A Beginners Guide to Bitcoin: Is Bitcoin Investment Worth It Now? How to Invest in Bitcoin?
What is Bitcoin?
Bitcoin is a cryptocurrency or digital money made in 2009 by pseudonymous Satoshi Nakamoto. Because it is a decentralized digital currency, it does not require intermediaries such as central banks regulations and government control. The digital currency operates on peer to peer computer network to confirm trades between different users.
Bitcoin investment has observed high growth rate over the years. Bitcoin and other cryptocurrencies are making a huge wave in the world today. Most people believe that digital currencies such as bitcoin is the future of investments.
How Does Bitcoin Operate?
Bitcoin is a digital currency otherwise referred to as cryptocurrency. The symbol for bitcoin is BTC or XBT. Unlike the ordinary money, bitcoin is not physical money and it is not regulated by the governments or banks. So, how does bitcoin work?
Every bitcoin is mined or created using an encrypted code. The code is combination if numeric and letters which is virtual key for creating and unlocking it.
Bitcoin uses blockchain technology, which creates a shared public ledger to disperse the code generated to different computers. The storage of the code in different computers is a safety strategy to keep it safe from hackers. For example, let’s say you have generated the code, JCK354HKK, the code is broken down and different numbers of the code are sent to different computers. Therefore, if a hacker wanted to get the code, he will need to break into various computer to get the full code.
The blockchain technology uses the public ledger which uses thousands of computers or nodes, to monitor the coins and identify the owners. The data of the coin is altered, the nodes with check the records to verify the authenticity of the data and whether the owner of the coins initiated it.
Nowadays, most companies and businesses are accepting bitcoin as a mode of payment. The bitcoins are stored in a digital wallet online or offline. You can use platforms such as Coinbase to store and as a medium for trade.
The bitcoin miners are the members of the peer to peer platform that confirm the bitcoin transactions while using the top-speed computers.
According to Coinbase, currently, there are approximately 18.7 million coins in circulation out of the maximum of 21 million coins that will ever exist. The reason for this limit is still unclear.
Who Is Investing in Bitcoin?
As mentioned earlier bitcoin investment is growing rapidly as more people are embracing it. Anyone can start investing in bitcoin. You can buy and sell your digital currency using online platforms such as Coinbase and other apps.
On a typical day, there are approximately 300,000 bitcoin transactions that take place. Although, it cannot compare to credit cards or cash transactions, this figure is ever growing.
How Can I Start Bitcoin Investment?
Buying and selling bitcoins is easy and fast. If you are ready to venture into cryptocurrency trade, here are the steps you should follow:
1. Join the Bitcoin Exchange
First, you need to buy the bitcoins. You have to identify a seller. Note, that there is no specific company that deals with the sale of the bitcoins. It is an open-source technology with various platforms that enable bitcoin trade. Common platforms where you can purchase bitcoins are Coinbase, Kraken, Binance, Bitfinex, or Gemini among others. These are middlemen who facilitates easy buying and selling of your digital currency. Therefore, trading with these platforms comes at a fee.
2. Get Bitcoin Wallet
The bitcoins are stored in a wallet. The coins you buy will be stored in your cryptocurrency wallet. There are two types of wallet, the cold and hot wallet. The hot wallet is run by your provider or a cryptocurrency exchange. Once you open an account, some platforms automatically give you a hot wallet.
The advantages of using the hot wallet is that it allows you access your bitcoins through the internet or an application at any time. Although the hot wallets are convenient, they are not entirely secure. The hot wallet provider stands at a risk of being hacked which exposes your coins in the storage.
The safest way of storing your digital currency is cold wallet. The cold wallet is a hardware device such as flash drive where you can store your coins. The cost of a cold wallet ranges from $60-$100.
If you are buying small amount of bitcoins, it is best to use a crypto insured hot wallet. A cold wallet is an ideal storage if you are dealing with larger bitcoin investment.
3. Link Your Wallet to Your Bank Account
Once you have acquired your wallet, the next step is to link it your bank account. Linking the wallet to the account enables you to buy and sell the digital currency. Alternatively, you can link the wallet to the cryptocurrency exchange account such as Coinbase.
4. You Are Ready to Purchase
After the set-up of the wallet and linking to the account, you are ready to start trading bitcoins. When deciding how much bitcoin you should purchase, you should first consider your risk tolerance. Also, you should review bitcoin investment policies before you decide the amount of coins to buy. You can start by buying as little as $25 worth of coins.
5. Management of Your Bitcoin Investment
Once you have purchased the bitcoins, you can start trading with your coins, which is buying and selling the coins via the cryptocurrency exchange platforms. You can also use the coins to make online transactions and you can keep your coins for long and wait for them to appreciate in value.
Is Bitcoin a Great Investment?
Bitcoin investment is just like any other investment, which means it can be bad or good. The success of your bitcoin investment depends on your strategy, risk tolerance, and financial goals. When investing in bitcoin, you should critically analyze aspects such as your investment goals. Also, you understand the reason you want to get into the crypto investment. Do you want to save up for retirement, a passive income, or you want to become a full time investor?
Trading in bitcoin is volatile, but can be highly rewarding. The value may rise steeply and fall down equally within a short period of time. Understanding all the risks involved in bitcoin investments will help you to determine the extent of your investment. The value of the bitcoin is determined by the market demand. As more people buying the coins, the value increases. You should consider the perfect timing on the market when buying or selling to make profits.
Tips for Profitable Bitcoin Investment
Before jumping into investing in bitcoin or any other digital currency, you need to educate yourself first. Here simple tips that will help you invest bitcoins successfully:
1. Know Your Level of Risk Tolerance
Invest only in what you can afford to lose. Bitcoin is highly volatile and high risk investment. Therefore, you should not put all your money in the crypto investment at once. You should consider investing little by little. That way you will not lose all your money in case the bitcoin investment fails.
2. Keep a Healthy and Diverse Crypto Portfolio
Bitcoin is a good investment. However, don’t just invest in bitcoins or cryptocurrencies. Have other investment options. Diversifying your investment allows you to distribute losses and profits. If one investment fails, you can bank on others. No harm if all your investments go well, it’s a win.
3. Always Start Small
If you are getting started in the bitcoin investment, it is wise to start with small amount of money. Starting small allows you to learn the ropes of trading without making expensive mistakes. You can make an investment of as low as $25 every week. Overtime, the investment builds up to become something substantial.
4. Don’t Buy Under the Hype
Bitcoin is one of the biggest digital currency and it mostly talked about. When investing in bitcoin, learn to filter the noise and get the right information about the investment from expert financial advisors. It is good to listen to what other people say about bitcoin investment. However, you can choose to act on advice from experienced bitcoin investors and investment experts.
Since the bitcoin market is highly volatile, you must have the right investment knowledge and patience to let your investment grow. To minimize the occurrence of losses, you must actively learn about the market and take calculated risks.
5.Keep Your Accounts Safe and Secure
Bitcoins and other cryptocurrencies have been a target of hackers lately. You need to keep your accounts and coins tightly secure to avoid theft from hackers. Always choose the trading platform with security level. In Addition, you have to take the initiative to secure your investments. Observe all the online and safety protocols to make it hard to hackers to steal your coins. Remember to get yourself a cold wallet if you are buying a lot of coins. If you prefer to use the hot wallet, ensure you have a strong password and adhere to all safety protocols.
Bitcoin investment is a good venture for investors. It has a big potential for growth, so the investments are going to pay off. However, you should always remember that bitcoins are highly speculative and volatile. Have a wide investment portfolio in case bitcoin does not work out.