Every time you turn on the news nowadays, there is bound to be some news with Bitcoin in the headlines. Seen by many investors and businesses as the future of money, understanding about investing in cryptocurrencies like Bitcoin is essential for everyone today. But what exactly is Bitcoin and how to invest in it?
Bitcoin is the first-ever and most popular cryptocurrency that started in 2009. At its inception, the value of Bitcoin was not even one US dollar. However, in the last 11 years, it touched an all-time high of almost $65,000. Though its price did not shoot up continuously, Bitcoin, just like most securities had its fair share of ups and downs. On February 16, 2021, the spot price for Bitcoin crossed $50,000 for the first time. Regardless, Bitcoin tends to be a great investment for those who have a risk appetite.
A lot of young investors are now aware of the existence of cryptocurrencies. However, some people might not be aware of the ways through which they can invest in them. If you think you are one of them, we are here to help you out. In this post, we would take a look at the different ways through which you can invest in Bitcoin. We will also be guiding you with the steps that you have to take for investing in Bitcoin.
Things you need before investing in Bitcoin
Before you make any investment in any security like stocks, crypto, gold, etc. you need a set of documents that are the prerequisites of investing.
Your personal details:
While opening an account with a broker, you need to submit documents that can act as proof of your identity. This is done to ensure that the details you put while opening an account are legitimate. You can use many documents like Aadhar, Passport, Driving License, etc.
Bank account details:
Funds are one of the most basic requirements for investing. Therefore, you need to submit your bank account details to your broker. Through this, your bank account gets linked with the broker and you can transfer as well as withdraw funds easily. This is a one-time process that saves you from the hassle of managing funds with brokers.
An active and secure internet connection:
This is important to ensure the safety of your funds and securities. Open networks that are accessible to everyone can sometimes be risky. Therefore, you must avoid using them.
After you have decided all this, there are still some more questions you need to ask yourself if you are interested in investingin cryptocurrency. These include:
- Where are you going to buy Bitcoin from? There are many cryptocurrency exchanges today like Coinbase, SoFi, TradeStation, etc. Some traditional broker companies like Robinhood also help people who want to start investing in cryptocurrency. They will also provide you with helpful tips to invest in Bitcoin.
- You also need to think about how you are going to store your cryptocurrency. Decide about whether you want to keep your Bitcoin in a cold wallet or a hot wallet? It is best to do as much research as possible before going ahead with your cryptocurrency investment. There is no dearth of information today about cryptocurrencies.
- Decide on exactly how much you want to invest in buying Bitcoin.
- What are you going to do with this investment in the long run? Come up with a long-term plan for how you plan to use this investment asset.
Now let us look at the steps you need to take to begin investing in cryptocurrency like Bitcoin.
Steps to invest in Bitcoin
#1. Open an account with a Bitcoin exchange
As Bitcoin is a decentralised currency, there is no particular person or company from whom you can purchase it. Therefore, you create an account with a Bitcoin exchange. These exchanges are basically the intermediaries that help buyers connect with sellers.
There are multiple cryptocurrency exchanges from where you can invest in Bitcoin. It is important to note that each one of them is different in its own way and offers different services. You might get to see a slight change in the rates of the cryptocurrency as well.
Therefore, it becomes important that you choose a cryptocurrency exchange after doing some research. That said, some of the most commonly used cryptocurrency exchanges in India are Binance, WazirX, Coinbase, etc.
Many investors who are just starting with their cryptocurrency investment are often not interested in paying a separate transaction fee.
Many are hesitant to use a corporate platform to carry out their transactions. In such cases, it is also possible to opt for P2P or person to person mode of purchase of Bitcoin.
In the P2P purchase of Bitcoin, the crypto exchanges or platforms only function as mere facilitators. They will find a seller for you who is interested in your purchase, and the platform will also help you close the deal.
Many investors find this method of transaction to be more direct. However, it might not be easy to find a seller who matches your deal or transaction exactly. Also, P2P transactions usually tend to take much more time to be completed.
#2. Look for a Bitcoin wallet
Once you have purchased Bitcoin, you need to have a wallet to store it. Most cryptocurrency exchanges provide you with the option of storing your Bitcoin in the wallet provided by them. This is what we commonly term as ‘hot wallets’.
Hot wallets are known to be the most convenient ones because they are managed by the exchange itself. Some of the most commonly used hot wallets are Electrum and Mycelium for computers and mobile phones respectively.
However, if you are looking for security, a cold wallet might be your chosen option. This is because of that fact that it is easier to hack a hot wallet, and this might lead to the loss of crypto for investors. You can store your coins in these as they are extremely safe.
#3. Link your wallet and bank account
Once you own a wallet, you have to connect it with your bank account. This is important because it allows you to buy or sell cryptocurrencies. On the other hand, you can link your bank account with the crypto exchange as well. It works just as well.
#4. Go ahead and place your Bitcoin order
Now that your bank account is linked to your wallet, you are ready to start purchasing Bitcoin. When you start investing in cryptocurrency, it is important to understand that the cryptocurrency exchange has everything you need to buy Bitcoin. The only question that now faces you is how much Bitcoin do you want to purchase.
Some Bitcoins cost hundreds to thousands of dollars, but most exchanges let you purchase some parts of a single coin, and the best part is that your initial investment of cryptocurrency can be as low as $25.
Remember that investing in cryptocurrency like Bitcoin can be risky, so you must weigh your risk tolerance carefully and review your investment strategy before going ahead and deciding how much Bitcoin to purchase.
Now comes the part of managing your cryptocurrency investment. After purchasing Bitcoin, you can consider the following:
- Use your Bitcoins to make online transactions.
- Hold onto your coins for a longer period and wait for them to appreciate further.
- Carry out day trading with your bitcoins, which means that you buy and sell your Bitcoins with other Bitcoin owners. This can be made possible through the cryptocurrency exchange itself.
If you want to buy and sell your Bitcoins, your cryptocurrency exchange will facilitate the process and provide you with everything you need.
Tips on How to Invest in Bitcoin
Here are tips to help you invest in Bitcoin:
-Learn how to store your Bitcoin properly.
Read reviews of the major Bitcoin exchanges before you start buying Bitcoin. You need to know how to protect your assets and make sure that your digital assets are guarded against the threat of hackers, scammers, and cyberattacks.
-Follow the cryptocurrency market cap.
One of the most common mistakes made by beginner crypto-traders is that they make their investment decisions only considering its price. In reality, however, to determine the exact value of any cryptocurrency, you must consider the present circulating supply. For buying crypto, it is not recommended that you focus too much on the current value of the coin. Instead of this, take into account the percentage of the total market cap that you are buying. The closer a cryptocurrency is to the market cap, the greater the demand to sell in the future.
-Search for reputable news sources to find out which exchange to trust and which cryptocurrency to invest in.
There is a lot of criticism about Bitcoin all around as there are many opposing opinions about investing in cryptocurrency. Cut out the noise if you want a successful investment in cryptocurrency.
-Understanding the uses of both hot and cold wallets will help you immensely.
While cryptocurrency exists only virtually, you have the opportunity to store them online and offline through the use of hot and cold wallets. If you are a beginner, it is better to stick to hot wallets that are online, as this will prove to be more versatile and useful. They are also easier to use when you a new investor in cryptocurrency. Cold wallets, though, offer you more protection from cyberattacks and hackers. So as you increase your investment in cryptocurrencies and diversify your assets, it is best to learn how to use both types of wallets.
-Even though Bitcoin is a virtual investment, it still needs you to remain vigilant.
Cryptocurrencies have a higher safety rating than traditional money, but this does not mean that you buy your Bitcoin and forget about it. You must remain alert. If you want to trade or if you own large amounts of cryptocurrency in your mobile wallet, you must be prepared to deal with the vulnerabilities and risks that come with such digital investments.
Is it a good idea to invest in Bitcoin?
So is it a good idea to invest in Bitcoin? Well, investing in cryptocurrency like Bitcoin is not a good or bad idea per se. A lot of it depends on your investment strategy, risk tolerance, financial goals, and of course, your knowledge about the cryptocurrency market. Before considering an investment in cryptocurrency, you must carefully think about your goals and determine what it is that you want to accomplish by investing in cryptocurrency. You should ask yourself questions like:
- Are you investing in Bitcoin to develop a passive income?
- Do you want to become a full-time investor?
- Are you planning to save bitcoin as a retirement investment?
Once you have answers to these questions, it will be easy to figure out if Bitcoin is the correct investment option for you.
Understanding bitcoin further:
At the same time, it is necessary to keep in mind that Bitcoin is a high-risk investment as any cryptocurrency tends to be a volatile asset. This means that Bitcoin values can rise or fall drastically in value within a very short time it can be as quick as a few days or even a few hours.
Just like all cryptocurrencies, Bitcoin also has no intrinsic value as it is not supported or backed by any type of physical asset, like silver or gold. There is also no central regulator who will ensure that the value of Bitcoin remains stable.
Neither is the value of Bitcoin associated with the profits of any one company, like what happens when you invest in stocks. Your investment in cryptocurrency will depend on how many people buy Bitcoin. The more people are buying Bitcoin, the higher will be the value of Bitcoin. If there are fewer people buying Bitcoin, the value will fall.
If you are a beginner, you must invest after considering different factors, especially the risk involved. For doing this research, a person must have basic knowledge about Bitcoin.
Learn Crypto Online on Unluclass
If you feel like you need more knowledge to invest in Bitcoin, you must check out our upcoming online cryptocurrency course. We have designed this course keeping in mind the need of those who want to learn all about cryptocurrencies online. It covers all the crucial topics such as the cryptocurrency market, types of cryptocurrencies, bitcoin price history, etc.
Not only will you get to learn about the theoretical aspect of cryptocurrencies but you will learn their practical implementation as well. Therefore, you will learn about cryptocurrency converter, bitcoin news, bitcoin price prediction, and other relevant things. Stay tuned!
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