Cryptocurrency Investments: Buying Bitcoin Is Investing Or Speculating?

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The growing popularity and value of Bitcoin since its inception in 2009 is a curious case for many investors. Like the internet boom, cryptocurrency has also only taken a few years to become a mainstream topic, and it is growing more than ever. Many investors, as well as professionals, have integrated cryptocurrency investing into their portfolios. But Bitcoin and other cryptocurrencies, unlike fiat money, are not a physical asset. These digital currencies do not follow a centralized system and do not depend on banks. Their transactions are carried out via a decentralized network of computers.

So, are we investing in anything? Or are we just speculating on returns that might only happen in the distant future?

In 2018, business mogul Warren Buffett publicly denounced Bitcoin as not being an investment. Three years later, the world has seen a lot happening on the cryptocurrency front. On the one hand, there are business giants investing in these digital assets. On the other hand, crypto scams have left wrecks behind.

Perhaps we should stop wondering if buying Bitcoin is speculation. Instead, let’s focus on the simple rules to follow in the cryptocurrency market for those who would like to make it a real investment.

1) Long-term or short-term benefits

Speculation is when we enter into a risky transaction, hoping for short-term profit. Instead of being a speculator, become a real investor by focusing on long term goals. It is a rule of thumb not to invest an amount that we cannot bear to lose. The risks associated with cryptocurrencies are as real as it gets. So we need to weigh the risks and goals that suit us best.

2) Quality of the cryptocurrency

It’s best to stay away from flashy and risky projects when buying parts. The promise of quick profit can often leave us hoping for returns for eternity. But if we really want to invest in a coin, we have to check out the red flags. The profits may not be so quick, but it will save us in the long run. The price of Bitcoin in India has increased significantly since its inception.

3) Diversify holdings

Don’t put all the eggs in one basket. Diversify the portfolio, so that if a coin fails in the market, all is not lost. It’s better than fueling up on a cryptocurrency and speculating that things are getting better. A real investment is when we carefully choose safe ground in a volatile market.

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting Founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

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