Knowledge Popularization of Bitcoin Investment (Part 1): Things to Know Before Buying Bitcoin
Newbies need to understand several key points when purchasing Bitcoin. Due to space limitations, this article will be divided into multiple parts, focusing first on the essential knowledge before buying Bitcoin.
What You Need to Know Before Buying Bitcoin
1. What is Digital Currency?
Digital currency is a type of currency developed and operated by internet users through technologies such as public blockchain and computer encryption in an online environment. Cryptocurrencies like Bitcoin and Ethereum fall under the category of digital currencies. They operate based on a decentralized model and are fundamentally different from electronic currencies used in daily transactions like WeChat Pay, Alipay, and bank cards.
2. What is Bitcoin?
The concept of Bitcoin was proposed by Satoshi Nakamoto on November 1, 2008, and it officially came into existence on January 3, 2009. Unlike traditional currencies, it does not rely on a specific currency issuance authority but is generated through specific algorithms via extensive computations. Bitcoin utilizes a distributed database composed of numerous nodes to confirm and record all transaction activities, while employing cryptographic designs to ensure the security of all aspects of currency circulation. Additionally, the total supply of Bitcoin is limited to 21 million, which gives it a strong sense of scarcity.
3. The Returns and Risks of Bitcoin
The price of Bitcoin is highly volatile; historical data shows that it has surged from $1 to a peak of $69,158, an astonishing increase. However, such drastic fluctuations also imply risks, with prices oscillating dramatically like a roller coaster between highs and lows, which not everyone can endure. Although the Bitcoin market shows an upward trend in the long term, it is hard to predict when a sharp decline will occur. Investors should not focus solely on returns before investing; they must also pay attention to risks and make decisions based on their own risk tolerance.
4. Position Management
Position management pertains to the rational use of funds in investment, covering capital allocation and risk control. Suppose you have a savings of 100,000:
Daily Expense Fund: Reserve 10% for short-term living consumption needs.
Emergency Fund: Set aside 20% to deal with unexpected situations such as illness or hospitalization.
Capital Preservation and Appreciation Investment Fund: Invest 40% in stable-return products such as bonds and trusts that can preserve capital, appreciate, and resist inflation.
High-Risk Investment Fund: The remaining 30% can be used for high-risk investments, which will not significantly impact daily life even if they fail.
In the future, we will also bring you related knowledge about buying Bitcoin and what to do after purchasing Bitcoin. Remember to like + bookmark to prevent the article from getting lost~
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