Cryptocurrency is on the hot rise and investors, like you, are looking to profit from it. Cryptocurrencies are digital assets created using cryptographic network technology. This makes it possible to exchange them without the need for a central authority.
With the rise in digital currencies, there are different cryptocurrencies such as Bitcoin, Ethereum, and Litecoin, amongst others, from which you can invest in. Bitcoin is a dominant force in the crypto market. Over the last years, Bitcoin has become more popular and crypto enthusiasts argue that it is the future of currency and investing. There is a continuous rise in the value of Bitcoin and proponents of the coin believe there is more to experience.
Before you go ahead to invest in Bitcoin, this guide will provide you with all you need to know about Bitcoin, how to buy it and if it is a good investment for you.
What is Bitcoin?
Bitcoin was created by a group of programmers under the name Satoshi Nakamoto, although the real creators are still unknown. It is one of the most widely used digital currencies. Bitcoin was launched in 2009 as a decentralised digital cash to eliminate intermediaries like banks and government in traditional payment methods.
Bitcoin uses a digital technology referred to as blockchain It creates a shared public ledger of transactions which are organised into blocks that are connected to prevent tampering. The blockchain utilises a public ledger that makes use of thousands of computers referred to as nodes that keep track of coins and their owners.
How to Buy Bitcoin
In the world of diverse digital currencies, figuring out how to invest in Bitcoin and other digital currencies can be a bit difficult to understand. However, it is easier when broken down into little steps. Practically, to buy or invest in Bitcoin all you need is your personal identification document; a cryptocurrency exchange account; a method of payment and a secure internet connection.
The steps to follow to buy Bitcoin are listed below;
1. Choose your cryptocurrency trading service.
2. Get a Bitcoin wallet
3. Connect your wallet to a payment option
4. Place your order
5. Manage your investment
1. Choose a cryptocurrency trading service
The first step in buying Bitcoin is to decide where you want to buy. There are different ways to buy Bitcoin and other coins. Ways by which you can buy Bitcoin include crypto exchanges, traditional brokers, Bitcoin ATM, peer-to-peer, e.t.c. Bitcoin investors often make use of cryptocurrency exchanges because of the features and other cryptocurrencies available for trading.
For you to buy and trade your Bitcoin on cryptocurrency exchanges, you need to sign up with a crypto exchange service. Because Bitcoin is an open-source technology, there are diverse crypto exchange platforms that enable Bitcoin transactions. Some of the exchanges from which you can decide to buy include Coinbase, Binance, Kraken, eToro, and Gemini.
These exchanges are the easiest exchanges to start with in the cryptocurrency industry. They offer Bitcoin and other altcoins which gives you the option of investing in other coins. Ensure you follow safe internet practices when you sign up on a crypto exchange platform. Make use of strong and unique passwords and also enable two-factor authentication.
Choosing a Bitcoin exchange to buy from is becoming more difficult as an investor with the increase in the number of crypto exchanges. Our team at Cypherpunk will help make the best decision as you start your journey in cryptocurrency.
Alternative ways by which you can buy Bitcoin include;
- Bitcoin ATMs: In recent years, Bitcoin ATMs have become more popular. They act like an in-person exchange. To purchase Bitcoin using a Bitcoin ATM, insert cash into a machine and use it to purchase bitcoin which will be transferred to your online wallet. Using ATMs can be a bit expensive due to the charges associated with them. A purchase fee and a conversion fee are charged when you make use of a Bitcoin ATM.
- Peer-to-peer Exchanges: Unlike decentralised exchanges, P2P exchanges allow you to connect directly with another user. You can post requests to buy or sell Bitcoin with information about your payment methods and prices. With P2P exchanges, you can browse through different listings of buy and sell offers, and also decide on whom to transact with.
2. Get a bitcoin wallet
You will need a wallet to store your purchased coin. Storing your digital asset outside of the exchange and in your personal wallets allows you to have control over the private keys to your funds. It also allows you to be free from your exchange getting hacked.
Bitcoin can be stored on two types of wallets: hot wallet and cold wallet.
Hot Wallet: Hot wallet allows you to store your digital asset in the cloud with a trusted exchange or provider. You can assess the wallet through an app or a computer with internet service. All crypto exchanges you join offer a free bitcoin wallet where the Bitcoin you purchase are automatically stored. You might decide to store your Bitcoin with a third-party hot wallet provider.
Bitcoin hot wallet is however not the most secure crypto wallet because it is an attractive target for hackers. The wallet generates the private keys to your digital asset on internet-connected devices which makes it more susceptible to hacking. Hot wallets are best for storing small amounts of Bitcoin and or cryptocurrency you are actively trading.
Hot wallet providers where you can store your Bitcoin include;
Cold Wallet: Cold wallet is the most secure storage for your coins. A cold wallet is similar to a portable flash drive where you store your coin. Unlike hot wallets, cold wallets are actual pieces of hardware that are not connected to the internet. This makes it at a lower risk of being compromised. Cold wallets are also referred to as hardware wallets or offline wallets. This wallet is the most secure way to store your cryptocurrency offline. The cost of most cold wallets ranges from $70- $100. Popular cold wallets are: Ledger Nano, and Trezor
3. Connect your wallet to a payment option
After you create your wallet, you need to link it to a payment option. You can also connect your payment option to your cryptocurrency exchange account after you have been verified. This allows you to easily buy and sell your coins. You can either connect your credit card, debit card or your bank account.
Although you can make use of your credit card as a payment option, it is not a good choice. Cryptocurrency prices are unstable and can inflate the amount at which you buy a coin. Also, borrowing from a high-interest product like a credit card for investment is not a good option.
4. Place an Order
After setting up your exchange account and wallet, you are good to purchase Bitcoin. The cryptocurrency exchange platform you choose will have everything you need to buy your coin. Crypto exchanges offer different ways to invest with a number of order types.
While crypto coins cost thousands of dollars, exchanges allow you to buy fractions of a single coin. You can make an initial investment of as low as $25.
Investing in digital currencies is risky and it is important that you determine your risk tolerance before you purchase any amount of Bitcoin.
5. Manage Your Bitcoin Investments
After you have purchased your Bitcoin, you can use your coins for online transactions. You can hold your coins for a long period while it appreciates in value. You can perform day to day trading with your coins. The cryptocurrency exchange you choose will provide you with all you need to buy and sell coins.
Is Bitcoin a Good Investment?
Investors pay a huge consideration to the rate at which Bitcoin and other cryptocurrencies are adopted. Like conventional currencies, the value of digital currencies may fluctuate. However, investors speculate that the value of Bitcoin may rise significantly if there is an upsurge in the market.
Contrary to traditional equities, the value of Bitcoin increases when more people are interested in it. The best part of this is that more people are interested in buying Bitcoin today than ever before. The trading volume of Bitcoin is on a steady increase and it is frequently testing new highs.
To the question of Bitcoin being a good or bad investment, the answer is there is no good or bad investment. Your investment strategy, risk tolerance, and your financial goals determine your success at your investments. What you choose to accomplish with your investment should determine how you invest in Bitcoin.
Bitcoin and other cryptocurrencies are volatile and are high-risk investment options. The value may rise or fall hugely over a short period. There is no central regulator to ensure the value of Bitcoin remains stable and the value is dependent on the market demand. The value increases when more people buy and it decreases when fewer people buy. So to make a significant profit on your Bitcoin investment, you need to rely on the “market timing”.
How much should I invest in Bitcoin?
To start investing in Bitcoin and other cryptocurrencies, you should not allocate more than 5% of your investment portfolio. Do not invest in Bitcoin because of the fear of losing out.
Before you decide on how much you should invest, there are some things you should consider.
- Don’t invest all of your life savings in cryptocurrency
- Never invest more than you can afford to lose
- Treat cryptocurrency as a long-term investment to get a chance at making more money
Bitcoin’s value is based on speculation and not like conventional investing in the stock market. Crypto is very risky and you can lose all your money in Bitcoin if you don’t develop the right strategy for investing.
Basically, it takes just a few dollars to invest in Bitcoin. Although Bitcoin costs thousands of dollars, crypto exchanges allow you to buy in fractions. Most crypto exchanges have a minimum trade that is about $5 or $10. Know that some trading platforms take a certain percentage of your investments as a fee when you trade in small amounts. So it is best to select a good exchange platform with minimal fees.
How to Sell Bitcoin
To sell your Bitcoin, you can make use of the same platforms where you purchased the coin. The process of selling Bitcoin through cryptocurrency exchanges and P2P platforms is quite similar to the process of purchasing it. You might be required to click a button and specify your order type to carry out the sales.
When selling, cryptocurrency exchanges charge a certain percentage of the cryptocurrency as a transaction fee.
Tips For Investing in Bitcoin
To invest in Bitcoin, you should heed the following tips.
- Understand your risk tolerance: Cryptocurrency is a high-risk investment and you should be careful in calculating your risk before you invest. You should feel comfortable investing in volatile assets or investing only a small amount of money.
- Diversify Your Portfolio: Diversifying your portfolio will protect you from investment losses. You should spread your investments across low-risk and high-risk investments. Bitcoin is a high-risk investment that can yield a huge profit. It should, however, be your smallest and least-prioritised investment.
- Start small: If you are still unsure whether investing in cryptocurrency is a thing you want to do, you should start small. One of the ways to invest in Bitcoin is to put in about $10 a week. With this, you can build a healthy investment over time.
Bitcoin is a popular cryptocurrency and it is argued to be the future of currency and investment. Cryptocurrency is highly volatile and prone to huge changes in value within a short time. Before making any decision to invest in Bitcoin, you must learn more about Bitcoin and the crypto market. Ensure you diversify your investment portfolio. Likewise, start small and only invest an amount you can afford to lose.