One common term that we hear often in regards to Bitcoin is HODL, which means Bitcoin savings. So why is it important to save in Bitcoin? In this article, we will be talking about savings and trading Bitcoin where the term HODL Bitcoin was initiated and will find out the best ways for Bitcoin savings as an investment.
Should You Trade Or Save In Bitcoin?
There prevails a common saying in finance that 98% of people who try trading do not make it till the end. They end up trading so profitably that the trade can bring them their full time living.
Trading is a very difficult thing that requires the right combination of patience, dedication, natural ability, and also control over emotions. Most people just don’t have the capacity to be successful traders.
But there is nothing to worry about. Even though hodling (savings) isn’t certainly easy, it’s much more affordable to the average person compared to trading. Anyone can buy and do Bitcoin savings; you don’t need any special training for that.
As far as the profit is concerned , Warren Buffet was not a trader, but an investor, and he stood as the richest man in the world for a while. Buffet’s wealth tells us everything we need to know about how much money you can make from Bitcoin savings.
For an average person just getting into crypto, it is way better to HODL crypto than then try and trade.
How To Do Bitcoin Savings?
These four steps will help you in Bitcoin savings. At first glance, it sounds like it would be easy to HODL Bitcoin but as with most things in life, it’s more difficult than it looks from the surface.
Prepare for volatility
Bitcoin is one of the most fluctuating assets in the world, and the altcoins are even more than Bitcoin.
Massive fluctuations (big price swings) is what gets the investors huge returns, but it can work the opposite way as well. For instance, in March of 2020 Bitcoin price decreased 50% in one day. That was an unexpectedly large drop even for Bitcoin, but the value of Bitcoin regularly goes down by 30% or even more in a bear market.
So investors planning to opt for Bitcoin savings have to be really prepared for such fluctuations.
Get a hardware wallet
A Bitcoin savings wallet is very important as that will carry all your credentials. So while choosing wallets ensure you choose hardware wallets. Hardware wallets are safer than online wallets as there is no intervention of the internet so that chances of all your data getting hacked are less in a hardware wallet.
Here is a list of some of the best crypto saving account (Hardware)
- Ledger Nano S
- Ledger Nano X
- Trezor Model T
- Trezor One
Think for long term
By definition, for Bitcoin savings, you need to keep the investment for a long time. Bitcoin generally has a four year market cycle and many investors plan to keep their Bitcoin for several years or more.
For people just getting into the world of digital currency, it’s probably smart to have a 3 to 5 year plan. While it’s possible to make a lot of money by investing in Bitcoin, achieving big profits may take a while. So plan accordingly and keep the savings mentality strong.
Don’t day trade
As an investor, the worst thing you can do is day trade of crypto. The entire idea of Bitcoin savings is that everyone does it. Anyone can buy and invest in Bitcoin, there is no need for you to know charting, technical analysis, or even how the options and futures market work.
Unless you already carry some natural skills and take the time to develop them, it is very difficult that the average person will ever make more money day trading than what they could make by investing in Bitcoin. There are also provisions to earn interest on crypto.
Most crypto exchanges give you Bitcoin interest rate of 3 percent to 8 percent per annum, but some exchanges like BlockFi have tiered interest rates that depend on the Bitcoin deposited by you.
Another drawback of day trading is that the taxes incurred are higher in most of the countries. To qualify for a discounted tax rate, an investor must keep their digital currency for at least a year in most countries.
Bitcoin savings can be a better option than trading if done with care. There are many aspects that should be kept in mind while investing in Bitcoin, one among them is that you should be mentally prepared for the fluctuations that you may have to witness when you enter into the world of digital currency.