If you are interested in entering the digital currency market, two ways of doing so are through consistent monthly savings or less frequent speculative bets. Here are the pros and cons of each approach and my recommendation for which technique to utilize given today’s financial landscape.
Some people save in bitcoin just like you would in dollars. They set aside a percentage of their monthly income, buy bitcoin, and keep it in a digital wallet. This is done to gradually hedge your savings exposure away from dollar denominated assets and a way to dollar cost average your position into digital currencies over time.
Downside of this approach is obviously a potential significant loss of value the currency. You’ll need a strong stomach to get through the roller coaster up and downs that come from time to time. Nonetheless, bitcoin is on the long term uptrend while paper currencies are following the exact opposite trajectory.
Another way to bet on bitcoin is through speculative bets. While you can hold long or short positions for years, this is still the more short term approach where you take your money and flood it into the bitcoin market in one to three tranches. This way you are locked in at a much less dynamic price point and more so putting your eggs all in one basket thereby exposing yourself to more upside.
Downside here again is the massive loss of value of bitcoin. If you make a huge bet and lose, you’re burned. With the savings strategy you can dollar cost average your way through it and win the psychological battle with yourself that way. Taking a huge hit through a speculative bet gone bad can force you to exit your otherwise long term lucrative opportunity.
My recommendation – save some money in bitcoin. Like I said, the dollar and all other fiat currencies are in a downward trajectory. Bitcoin is quite the opposite and the future of money…who knows, one bitcoin might be worth quite a lot someday.