Bitcoin markets are highly volatile, meaning that prices can rise and fall by large amounts within a single day. If you buy and sell at the right times, you can make a lot of money. Buy or sell at the wrong times, and you could lose. By using a long-term investing you will not have to worry about losses stemming from short-term fluctuations. At the same time, however, you will miss out potential gains. Short-term investors make their money by betting correcting on day-to-day (or even hour-to-hour) price fluctuations.
Earlier in this guide we already pointed out the concept of buying in and cashing out. While these terms are important for long-term investing, they are absolutely essential for short-term investing. If you are interested in short-term investing, make sure you understand these concepts. A long term investor has the benefit of not having to closely monitor markets. A short-term investor, however, must constantly watch for changes in prices. Short-term investors make their money off of short-term fluctuations in prices, so obviously they must be well-aware of these changes.
As a short-term investor, your goal is to understand the movements of Bitcoin markets. You will have to constantly follow market news and base your trades on said news. If the American government announces actions against the Bitcoin, prices will likely plummet. Your job would be to figure out if A) the government’s action will destroy Bitcoin (like e-gold) and B) if not, when have prices bottomed out. For example, if the government announces a move to regulate Bitcoin to ensure against terrorist activity, prices would likely drop, but the currency itself wouldn’t be destroyed.
Once prices bottom out, you should pull the trigger and make a purchase. Then, you will have to wait until prices rise. Continuing with the scenario above, the government might outline its stance and the Bitcoin community comes to understand that regulations will be minimal. Prices might then jump considerably. Once prices peak, that’s the best time to sell. Once you’ve sold off your Bitcoins, you want to wait until prices drop again. Once they bottom out, you will make a purchase and the whole process will start over again.
Is Bitcoin a Good Short-Term Investment Vehicle?
Yes. Not the long answer you were looking for? Well, let us explain. A good short-term investment vehicle is a volatile one. That means that prices will change dramatically in a short-period of time. The more prices change, the more chances there are to make a profit. Of course, the more prices change, the more chances there are to lose money.
Short-term investment opportunities are generally high-risk opportunities. Short-selling stocks, penny stocks, volatile commodities (i.e. oil in the lead up to a war or recession), and numerous other investments can be counted as highly-volatile investments, and Bitcoin fits right in with this crowd.
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