Introduction:
If you have never traded with Bitcoin, then you may be wondering what your expected returns are likely to be. In this article, we’ll discuss some of the various ways you can invest or trade with Bitcoin and what your expected returns could be.
It’s important to remember that there are always difficulties involved with investing in anything, but the potential benefits of trading this volatile digital currency make it well worth the effort for many investors and traders.
How would you define returns on bitcoin investment?
Many investors are wondering what they can expect to get out of their investment in bitcoin. The answer is that it depends on a few factors. First and foremost, one must keep in mind that bitcoin value is solely based on supply and demand as well as a degree of hype. On top of that, you should also consider how liquid your investment will be over time (i.e., whether you will be able to cash out whenever you need or want).
Let’s take a look at some examples The most basic example would be to buy $1,000 worth of bitcoins with another $1,000 in hand for emergencies. If you're expecting 10% returns every year for four years then your initial investment would grow to about $4,000.That's roughly 100% annualized return. Of course, there's no guarantee that returns will even stay close to 10% each year, but still - not bad!
A look at the economic history of currency and commodity bubbles
The economic history of currency and commodity bubbles can be thought of as a series of steps. First, there’s a rapid growth period during which something (bitcoin, say) seems like a promising investment or trading opportunity. Then, however, come some warning signs—media coverage grows negative or begins to focus on some nagging problem (maybe the bitcoin exchange Mt.
Gox has its servers hacked), but few people do anything about it and asset prices continue to increase anyway. Eventually one day people decide they’ve had enough and panic sets in, leading to a massive price drop that seemingly justifies any short-term losses you might have experienced along the way. At that point, you simply cut your losses and hope for better opportunities down the road.
How do we quantify bitcoin’s current value relative to its future potential?
In recent years, we’ve seen an unprecedented amount of excitement and growth in cryptocurrency investments. Since bitcoin was introduced just over a decade ago, it has enjoyed major price surges and is currently valued at around $6,500 per coin. But how do we quantify bitcoin’s current value relative to its future potential? It may be a better idea to examine factors like the velocity of money, market saturation, and demand for digital assets as predictors of future returns on investment.
While these indicators can provide valuable insight into future performance, they aren’t without flaws. For example, there are many reasons why a currency with a large trading volume could drop in value or fail entirely (e.g., Mt Gox). And while supply-side economics play an important role in evaluating commodity prices (like oil), they don’t necessarily explain movements in virtual currencies.
That said, if you can put these indicators into historical context and evaluate them alongside other data points (like transaction volume), you might have a more accurate picture of what to expect from your investment portfolio going forward.
One way to analyze bitcoin’s overall potential value proposition
take a look at how it compares to gold and other precious metals. As of late May 2017, one bitcoin was worth about $1,245 USD, which is significantly less than its peak value of more than $3,000 USD per BTC back in 2013. It's also been tumbling downward more or less steadily for almost a year; as such, it'll be interesting to see if it can actually stabilize anytime soon.
In fact, looking at its recent performance makes me think that the long-term for bitcoin is closer to months rather than years. (Just check out its 5-year chart.) That said, given all of its volatility, I wouldn't bet on it being much more stable than gold or silver over any time period. One way to put things into perspective: if you had invested just $100 in bitcoin back when it first came into existence (in 2009), your investment would be worth approximately $2 million today. That said, there are many factors affecting bitcoin’s price—not least of which are government regulations and security breaches—so don’t feel like you have to go all-in right now.
Where does this leave us? And what returns should you expect?
Right now, it’s extremely difficult to tell what kind of returns you can expect from your investment in bitcoin. The volatility and unpredictability of bitcoin will almost certainly cause a lot of turbulence for investors; however, as time goes on, we should be able to see a clearer and more solid estimate of what returns one can expect on their investment.
Regardless of whether you view yourself as an investor or trader, your money is at. The potential for loss is significant. As a result, it’s important that you not invest more than you can afford to lose—and don’t look at these figures as guaranteed rates of return but rather ballpark estimates that are likely pretty far off given how unpredictable bitcoin is over even short periods.
Why is it important for me, as an investor, to understand where I am in the cycle today?
It’s never too late to start trading, but it helps to know where you stand at any given point. Cryptocurrency cycles can be a bit unpredictable, and as an investor or trader, it’s important to have an idea of what kinds of returns are possible in crypto at any given time. Understanding market cycles will help you set realistic expectations. Let’s take a look at some of these cycles
Understanding where you are in a given crypto cycle will help you set expectations
When we say crypto cycle, we mean big market moves—like when bitcoin went from $200 to over $1,000 in just a few months back in 2013. In crypto, everything is highly volatile and new assets are hitting exchanges daily.
The fact that digital currency is such a new technology leads to a lot of uncertainty. No one really knows what will happen next or how much valuations will increase or decrease even over short periods of time. That said, it’s important for investors to stay realistic about their expectations so they can be better prepared for both bull and bear markets. Here are some guidelines on what you can expect from returns if you’re thinking about buying bitcoin
Conclusion
A lot of people are asking me about how much money they can expect to make by investing or trading Bitcoin. Let me start off by saying that I am not a financial advisor and I don’t know what’s going to happen in three months or even tomorrow. The truth is, nobody knows. Some people have made a lot of money, and some have lost everything; it’s all just part of playing with fire (no pun intended).
My advice: tread carefully when trading bitcoin and never invest more than you can afford to lose because you will indeed lose money over time if you trade like a madman. As for my own experience, I've been lucky enough to see a return on my investment so far but nothing life-changing. If you're looking for large returns on your investment right away then keep looking elsewhere.
For those who want to learn more about trading bitcoin and other cryptocurrencies check out my Crypto Mastermind group here on Facebook where we share tips, tricks, strategies, and insights into making money through cryptocurrency investments. That's it for now! Happy investing everyone!