possible but unlikely bitcoin price reversals.
Having read the article, I think you should agree with me that the best place to buy bitcoin for long term investment is eToro Forex Trading.
Be that as it may, this method of investing in bitcoin is worthwhile only if you plan to take advantage of the 5 to 1 leverage ratio. If you opt not to use leverage, then it is probably better and cheaper if you buy bitcoins through a cryptocurrency or bitcoins exchange.