Making a profitable Bitcoin investment is conceptually simple. Buy when the Bitcoin price is low and sell when the price is high. Nothing to it.
That formula sounds simple – but it’s not as easy as it seems. That’s especially true with Bitcoin and other cryptocurrencies. Market volatility sends the BTC price flying and falling dramatically with no warning and no obvious cause. Last week’s 100 € purchase may be worth 500 € today – or 50 €.
That’s why life is so difficult for spot traders who make a profit by timing the market – buying and selling in line with their predictions about the rapidly changing Bitcoin exchange rate. BTC value rises and falls according to market dynamics, regulatory changes (both real and rumored), celebrity tweets, and dozens of other reasons. Timing the market is hard. That’s why so many day traders lose money.
Taking the Long View
Bitcoin’s price history chart is all steep peaks and sudden valleys when you examine short-term high and low Bitcoin value measures. But when you zoom out to examine the BTC exchange rate over a period of years, the jagged highs and lows are dwarfed by a long-term upward trend.
Here are some comparisons of Bitcoin value and other good investments over the past 10 years. Check out the 10-year compound annual growth rates:
Asset 10-year CAGR
Bitcoin 132.2%
Gold 1.2%
S&P 500 16.6%
DJIA 11.41%
As you can see, the Bitcoin price has risen at 132.2% over the past 10 years. That dwarfs the respectable returns earned by investors who chose S&P or Dow Jones index funds.
It is true that the Bitcoin exchange rate rises and falls precipitously in the short term. If you’re making short-term investments, you could lose or gain a lot of money very quickly. But these short-term changes in Bitcoin value take place within the context of long-term trends. If you invested 1,000 € of Bitcoin a decade ago, today you would be wealthy.
What’s true of Bitcoin is true of many other cryptocurrencies, whose values tend to rise and fall along with BTC’s. The long-term trend is upward.
It is true that some cryptos lose value. Price charts reveal weeks and months when values could be less than the purchase price. But the historical record shows that successful investors are those who zoom out to consider holding Bitcoin and other cryptos to meet long-term goals. This strategy occupies a special place in the Bitcoin world, where it is known as “hodl” to commemorate a newsgroup typographical error.
Learning From the Past
What if you had purchased Bitcoin a month ago or a week ago? If you had purchased 100 € worth of BTC, what would you have now?
You don’t have to wonder. The Kriptomat what-if calculator performs the calculations based on data that is refreshed around the clock. The calculator can tell you exactly how much your 100 € investment would be worth today using actual historical data.
In fact, the calculator can display results for any of the 350+ cryptocurrencies on sale at Kriptomat.
The calculator demonstrates that despite the short-term volatility, crypto in general – and Bitcoin in particular – has generated eye-opening returns for long-term investors.
One good way to take advantage of long-term upward trends is to use the Kriptomat Recurring Buy feature, which lets you set a schedule of regular purchases on a weekly, bi-weekly, or monthly basis. For the price of a daily cup of Starbucks, you can slowly but steadily build up your crypto portfolio in support of long-term goals like retirement, purchasing property, or paying for an expensive university education.
The Bottom Line
Hordes of money-losing day traders can tell you that there’s nothing simple about predicting highs and lows when it comes to crypto prices. The factors influencing the Bitcoin exchange rate are too numerous and obscure to track.
While price volatility makes life tough for day traders, its effects are dwarfed by long-term Bitcoin price trends. There are no guarantees in real-world investing, but hundreds of thousands of Bitcoin owners have found success in considering crypto a long-term investment.
