Despite pushback against cryptocurrencies, all signs show they’re here to stay. One such cryptocurrency that’s here for the long haul is Bitcoin.
As valuable as Bitcoin may be to future investors, many people don’t know how to properly start investing in it. If you’re considering purchasing Bitcoin, it pays to know how to make safe, smart investments. Here’s how to get started investing.
What Is Bitcoin?
To make smart investments in Bitcoin, it’s important to know what it is and how it works.
Bitcoin is one of the most widely used types of cryptocurrencies. With Bitcoin, virtual “tokens” or “coins,” are used instead of physical cash. Bitcoin doesn’t have an intrinsic value and it isn’t backed up by gold or silver. In other words, it’s a decentralized currency that isn’t backed by any particular government.
Because of that, Bitcoin has also been used in shady dealings in the past. Since it’s harder to trace and is generally anonymous, it’s opened the door to cybercriminals using it to make money. Some prominent central bankers and global financial figures have denigrated Bitcoin for this reason, even as everyone knows that the US dollar is still the leading choice for global money laundering and other nefarious activities, such as drug dealing and arms sales.
However, despite its seedy past, Bitcoin can still be a safe and legal investment. It’s a great way to start earning cash that doesn’t follow the same fluctuations as standard fiat currencies.
How to Get Started Investing in Bitcoin
Now that you have a more solid understanding of what Bitcoin is, let’s talk about how to start investing in it. There are a few steps you’ll need to take to make your investments successful.
Step One: Join a Bitcoin Exchange
The first step to investing in Bitcoin is to determine where you want to make a Bitcoin purchase. There are no official Bitcoin companies, but you’ll find that several different exchanges facilitate Bitcoin transactions.
Some of the most popular exchanges include Coinbase, Binance, Kraken, Gemini, and Bitfinex. Regardless of which you pick, make sure that it’s a platform that’s safe, reputable, and makes sense for your situation.
Step Two: Create a Wallet
Bitcoin is stored in “wallets.” These are virtual platforms that help keep your cryptocurrency safe and reduce the likelihood that hackers and scam artists will steal your hard-earned coin.
There are two types of Bitcoin wallets: “hot wallets” and “cold wallets.” Your wallet depends on which cryptocurrency exchange or provider you’re using.
Hot wallets are virtual wallets that are connected to the Internet. They’re convenient because you can access them through the Internet, an app, or a specialized software program. However, they’re also more vulnerable to cyber-attacks and therefore could be risky.
On the other hand, a cold wallet is a physical piece of hardware that stores your coins. A cold wallet is the safest storage method because it’s much harder to hack.
One thing to know is that cold wallets can also get pretty pricey. While some hot wallets are free to join, some of these cold wallets cost around $60 to $100. A simple search on Duck Duck Go or Google or Yahoo for “cold wallets” will give you a good education.
Step Three: Link Your Wallet to a Bank
Once you’ve decided which wallet is for you, you’ll need to connect it to a bank account.
This enables you to purchase and sell coins. Alternatively, your bank account may be linked to your cryptocurrency exchange account.
You can typically link your bank by logging into your bank through your virtual banking platform. Or, you can add a debit or credit card to your wallet.
Step Four: Build Your Wallet
When you’ve got your bank account linked and your wallet set up, you’re ready to purchase Bitcoin. First, however, you’ll need to know how much to purchase.
Since investing in Bitcoin is risky, you must determine your risk tolerance and have a strategy before purchasing any. A good rule of thumb is to start with a low initial investment.
By starting small, you help limit your risk and increase the likelihood that your investments will pay off.
Step Five: Manage Your Investments and Develop an Investing Strategy
Once you’ve purchased Bitcoin, you’re ready to get into the meat and potatoes of Bitcoin investing. You can use your coins to:
- Make online transactions
- Day trade
- Build value
If you want to wait for your currency to build value, hold onto it and wait for the price of Bitcoin to rise. No matter how you plan to use Bitcoin, it’s important to devise a plan for your cryptocurrency assets.
As an extremely volatile digital asset, your strategy could vary depending on the current value of Bitcoin. In general, you’ll want to wait until the prices fall to “buy the dip” and then buy your coins. As of this writing in late June of 2022, Bitcoin has fallen approximately 68-69% from its high on 11/10/21, so it is clearly a more attractive entry point at the $20,000 level, even as there can still be more downside risk left.
Become a Master at Investing in Bitcoin
Now that you know how to invest in Bitcoin, there are a few tips to implement.
The biggest thing to keep in mind as you invest in Bitcoin is to beware of scammers. There are a lot of people who will make exaggerated claims about the price of Bitcoin, and some of them are dishonest charlatans trying to steal your money.
These scammers often thrive on creating a sense of fear of missing out, also known as FOMO. If you find yourself being pressured by these tactics, don’t many any rash decisions. Instead, keep yourself informed by checking out impartial cryptocurrency industry news. There are an increasing number of private crypto “analysts” on youtube, and many of them offer very good advice, insights, and education.
With these tips, you should have no problem starting a successful Bitcoin wallet. That way, you can start growing your investments for the future.