How to Invest in Bitcoin: A Beginner’s Guide

Over the past few years, Bitcoin has become increasingly popular with modern investors. Nowadays, there’s a lot of talk about bitcoin and other cryptocurrencies - while these proponents say it’s the future of currencies and investments, critics say it’s a risky investment that may not result in high returns.

To better understand true market value, we need to look at recent moves. Recently, Bitcoin has risen more than 763% in just one year, easily surpassing traditional stocks. More and more people are buying Bitcoin, which has become a decentralized global currency. One particular heavenly blessing is the adoption of Bitcoin by many famous people and companies.

Elon Musk, the mastermind behind Tesla and SpaceX, recently announced that his automotive empire will not only buy $ 1.5 billion worth of bitcoin, but it also plans to accept cryptocurrency as payment in the future. Many well-known FinTech (financial technology) companies such as Square and PayPal have also expressed their intention to support cryptocurrencies in the future. However, the most important event for Bitcoin is the latest public offer (initial public offer) from Coinbase Global, Inc., which may. (NASDAQ: COIN), the leading cryptocurrency exchange today.

There’s no doubt about it: Bitcoin’s momentum is rising. Recent events have spurred the rise in the value of Bitcoin, and supporters of this asset believe this is just the beginning.

So what exactly is bitcoin and how do you know if it’s right for you? Read our beginner’s guide to investing in bitcoin.

What is bitcoin?

Bitcoin was created by a developer or group of developers called “Satoshi Nakamoto”. But the real creator (s) of Bitcoin is still not known to the general public.

The cryptocurrency system uses virtual “coins” or “chips” instead of physical money. Coins have no real value and are not backed by gold or silver.

Bitcoin was created to solve some of the major cryptocurrency problems. First, it is designed to prevent counterfeiting of cryptocurrencies. Imagine how easy it is to back up your computer data - documents, photos, files, etc. If it can copy money and create an unlimited amount of money for itself, it is impossible to use cryptocurrencies. You can't just copy the $ 20 bill, can you? Similarly, people should be banned from copying cryptocurrencies.

Understanding Blockchain Technology

Bitcoin uses a digital technology called blockchain, which is an advanced encryption mechanism that distributes a unique code to thousands of different computers. For example, let’s say your component is codenamed “XDA146DDS”. Blockchain splits code into smaller pieces and stores them on multiple computers. If a hacker wants to gain access to code, he has to hack several computers to gain access to all the code.

Blockchain also uses a “public ledger” that uses thousands of computers (called “nodes”) to keep track of currencies and their holders of them. When changing currency data, nodes re-check their files to make sure the change is correct and was initiated by the owner of the currency.

What is bitcoin used for?

Once you have sold the coins, you can use them for online transactions anywhere. Please note that no real money will be withdrawn from your bank account during the foreign exchange transaction. The coin is debited from your bank account when you buy the coin yourself, not when you buy it with a coin.

Like cash, the value of a coin can change. This is why some investors are excited about bitcoin and other cryptocurrencies. Investors believe that if the market rises, the value of bitcoin could rise significantly. I will explain the advantages and disadvantages of investing in cryptocurrencies later.

Right now, investors need to be careful about how quickly Bitcoin and other related cryptocurrencies will be used. Like traditional stocks, bitcoin is gaining value now with more people interested in it and more people interested in buying bitcoins than ever before. The volume of trade continues to grow significantly, either out of naive faith or fear of losing what many consider to be the largest wealth transfer in American history. Bitcoin trading volume has continued to rise throughout most of the year. As a result, Bitcoin regularly tests new highs.

What do you need to invest in bitcoin?

You don’t have to invest big in bitcoin! All you need is:

Personal identities

Bank details

secure internet connection

Please note that if you buy coins through a broker, you may not need to provide your personal or financial information, as your broker will likely already have this information.

Invest in bitcoin in 5 steps

Ready to dive into cryptocurrencies?

Subscribe to bitcoin exchange

buy bitcoin wallet

Link your wallet to a bank account

Place your bitcoin order

Manage your bitcoin investments

1. Register on the bitcoin exchange

First, you need to know where you want to buy bitcoin. Most bitcoin investors use cryptocurrency exchanges.

These exchanges are intermediaries in investing in cryptocurrencies, such as a stockbroker.

If you decide to buy on an exchange, you need to decide which exchange you want to buy. Here are some of the most popular options:

• Coinbase: A very popular cryptocurrency exchange that guarantees losses in the event of a security breach or fraudulent transfer.
• Binance: Founded in 2017, Binance is a cryptocurrency exchange with a strong focus on altcoins.
• Gemini: Gemini was launched in 2015 by Cameron and Tyler Winklevoss and offers both casual and experienced bitcoin traders a variety of user interfaces and payment structures for both.
• Bitfinex: The oldest cryptocurrency exchange optimized for advanced traders and lenders (unfortunately, Bitfinex does not currently accept US clients).

As you can imagine, as more and more options become popular, it becomes more and more difficult for investors to choose a bitcoin exchange.

2. Buy a bitcoin wallet

When you buy a coin, it is stored in a “wallet” where all your cryptocurrency is stored. There are two types of wallets you can get: "hot wallet" or "cold wallet".

A hot wallet is a wallet powered by your cryptocurrency exchange or provider. On some exchanges, you automatically get a hot wallet when you open an account. Either way, hot wallets are useful because you can access your money online or through software.

Some important hot wallets:

• Electrum: the program allows you to save money on your computer
• Mycelium: mobile application for Android and iPhone users

Hot wallets are not the safest way to store coins. The currency information of your compromised active wallet provider may have been compromised.

A cold wallet is the safest way to store your coins. A cold wallet is a portable coin storage device that looks like a flash drive. Cooler wallets cost between $ 60 and $ 100. Some popular cold wallets:

wealth

nano universal

To buy only a small amount of coins, it can help to use a hot wallet for a trusted crypto exchange. But if you can save a lot of coins, a cold wallet is worth the investment.

Need help choosing the right bag? Check out our selection of the best bitcoin wallets.

3. Link your wallet to a bank account. 

When you receive the wallet, you need to link it to your bank account. It allows you to buy and sell coins. In addition, your bank account can be linked to a cryptocurrency account.

4. Get your bitcoin

Now ready to buy bitcoin. You have everything you need to buy cryptocurrency. The big question is how to buy bitcoin?

Some of the money is in the thousands of dollars, but at fairs, you can often buy parts of the same currency-the initial investment can be as little as $ 25.

Investing in Bitcoin is extremely risky and it is important to carefully determine your risk tolerance and evaluate your investment strategy before buying Bitcoin.

5. Manage your bitcoin investments.

After buying bitcoins, you can:

use coins for online transactions

Hope they enjoy your plays, leave a tip

Cryptocurrency other bitcoin holders buy and sell coins-Trade your money every day

Is bitcoin a good investment?

Is bitcoin a good investment: here’s one of the most frequently asked questions about bitcoin?

So the real answer, of course, is no investment is "good" or "bad." It all depends on risk tolerance, investment strategy, and financial goals. Before considering Bitcoin as an investment, you should consider your goals and what you want to achieve in your investing activity. Do you want to earn passive income? Become a full-time investor? Retirement savings? If you have the answers to these questions, we understand Bitcoin as the right investment option for you.

Bitcoin is a very risky investment because it is a volatile asset. This means that in a very short period, Bitcoin prices can rise or fall sharply, even over hours or days.

Like all cryptocurrencies, bitcoin has no intrinsic value. It is not supported by natural assets such as gold or silver, and there is no central regulator to ensure value stability. Moreover, the value of Bitcoin does not depend on the income of an individual company. The value of bitcoins depends on market demand. As more and more people buy Bitcoin, its value increases. The fewer people who buy Bitcoin, the lower its value.

For big profits in bitcoin, it may be necessary to rely on market timing, which is a difficult and often inappropriate investment strategy. However, the possibilities are increasing.

Compared to other bitcoin investments

Deciding which investments you should make and which ones you should avoid can be a confusing decision. Determine if your choice wins or if you lose all of your high earnings over the years. It’s impossible to turn on the TV or read a blog without hearing about investing in bitcoin. This is one of the hottest topics in the world right now, but where to ask, isn’t this the only way to invest your money: How does Bitcoin compare to other wealth creation tools?

It is important to note that while Bitcoin is a native investment vehicle, it can exceed investment limits. Bitcoin can be used simultaneously with some of today’s largest assets. In particular, real estate can benefit greatly from so-called “tokenization”. According to Tom Winter, co-founder of DevSkiller and CRO, "Tokenization is the process of creating a virtual token that represents owning a piece of real estate on the blockchain (the core technology behind Bitcoin)." Winter argues that "tokenization has the potential to transform the global real estate market, offering investors many benefits over current investment opportunities."

The unique convergence of real estate and bitcoin may reward investors with attractive profits, but how do these two investment vehicles separate?

Bitcoin:

Many experts believe that bitcoin is a bubble, meaning it is very expensive and could collapse at any time.

The price of Bitcoin is not stable. It is also sensitive to significant increases and decreases in prices.

Bitcoin is completely digital, which means it is more vulnerable to security breaches than a tangible asset.

Real estate:

Real estate is an investment supported by a solid track record and the security of a physical asset.

Rising property values ​​and rent are a great hedge against inflation.

Depreciation, utilities, insurance, and repairs provide important tax breaks to real estate investors.

The rental property provides a stable monthly cash flow that you can count on.

Benefits of investing in bitcoins

The main advantage of investing in bitcoin is that you can get a huge return on investment, maybe up to 200% or more. Of course, this is a challenge, but possible.

If you buy large amounts of bitcoin, you can take advantage of market volatility and sell your currency at a higher price if there are many buyers. There’s also little chance that bitcoin will become the currency of the future or a more popularly tradable asset, and hopefully, you’ll see a return on your long-term investment. However, it should be noted that the value of bitcoins is usually falling every year.

In other words, you buy coins at the lowest price and resell them at the highest possible price. very delicate

Investors who keep a close eye on the market can make huge profits with this technique. You can also earn unlikely income in the world of corporate stocks or government bonds. To that end, Bitcoin is incredibly volatile. According to Sean Heng, Vice President of Growth and Operations at CoinMarketCap, “Bitcoin is one of the most liquid assets you can own and more liquid than any other cryptocurrency.” As a result, any awareness can be achieved almost immediately.

Disadvantages of investing in bitcoin

Unfortunately, the high volatility of Bitcoin makes it a risky investment and you can lose money if you are not careful.

“It looks like one of the best investments considering everything you’ve seen about bitcoin over the past few months,” said Jim Pendergast, vice president of AltLine, “but the return of public policy is causing a drop in the value of bitcoin. Especially now. "

Bitcoin and other cryptocurrencies are also at high risk due to the pump and stop system. Predatory investors will target novice or humble investors and entice them to invest big money in bitcoin. As a result, volatility is leading to an increase in the price of Bitcoin.

Predatory investors are smart and sell all their shares and make big profits before the buying wave ends. But when investors stop buying, the value of money drops to a very low price. A coin purchased in the amount of $ 200 can only be worth $ 30. Foolish investors are spending their money.

You can still make money by selling your coins before the price drops, but it’s impossible to predict when the boom will stop - prices could drop by 50% in a matter of hours. Therefore, all volatile assets such as cryptocurrencies and penny stocks are considered high-risk investments.

You should also know that pump and dump systems and pyramid schemes are illegal. While it’s not always illegal to profit from a market explosion, whether natural or artificial, you may not want to be associated with such a practice. Even if you did nothing wrong, you could be the subject of an IRS review or criminal investigation.

How to invest in bitcoin: different ways

There are several ways to invest in bitcoin, both directly and indirectly.

First, you can invest in a company that uses bitcoin technology. While bitcoin is a risky investment, many companies sell successful products that combine bitcoin and blockchain technology. You can find many exchange-traded mutual funds (ETFs) with shares in various blockchain-related companies, such as the Amplify Transformational Data Sharing (BLOK) ETF. They do not invest directly in cryptocurrencies but in parts of companies that use bitcoin. It is safer and most ETFs in this category are superior in the market.

Second, you can join bitcoin mining. When mining bitcoins, your computer can easily be used as a hub for general caching. This topic is worth posting on a blog, but you should know that bitcoin miners are rewarded with real bitcoins for their contributions. You can get free bitcoins without any purchase.

In addition to what was discussed, let’s take a look at some of the most popular ways to invest in bitcoin today and what it means for investors.

Buy bitcoins yourself

The most obvious strategy for investing in bitcoin is to buy an individual bitcoin. Buying bitcoins directly through an app like Coinbase allows investors to “physically” own the asset. This is an important distinction because Coinbase allows investors to buy bitcoins and store them in their crypto wallets. Thus, traders simultaneously access the price history of an asset and use it as a currency for subsequent transactions. Owning an individual bitcoin is no different than owning any other currency, except for the incredibly volatile value.

It’s important to note that no online platform or investor app allows you to store bitcoins on your own. For example, online trading platforms like Robinhood allow people to invest in bitcoin but don’t go so far as to make sure investors own bitcoin (or the keys). While Coinbase gives investors “keys” to their bitcoin shares so they can transfer their holdings to their wallets, Robinhood does not. As a result, investing in bitcoin on Coinbase allows investors to own the asset and treat it as a currency. On the other hand, Robinhood investors can only profit from price changes in their accounts and cannot transfer their assets to a crypto wallet. Investors thinking of buying standalone bitcoin should understand the limitations of their trading platform before investing in any cryptocurrency.

Greyscale’s Bitcoin Investment Fund (GBTC)

Founded in 2013, Greyscale Bitcoin investment fund has become a leader in the cryptocurrency industry. Grayscale has become a trusted name in the emerging space with a focus on Bitcoin democracy for the masses. While Bitcoin is already decentralized, Greyscale is giving more people better access to the new digital currency. In particular, Greyscale is a capital markets investment platform that creates transparent and reliable investment vehicles for the growing asset class with unlimited potential.

With its current success, Greyscale is committed to making Bitcoin more accessible to everyone. The colors of gray have helped bridge the gap between the knowledgeable and the ignorant. That’s why Greyscale has made investing in bitcoin easier than ever. For example, Greyscale allows investors to hold bitcoins in certain IRAs, Roth IRAs, and other brokerage and investment accounts.

ETF powers Transformational Data Exchange (BLOK)

As the name implies, the Amplify Transformational Data Sharing ETF is an exchange-traded and exchange-traded mutual fund. Investors can buy BLOK shares in the secondary market and increase their exposure to bitcoin. More specifically, however, BLOK is an actively managed ETF focused on blockchain technology. This means that fund managers are constantly looking for and investing in blockchain technology companies. This is why anyone who invests in BLOCK invests in several blockchain technology companies. While BLOK will not give investors access to a standalone bitcoin, it will give them access to companies using blockchain technology and transformational data exchange.

Bitwise 10 Private Index Fund (BITW)

The investment in the Bitwise 10 Private Index Fund is an investment in the Bitwise 10 Large Cap Crypto Index. For those unfamiliar with the Bitwise 10 Large Cap crypto index, it tracks the performance of the top 10 crypto assets on the market. This is why investors who buy shares in this particular fund with each other invest in the top 10 “crypto-assets” that are measured and weighed by their value in the open market. When assets perform well, investors earn based on the shares they own.

Bitcoin Investing Tips

Here are some tips to keep in mind if you decide to invest in bitcoin:

Understand your risk tolerance: As mentioned earlier, bitcoin is a high-risk investment and you should carefully evaluate your risk tolerance before investing. If you are not comfortable investing in variable assets or only have a small amount to invest, you may want to consider other investment options.

Diversify your portfolio: The best way to protect yourself from investment losses is to diversify your investment portfolio. Your underlying investments, such as government bonds or index funds, should be low risk. Then you should look for moderate-risk investments such as real estate or company shares. Risky investments like penny stocks or bitcoin should be the smallest and least priority in your investments. Bitcoin, in essence, is the icing on the cake: an investment that can bring in huge profits but can also be lost.

Start small: If you’re at your doorstep, start small. Cliff Auerswald, president of All Reverse Mortgage, recommends investing $ 10 per week. "A lot of people still doubt that cryptocurrencies will survive." But, despite all the hype around cryptocurrency, many are still interested and don’t want to lose it.

Bitcoin Investment Strategies

While there are many differences between buying bitcoin and buying other stocks such as stocks, there are inherent similarities that need to be considered. The real bitcoin investment strategy is not much different from the corresponding stocks. However, many bitcoin buying strategies have more to do with investment plans. In particular, investors can join one of the three most popular bitcoin investment strategies:

Buy and hold bitcoins.

Save bitcoin in the long run

Bitcoin exchange for short-term volatility

Buy and hold bitcoins.

Those familiar with bitcoin probably already know the meaning of the words “buy” and “hold”. However, those who don’t can get caught quickly. “Hold” (an intentional misspelling of “Hold”) is just an investment philosophy. An acronym for “Dear Life, Hold On” suggests that the best strategy for investing in bitcoins is to hold on to them forever. Those who follow this approach are more aware of asset volatility but firmly convinced of prospects. Thus, this strategy forces investors to experience many increases and decreases in the price of bitcoin without selling.

Save bitcoin in the long run

Investors who want to hold bitcoin for a long time, unlike the original approach, are convinced that its value will increase over time. However, unlike the holding strategy, long-term holders may be tempted to sell shares when they are satisfied with the performance. These investors believe that Bitcoin can gain value as a new store of value (similar to gold), but they don’t think to sell it for a profit when the time is right.

Bitcoin exchange for short-term volatility

One of the most popular bitcoin investment strategies is based on asset volatility. Finally, Bitcoin has become synonymous with wild fluctuations in value. A simple look at the annual chart shows how volatile Bitcoin is, which should be positive for short-term traders. Not surprisingly, this strategy will cause traders to go up and down, selling high and buying low. This is the most complex of the techniques discussed, and it exposes investors to the greatest risk. However, it can produce pipe faster than the above.

Overview

Bitcoin is a popular form of cryptocurrency that uses large chains of interconnected computers to store and protect your digital assets. Bitcoin is an extremely volatile asset, subject to large and rapid changes in value, offering high returns but also high risk. It is important to learn how to invest responsibly in Bitcoin before making any decisions. Be sure to diversify your investment portfolio to protect against market changes.

The information provided should not be relied upon as the sole basis for making investment decisions and should not be construed as advice to meet the investment needs of any particular investor. None of the information provided constitutes financial, tax, legal, or accounting advice or personal investment advice. This information is for educational purposes only.