Post Menu and Details.
- Buying Bitcoin
- Choose your wallet
- Back up your wallet
- Know what you're investing in
- Define your goals
- Protect your investment
- Invest strategically
- Define your entry point
- Consider your exit strategy
Reading time: ~5 minutes
In this digital world, everything is headed towards going cashless. This cashless system includes online transactions, buying, and selling of assets like stocks, precious metals (and now cryptocurrency), etc. Out of all these things that are heading towards a paperless way of doing business, the one which has made headlines over the last few years is none other than Bitcoins. The first-ever cryptocurrency which has been set up based on cryptography started its journey less than a decade ago and within such little time, it has created enough buzz for itself to become widely popular.
People who have bought bitcoins or mining them using their computer power know how much they stand to gain from it but if you’re someone who’s just planning to invest in bitcoin then before you take your first step there are a few things you should know about bitcoin before getting started on it.
Buying Bitcoin is not as easy as it looks, especially if you are starting the investment. There are several things to keep in mind regarding how to buy Bitcoin online. For one, Bitcoin is bought through an exchange of fiat currency like the U.S. dollar (USD) or Euro (EUR). Bitcoin exchanges are often described as “digital marketplaces” where buyers and sellers meet, much like a stock market. Unfortunately, Bitcoin exchanges have been known to be unstable at times so it’s not uncommon for prices to change rapidly which also makes Bitcoin very volatile.
There are several popular options when it comes to exchanges with Coinbase remaining as one of the best crypto exchange sites online. Coinbase and other popular crypto exchanges have reliable security and convenient and useful interfaces. Note, however, that these exchanges require users to verify their identities with photo identification and personal information before they’re allowed to trade.
There are several types of wallets you can use to store Bitcoin. Software wallets are installed on your computer and provide complete control over the security of your Bitcoins but these systems can be difficult to install correctly and they’re prone to malfunction. Another option is a web wallet where you can access your Bitcoins on any device using the browser and some online wallets provide more advanced features like offline data storage. Coinbase wallet is a reliable online and mobile wallet for beginners in the trade. The most secure option is to purchase a hardware wallet such as Trezor or Ledger Wallet.
Once you have bought bitcoins, they are stored in a digital wallet on your computer or mobile device. However, they are not yet safe! If someone were to hack into your system and steal them from your wallet, there would be no way to get them back. Even with the best security practices, user error can lead to loss of funds.
For this reason, it’s extremely important that you back up your wallet in case something happens to your primary copy of the software. You can do this by simply creating copies of your wallet file or by saving an offline version which should be updated regularly for security purposes. You can also back up your bitcoin wallet by copying the address data onto a USB key that you keep in a different location. It’s also smart to encrypt the information by using a password so that it’s protected in case of theft or loss.
Before buying any Bitcoins, it’s helpful to understand what they are and how they work. In case you didn’t know, Bitcoin started off as a “dark web” currency used by criminals and those who wanted to purchase illegal goods and services. However, its increasing popularity means that now if you want to invest in bitcoin, it’s not hard to get involved! You’ll need a digital wallet (like Coinbase), some bitcoins (via Coinbase!), and then you can start using them as currency whenever someone accepts them.
Bitcoin (BTC) is a digital asset and a peer-to-peer payment system with an optional “low-volatility” feature that’s backed by a 21 million BTC hard cap, which is quite impressive considering BTC was only worth $0 in 2009. When you buy Bitcoins, what you’re actually purchasing is the blockchain ledger which oversees all transactions and controls the supply of new Bitcoins introduced into circulation. This means there’s no central authority overseeing everything and managing inflation – it’s distributed across the entire network.
A critical step is to determine what you want your investment to do for you. Do you simply want to cash in on the increased value? Do you have charitable goals? Is it just for fun? Or are you looking for something with steady returns that will give your kids a head start?
Once you define your goals, decide how much risk – and return – that’s comfortable with. Remember, many investors who got burned during the financial crisis had set their expectations too high. If they were expecting gains of 15 percent a year, they probably didn’t have the stomach for losses of 25 percent or more during the recession.
Many investors see protecting their investment as an afterthought and end up paying dearly for it. When you protect your investment you reduce the risk and therefore reduce potential return. If you want to buy insurance against theft or loss – which is separate from FDIC bank insurance – look into security companies like BitGo that can store digital wallets offline on flash drives.
Don’t invest in bitcoin because someone told you to, do your own research first. Remember those stories about people who bought $50 in bitcoin seven years ago? Well, there’s only one way that could ever possibly happen…
When you are ready, educate yourself on the best investment strategy. Again, there are plenty of options out there. Some people buy bitcoin and simply hold onto it for dear life while they watch its value fluctuate. This is known as “holding then.” A third option is to be more active – buying coins when their price dips selling them once they’ve risen. This is called trading and requires a lot more research than just holding, which is why some investors start out slow by simply holding onto coins bought at low prices instead of spending money on trading fees to buy low and sell high.
Of course, you want to maximize returns, but what’s most important to you? Some investors may want to buy bitcoin right at the beginning, but others are more comfortable buying bitcoin after it has increased in value. Some people are taking profits as they go and won’t risk more than $100 or $200 on one currency trade. And some people only invest what they’re willing to lose, which is $50 or $100.
Before you plan an exit, remember that most people tend to overestimate how much money they can make when prices are rising and underestimate how much they can lose when it’s falling. That is why many experts say you should only put up what you can afford to lose – if any at all – and not base your plans for future income on speculation.
Whether you’re a seasoned trader looking for a new way to diversify your portfolio or simply want to start earning some extra income on the side, investing in Bitcoin can be a great way to boost your finances while having fun at the same time. In this article, we’ve covered how to open an account, choose a wallet, back up your data, and other things to know about what you’re investing in so good luck on beginning your investment journey!
Thank you for reading!