How Much Fiat Currency Should You Invest in Bitcoin?

How Much Fiat Currency Should You Invest in Bitcoin?

Do you understand the key difference between bitcoin investors who will thrive in 2022 and those who won’t? Those who are successful have started investing in cryptocurrencies. When you first start investing in bitcoin and other cryptocurrencies, you have many questions, including whether bitcoin is a good investment and how to buy it.

Questions about where to start and how to invest in this cryptocurrency can confuse you. To help you get started, I’m sharing my experience, giving recommendations on how much you should invest in Bitcoin, and giving you tips on how to do it.

How Much Money Should You Invest in Bitcoin?

The best way to invest in Bitcoin is to allocate between 5% and 30% of your total investment capital. It’s 5% very safe and 30% fairly risky. I wouldn’t advise anyone to invest more than 50%.

In the end it’s your choice. It also depends on individual characteristics like risk tolerance and how much money you can afford to lose, although market conditions play a role.

Factor 1: Willingness to take risks

The cryptocurrency market fluctuates wildly. Consider an amount you would be willing to lose when deciding how much to invest in bitcoin. You should reduce the amount you had in mind and ask yourself these questions again if the answer to any of them is “maybe yes.” Check with your friends and family if you are unsure of your answer. Will you have a hard opinion of yourself for choosing to invest? Do you think about suicide? Having trouble sleeping?

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The temptation to “panic sell” at a loss will also exist for overinvesting investors. Sometimes accepting a loss can be the right decision, but only if the decision is made logically and not emotionally. Think about how much you want to invest. Think about that amount and imagine your future self: Would you be okay with losing your entire investment, say $12,000?

Factor 2: Profit Tolerance

While this may seem like silly advice at first, consider this: if you invest a sum of money that can upset you greatly if you lose it, what happens when you multiply your investment?

Many investors experienced this during the cryptocurrency boom of late 2017. They (wrongly) chose to invest their life savings, leading to them becoming millionaires.

Do you think they would have sold their stock and taken their profits if they were too greedy to make a wise investment? So investing in Bitcoin this way is not the most incredible option. Most of them returned to their previous positions during the 2018 market crisis.

Factor 3: timing

I guarantee you’ve heard a lot more about cryptocurrencies when the price of bitcoin was skyrocketing than when it was falling or stabilizing. This is because individuals and the media have a natural inclination to follow current trends.

But did you know that multiple market cycles make up the bitcoin industry? These market cycles typically span one to two years, with prices rising rapidly and creating bubbles. These bubbles then undergo catastrophic bursting.

There are platforms like that will automatically let you know when to trade and invest. The timing should only change your entry strategy and the starting amount you had in mind.

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Factor 4: Diversification

Any experienced investor will use diversification as a strategy to reduce the importance of luck. This means that you not only invest your money in cryptocurrencies but also spread it across various other investment vehicles such as gold, stocks and real estate. You can also leave some of your money in the bank to get a minimal interest rate.