The industry of financial technology is booming with bitcoin, but oddly enough, most people don't even know what bitcoin is. With the rise of cryptocurrency, there's no better time than now if you want to dive into the world of BTC investment.
Here's a complete breakdown of all the basics you need before you buy BTC – or opt not to. From how to get bitcoins and where you can store them correctly, we've got you covered.
Before you get bitcoin, do your due diligence and spend some time researching. If you've had a hand in stock investing, you'll find that cryptocurrency investing can be a lot more volatile.
However, this doesn't mean that it won't be lucrative. Because of BTC's special characteristics, its value will only keep on rising. The increasing demand for bitcoin and its finite amount are prime causes of this.
If you already have a strong understanding of what bitcoin is, its key aspects, and how it functions, then you're ready to move on to the next step:
If you want to do transactions with bitcoin, you need to get yourself a "wallet" first. BTCs are purely digital, so how do you store them in a wallet? You need a functional wallet that is comprised of cryptographic keys unique to your account – a private key and a public key.
Private keys are essentially the password that you have to enter when buying, selling, or trading with bitcoin in your wallet. Public keys are the locations where your transactions deposit and withdraw the currency. These keys are also the ones recorded on the blockchain's ledger in the form of your digital signature.
To discourage money laundering using cryptocurrency, the Securities and Exchange Commission in the US now requires user verification. Before you can purchase and sell with bitcoin, you need to identify yourself with documents like your Social Security Number and driver's license.
Before you can trade in bitcoin, always be wary where and when you try to access them through your digital wallet. We highly discourage you from using public networks when making bitcoin transactions because this leaves you more vulnerable to hacking attacks.
You need to have the funds to buy bitcoin, and the easiest way is to have a bank account with a credit or debit card. You can use your digital wallet to directly connect your bank account for faster and more convenient transactions.
Once you have prepared your wallet and connected it with your desired mode of payment, you can now begin bitcoin investing. You can use exchanges which are online marketplaces for cryptocurrencies. There, you can set up a bitcoin account and connect directly into their dialogue and trade your conventional currencies for digital currencies. As you might have deduced, these platforms have a resemblance to platforms that sell stocks.
Before anything else, you should know that the amount of bitcoin is finite. The rate of its production is getting slower and slower as each year passes. Back in February, 17.37 million bitcoins have been created, which is already 82.7% of its maximum amount (21 million.)
If BTC demand becomes high enough that it surpasses its production rate, this will result in a price increase. Because of this, many assume that bitcoin investment is risk-free since it will pay off in a few short years. But sadly, it's not that simple.
As a word of caution, you need to know what you're getting into before you start investing in cryptocurrencies. Unlike regular investments, where you see the cause of why prices rise and fall, cryptos are harder to figure out. Even the most popular cryptos like bitcoin can be very unpredictable. For instance, bitcoin is worth $9,339.98 now. And back in 2017, it was worth almost $20,000. You won't be seeing a steadily rising trend with bitcoin prices because they are much more volatile.
Overall, you should only and other cryptos if you have the money to spare and want to try out a new form of investment. You should never get into bitcoin, assuming that it's just like regular trading because it's not. One good piece of advice with any investment is not to buy more than you're willing to lose.
While BTC value has been steadily rising these past few months, it's still a far cry away from the 2017 boom. Much like any cryptocurrency, bitcoin is very experimental and will experience more volatility compared to conventional investments like stock trading, bonds, and land acquisition.
However, if you're interested in expanding your portfolio with digital investments, you might be wondering, "Where can I buy bitcoin?" Here are the many methods you can employ how to purchase bitcoin:
A cryptocurrency exchange is an online marketplace that lets you trade cryptos like bitcoin for your conventional currencies. Much like any regular online purchase, you have plenty of sites to choose from, each with their own special set of benefits that you can take advantage of.
You will find that many exchanges will trade in the same cryptocurrencies, but they offer varying services. Before settling on an exchange, you need to check into their reputation, security, reliability, fees, exchange rates, and the cryptos that they trade with. Try to test a list of exchanges and narrow them down to the ones you prefer.
If you're having a tough time looking for a good exchange, and you want to know how to buy bitcoins with cash here are a few that we recommend:
A common choice for American bitcoin users, Coinbase, makes it easier for US citizens to link their banks with their online accounts. This exchange also offers a lot of cryptocurrencies, such as litecoin and etherium.
With every transaction, you're charged with a spread (or adjustments in the price of your investment). It totals around 0.5% and a separate transaction fee. This fee can be higher depending on the region you're in and the type of payment. For instance, you get 1.49% of every purchase that's funded from a US bank account.
You can also get flat fees that can range from $1 to $3, which depends on the amount you transferred.
It is the world's biggest exchange (in volume) for every cryptocurrency. Binance has a 0.1% fee with every trade transaction, with a few discounts available, and an additional withdrawal fee.
In general, you should only use Binance if you want to purchase something through cryptocurrency. This site does have an option to buy bitcoin with credit card, but it's only available in some states in the US.
Gemini trades in bitcoin, bitcoin cash, zcash, litecoin, etherium, and a few others. Their transaction fees are priced between $0.99 to 1.49% of the total order. It depends on the amount of your sale or purchase, with an additional 0.5% fee.
This crypto exchange trades in 8 currencies, including bitcoin. With Coinmama you need to purchase a minimum of $60 and it charges a 5.9% fee for each transaction (credit card purchases fee comes extra and is 5%).
If you want to know other ways how to invest in bitcoin, you can opt for a stockbroker, essentially bitcoin investment sites. There are a select few choices for BTC brokers in the market, with Robinhood being the most viable option.
This "mainstream" form of an investment broker is the very first that offers biotin. The advantage of using this broker is that it doesn't charge any fees for bitcoin trading.
As the name suggests, these are much like regular ATMs that can be used for bitcoin transactions.
A P2P trade is trading bitcoins directly with other crypto owners. Sites like Bitquick and Bisq act like a "craigslist" for BTC, but use these services with caution. Buying and trading with cryptocurrencies without a mediator can be a risky business.
You can use TradeStation to trade in bitcoin futures. We only recommend this for investors who have a lot of experience.
It is an asset manager for all of your digital currencies. You can opt for using an investment trust in bitcoin called GBTC, or in etherium call ETCG. And these are publicly traded so that you can avail them from numerous discount brokers. These come with a few fees, though.
GBTC generally trades at premium prices. It means that the shares for GBTC will cost more than the price of bitcoin, even though its holding is primarily of bitcoin. You don't need to worry about storage or wallet, so you're paying a little extra to alleviate yourself of that trouble.
You can store bitcoin in two wallets: a cold or a hot one. For a brief explanation, hot wallets offer faster transactions, while cold wallets will have enhanced security measures, with the drawback of longer transaction times.
For hot wallets, you store your bitcoin with a provider or exchange it through the cloud. You can access your cryptos using an app internet browser. Most trade exchanges will offer free hot wallets upon using their services.
Any transaction you process will retrieve and store cryptos from there. However, most users prefer transferring and storing their cryptos using wallets from third-party providers. And these are generally free for downloading and use.
Maybe you're wondering why more people are using third-party providers for their wallets. While many advocates praise blockchain tech as a more secure form of electronic transfer, hot wallets are becoming a potential target for hacking.
Even Bitcoin.org is warning users that online wallets and exchanges have suffered past security breaches. So it's safe to assume that these services are not reliable enough, and the security and insurance provided is lackluster compared to a conventional bank.
There are plenty of providers for hot wallets. Here are some that we recommend:
A prevalent exchange that also offers free hot wallets plus insurance that acts as a safety net for any losses incurred from hacks, breaches, fraudulent transfers, or theft.
This software lets you store cryptos on your computer systems.
This online wallet is similar to Coinbase's. However, unlike Coinbase, this currency exchange doesn't use blockchain, making this less of a potential hacking target.
This hot wallet can only be used on your phone, with available versions for both Apple and Android models.
A few providers for hot wallets do offer insurance in case of mass-hacking, but it might not cover isolated hacking incidents. It is where a cold wallet comes in.
These wallets are a small, portable device that's encrypted. You can download and carry cryptos with this storage. Cold wallets can be more costly, but you're mostly paying for the extra security. A few notable cold wallet providers are:
Trevor provides small wallets the size of a regular key that is priced at $80 - $170.
This wallet provider offers wallets with "thumb drive" designs and can range between $60 - $120.
Bitcoin, or cryptocurrencies in general, is very volatile and purely speculative. If you want something a little less risky, we recommend that you go for stock trading instead. Only invest in bitcoin if you have money to spare.