Bitcoin has been around for more than a decade now and doesn’t seem to be disappearing any time soon. This cryptocurrency has drawn bad and good headlines and has worked its way through many milestones and hurdles over the years.
Even though it has a volatile reputation, it continues to attract new investors as it promises market-beating returns.
Here’s what you need to know about investing in Bitcoin.
Things you need to know about bitcoin
Bitcoin is known as a cryptocurrency. This means it’s some kind of electronic money that validates and secures transactions through the use of cryptography. In this regard, companies and individuals referred to as miners utilize computing hardware and use it to count a code known as a “hash.”
This encrypts the data within transactions. This data is taken and classified into blocks that are linked together in a blockchain that you can’t change once written.
Bitcoins initial creator, Satoshi Nakamoto made bitcoin in 2008 as a form of “sound money” something close to digital gold.
What makes bitcoin so unique is that it has a limitless supply of more than 21 million coins, with only a few million left that needs to be mined.
Despite this reality, having a fixed maximum supply, bitcoin has displayed outstanding volatility during most of its lifespan with big fluctuations in its pricing.
These fluctuations make bitcoin a very speculative asset, something that only traders should consider if they can bear a significant amount of risk. Some analysts suspect that its volatility will slowly drop over time, as its market expands and cuts down its destabilizing reliance on leverage.
Start by choosing the crypto exchange
For a majority of people, the best place to purchase bitcoin is on a crypto exchange. These kinds of online platforms are built for facilitating trades in cryptocurrency. Offering trading pairs is common on these platforms usually done by linking buyers with sellers. Alternatively, you can learn how to buy dogecoin to diversify your crypto trading portfolio.
In the United States, coinable is the leading crypto exchange platform by customer base and by volume. Other regulated and noteworthy crypto exchanges include eToro, Gemini, and Kraken.
Other traders with less experience may benefit better from trying generic trading platforms like Robinhood. These have the advantages of being more user-friendly than the basic crypto exchange. Although a huge disadvantage is that most don’t allow users to withdraw their bitcoin.
Decide on a payment method
Crypto exchanges differ when it comes to the terms of payment methods they support. A majority of big platforms provide the option to link your bank account for ACH and wire transfers, some also have the option to link your debit card. Others permit you to pay through PayPay.
Regardless of the option you select, you will need to verify your identity when you first sign up for an account and again when you register for a payment method. In the United States, you often need to submit a scan of an ID issued by the state. This can take the form of an identification card or driver’s license.
Depending on where you are located and your selected platform, you may also need to give scanned extra documents like proof of address as well as your passport.
Make your order
As soon as you’ve deposited cash and verified your account, you can then start buying bitcoin. This method differs based on the exchange you use. Some exchanges provide a process that involves pressing a sell or buy button and then gives you the option to specify the amount of bitcoin you want to sell or buy.
Generally speaking, a majority of exchanges provide about three kinds of order types:
Stop order
With this kind of order you specify the price at which you desire to sell or buy bitcoin. This kind is better if you want to ensure you sell bitcoin before it falls too badly. This type of order can take some time to perform, depending on how fast the market moves.
Market order
This alternative gives you the option to select if you desire to purchase bitcoin at its present price. This order type is completed faster, in just a few seconds, depending on the time during the day.
Limit order
Directs the exchange to execute a sell or buy order at a specified price or better. Contrary to stop orders, limit orders are viewable to the market and can take a bit longer to fill.
Again when performing any of these alternatives, usually you will need to click a trade, buy or place a new order button on an exchange’s desktop screen. You’ll be enabled to select from the three options mentioned above before you press the submit button or something similar.
All exchanges will permit you to purchase a fraction of a bitcoin. For instance, if the price of 1BTC is relatively expensive at the moment, you be able to purchase 0.1 BTC, 0.01 BTC, or any other figure you input into the exchange interface.
Keep your crypto in a secure place
As larger exchanges are becoming safer, fraud and hackers are still a huge problem in the sector. This is one of the reasons why investors with lots of bitcoin are told to think about keeping their cryptocurrency themselves.
Traders with ample experience may prefer to own their wallets, because this gives them the freedom to relocate their cryptocurrency whenever they desire to and not be obligated to an exchange.
This then means moving your bitcoin from the exchange you utilize to your cryptocurrency wallet. These kinds of wallets come in two variations:
Hot wallets
These are also referred to as software wallets. These are applications that can be used via your phone, web browser, or desktop computer. They also have a feature where you can store the private key of your bitcoin address. However, because they are linked to the internet, they are not viewed as safe hardware.
Cold wallets
Are also known as hardware wallets, these are tiny devices that keep your bitcoin address private key. Private keys are needed to transfer bitcoin out of the address. Cold wallets don’t link to the internet and are therefore seen as a safer option compared to software-based online alternatives.