There’s no doubt about it – if you’re looking for how to make money with stocks, then you should be looking into investing in bitcoins. The latest virtual currency broke a historic high on Tuesday night. For many people, this represents a good omen – the value of this digital asset just went up by more than tenfold since it was created a year ago. Investing in this way means you’ll be able to ride out the wave of its rise, hopefully profit from it when it regains stability. In this article, I’ll tell you how to buy a piece of this stellar virtual asset.
Unlike gold, the scarcity of bitcoins means there will be limited amounts floating around. As such, investors in this stock-to-flow ratio-trading game must keep their funds in the bank, or in the liquidator, until a spike in demand causes an increase in supply. One place some investors have been taking advantage of the scarcity is gold.
There are a number of parallels between the two assets. In both cases, supply outstrips demand, which drives up prices. In the case of gold, a global crisis in 2021 resulted in a rush to invest in the precious metal that, for a while, appeared as if it might go on a permanent gold run. Now, investors have been pulling out of the market, buying up gold as if it were like clockwork.
In the case of how to trade a bitcoin stock-to-flow ratio, it’s important to understand how this asset is affected by changes in supply. For example, when the price of a single unit increases, more of it is produced, making the supply less constrained. This can create volatility in the market; in a bullish stock-to-flow model, the spread between one bullish trade and another becomes smaller. When the supply is constricted, the spread between trades becomes larger.
This also applies to the Forex market. In a paper published earlier this year by researchers at Stanford and MIT, these same researchers proposed an economic theory called the Quantitative Easing Theory. They believe that investors may be willing to sit on their investment until the supply of currencies rivals the supply of gold. If and when that happens, the value of the currency will plummet.
There are a number of similarities between the gold and Forex markets, too. As was mentioned above, when the price of gold meets a plateau, investors panic and pull out of the market. The Financial Times recently ran a story under the title “A Golden Age of Gold Trading,” which highlighted numerous instances over the last decade where the price of gold reached a peak and then followed a string of all-time highs. The chart at the bottom of this article shows the cumulative total of gold sales for each of the last eight years. It’s an interesting study, although perhaps overstated in some ways.
Now, let’s say that gold prices fall to a 20 percent range and stays there for two years. Then, something happens: the government decides to sell off tons of gold. In either case, the same market mechanisms would apply, with the gap between supply and demand increasing the price further, until eventually investors feel compelled to buy. Even though gold prices have been increasing steadily since the 1970s, this phenomenon doesn’t happen every single day.
If you’re thinking about putting money into the market, you should definitely think about it using a service like bitcoin. Unlike standard stock options, buying bitcoins allows you to circumvent most of the marketplace. You don’t have to go through a broker or take your money wirelessly from the bank. Instead, you can purchase your chosen number of bitcoins and hold them in a digital wallet safe from prying eyes on the worldwide web.