Bitcoin's high rate of return on investment has always attracted a large number of investors. Similarly, the fluctuation of bitcoin price also makes some investors wait and see. So, is bitcoin worth buying? Should we put bitcoin on our investment list? There are three things you need to figure out first.

Three basic logics of bitcoin Trading

In fact, investors' obsession or hesitation with bitcoin is easy to understand. For this investment, we need to master the following three points.

1、 Cryptocurrency trading is similar to the ups and downs of commodities

Most mainstream retail investors do not invest in traditional currencies. For example, you don't hold a lot of euros. The currency issued by the government often fluctuates with inflation, and the main purpose of long-term investment is to fight inflation. Some mutual funds set up currency positions to hedge the impact of exchange rates on their returns, but their currency is hardly really used to generate earnings.

Cryptocurrency transactions and currencies are completely different. One of the main reasons is that there is a limit for coins in the circulation of any given currency. Central banks such as the Federal Reserve can and do manage inflation by issuing more money and support their own economic policies. On the other hand, based on the control allocation algorithm, the number of bitcoins in circulation will eventually reach the extreme value of 21 million.

This makes many cryptocurrencies more like commodities because of limited supply, just like gold or oil. Given the supply problem, Maher said, "it's hard to see bitcoin as money.". At the same time, limited supply is another reason for the volatility of bitcoin (this may change one day if more institutions accept such assets).

2、 Do winners take all?

The technology behind bitcoin, namely blockchain, makes people believe that it will exist for a long time. But no one is sure how many blockchain dependent currencies will survive and thrive. The current value and price of bitcoin, to a certain extent, stems from the belief that it will continue to develop as the dominant cryptocurrency in the world.

"We don't know who's going to win at all," said Gabriel gubakos, head of digital asset strategy at Vaneck

Maybe there are many ways for another cryptocurrency to subvert bitcoin in the future (think about the rise of Facebook and the demise of MySpace).

Some commentators believe that traditional currencies may have similar characteristics to blockchain at some time, which will reduce the mainstream market's acceptance of cryptocurrency, which may significantly reduce its value.

3、 Cryptocurrency fund has a price

Institutional investors and some of the wealthiest individual investors already have some means to intervene in the cryptocurrency market.

Mahe regards all clients who invest in bitcoin or the above funds as "adventurers", even though he owns bitcoin and Ethereum himself. He often introduces his ideas in the name of Mark Cuban, and then responds to those who want to hold bitcoin.

Kuban believes that if you want to invest in cryptocurrency, "you have to pretend that you have lost money."

If you think about these three things, you can start preparing to invest in bitcoin.

(2021-3-23)