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Bitcoin (BTC) hit a new high this week, breaking the $ 65,000 mark for the first time. The recent rise in prices is largely due to the successful launch of a Bitcoin Futures Exchange Traded Fund (ETF) on the New York Stock Exchange.
But billionaire crypto enthusiast Mark Cuban has said he will not invest in the new ETF. The reason? He prefers to buy Bitcoin directly.
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What is a Bitcoin futures ETF?
The ProShares Bitcoin Strategy (BITO) ETF is the first of several Bitcoin futures ETFs to receive the green light from the SEC. It paves the way for non-crypto investors to buy Bitcoin without opening a separate crypto account. If you are considering investing in ETFs, be aware that buying Bitcoin futures is different from buying Bitcoin.
Futures contracts are a form of financial derivatives, that is, contracts that derive their value from another asset. For example, Bitcoin futures contracts are essentially an agreement to buy Bitcoin at some point in the future, rather than actually owning Bitcoin.
Mark Cuban Would Prefer To Buy Bitcoin Directly
The Shark aquarium The judge told CNBC that he will not buy Bitcoin ETFs because he can simply buy Bitcoin for himself. Cuban previously called Bitcoin a type of digital gold because he saw it as a good store of value. In May, he said Bitcoin made up 60% of his crypto portfolio.
If you are a first-time crypto investor who wants to follow Cuba’s lead and buy Bitcoin for yourself, this is not difficult to do. You will need to create an account with a reputable cryptocurrency app or exchange, deposit money and convert it to Bitcoin.
Our guide to the best places to buy Bitcoin is a good place to start. You will find several secure platforms that make it easy to create an account. You will likely need to provide basic personal information and photo ID.
It’s worth taking a little time to understand the fee structure and security protocols. Some exchanges charge you to deposit money, while others earn their money when you trade or withdraw your assets. In terms of crypto exchange security, look for platforms that keep the majority of client assets offline in what is called cold storage.
Before buying your first Bitcoin, it is important that you understand what you are getting into. Here are three important factors to consider.
1. Bitcoin is volatile
All cryptocurrency investors should be prepared for crazy price swings. Bitcoin can easily lose or gain 10% or even 20% in a day. In April, its value almost halved in just six weeks.
One way to protect against volatility is to invest for the long term. If you’re a buy and hold investor looking into a five to 10 year window, you won’t be as affected by day-to-day price fluctuations. That said, it is important to be careful before jumping in when a crypto has just reached an all-time high because you don’t want to buy at the top. Take it slow and make sure your emotions aren’t guiding your buying decisions.
2. Bitcoin is a high risk investment
Bitcoin is becoming more and more common, but that doesn’t mean it’s risk free. Indeed, some finance gurus still think it is a bubble and the price could go all the way to zero. This is why it is important that investors invest only the money they can afford to lose and ensure that crypto does not represent more than around 5% of their overall portfolio.
3. You need to do your research on crypto
As with any investment, it’s not a good idea to buy just because Mark Cuban did. Only you know your financial situation and tolerance for risk, and research will help you make sound financial choices that are right for you.
Try to understand the basics of blockchain technology and why crypto is different from other investments. There are many potential ways to invest your money, from crypto and stocks, to real estate and even wine or art. Each has different levels of risk and reward, and will suit the needs of different people.
Buy Bitcoin for the right reasons
Taking your first steps into investing in cryptocurrency can be intimidating, but it doesn’t have to be. There is a wealth of information and, as we noted above, there are ways to minimize or manage the risks involved.
The most important thing is to buy Bitcoin for the right reasons. Don’t invest because everyone is doing it or because you’re afraid of missing out. Make sure it fits into a clear investment strategy that works for you and that you are convinced of its long-term potential.
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