Getting Started in Investing in Bitcoin: What You Need to Know

Are you interested in investing in cryptocurrency?

Cryptocurrency refers to a type of virtual currency that makes use of encryption to secure and verify transactions.

It can either be centralized or decentralized, depending how it was issued.

Bitcoin is one of the most popular types of cryptocurrency.

It is considered one as it relies on “peer-to-peer cryptography” to verify exchanges and transfers.

Users of Bitcoin exchange this currency in a process called mining, which is then recorded on a public ledger. Here, details about the sender, receiver and transaction are recorded.  

Bitcoin is said to be a decentralized currency that was invented in 2008.

It was released with the publication of the study titled: “Bitcoin: A Peer-to-Peer Electronic Cash System.”

This paper was written under the pseudonym Satoshi Nakamoto.

Until today, the true identity of Nakamoto is still unknown.

He or any other person has no control over how the Bitcoin protocol works. It operates mainly on specific mathematical principles.

This invention has brought many significant changes in the internet, paving the way for other cryptocurrencies to be introduced.

More and more people are thinking of investing in Bitcoin.

And you’re probably considering the same thing.

But like most people, you’re probably wondering if it’s a good idea to invest in Bitcoin.

We’ll attempt to answer this question as well as provide a thorough guide on Bitcoin investment in this article.

Reasons to Invest in Bitcoin

Bitcoin is one of the top 30 currencies in the world. It has been breaking records here and there.

It’s no surprise that many people now want to jump into the Bitcoin bandwagon.

In a 2017 study conducted by the Cambridge Centre for Alternative Finance, it was reported that there are about 3 million to 5 million active users of cryptocurrency wallets.

Even though 0.5 percent of the world’s population are adopting the use of cryptocurrency, it’s amazing to see how in just a few years, Bitcoin has gone from the value of $750 to $12,000.

This is a significant sign of exponential growth, which according to experts will not stop anytime soon.

And it’s expected to grow even bigger with the NASDAQ and CME coming into the picture.

Cryptocurrency has gone from the value of $18 billion to more than $300 billion that it is today.

It’s unbelievable how this happened so fast.

When it was first introduced in the public, it was portrayed by media organizations as a scam or a pyramid scheme. Some would even say that it was a means to launder money or to finance terrorist groups.

But today, as most people can see, Bitcoin and other cryptocurrencies have become a steady means of financial transactions, allowing quick, cost-effective and partially anonymous way to send and receive cash value.

Getting Started in Investing in Bitcoin

This guide will help you through each step of the way. Here are the steps that you need to follow to get started in investing in Bitcoin, and be on your way to participating in the Bitcoin revolution.

Step # 1 – Set up your digital wallet and buy your Bitcoin

A digital wallet is where you will store your Bitcoin.

There are five primary types of digital wallet that you should know about:

  • Online
  • Mobile
  • Desktop
  • Hardware
  • Paper

The online crypto wallet is the type that runs on the cloud. You can use this as long as your laptop or mobile device is connected to the internet. This type of wallet is easy and convenient to use. The only problem is that it is quite vulnerable to hacking and online theft.

The mobile type is one that works as a mobile device application. You need to download the app into your smart phone or tablet. Since it is on your mobile device, you can bring it to physical stores that accept Bitcoin payments.

The desktop crypto wallet is one that is downloaded and installed in your desktop computer.

The hardware wallet is stored in a device such as USB drive, which means that you can plug it in any device to be able to use your digital wallet. This is the most expensive type of digital wallet.

Finally, the paper wallet is simply a printed copy of your public and private keys so you can access your digital wallet account anytime, anywhere.

Now that you know what the types of digital wallets are, it’s time to set up one for your Bitcoin investment.

It is imperative to choose the right wallet based on its pros and cons, as well as your own preferences so you won’t have any trouble in the future.

Since you’re investing on Bitcoin, you need to find a wallet that lets you make use of this cryptocurrency.

Some of the best choices include:

Most experts will recommend you to get started with Coinbase as it is the easiest to use and it also lets you connect directly to the Coinbase exchange.

To set up your Coinbase wallet, here are the things that you need to do.

  • Go to the Coinbase official website.
  • Click “get started”.
  • Enter your first name and last name.
  • Type in your email account
  • Create a strong password that is difficult for hackers to guess. Do not use your birthday or any other detail that’s easy to guess.
  • Click “create an account”
  • Check the email account that you used in the registration form.
  • Here, you will find a verification email. Click the verification link.
  • Link your bank account, credit or debit card or PayPal to your Coinbase account. Simply go to the account settings and click “payment methods”. Choose the method that you prefer. Buying Bitcoin with credit or debit card is the easiest and most convenient route. Enter the details required.
  • Provide photo ID for verification.
  • Click “buy Bitcoin”.
  • Set the total number of Bitcoin that you want to buy using your chosen payment method.
  • Click “buy Bitcoin instantly”.

Step # 2 – HODL

HODL is a slang term in the cryptocurrency world which means to “hold” the cryptocurrency instead of selling it right away.

This was first coined as reference to holding Bitcoin but it is now also being used for other types of cryptocurrencies as well.

You might wonder how long you should hold on to your Bitcoin before selling it for a profit.

If you will do a quick search online, you’ll see that there’s no single answer to this question.

Experts have different views, and so do Bitcoin investors.

Some say that they are able to double their Bitcoin value in only a month or two. Others recommend holding on to your Bitcoin for many years, or for as long as you possibly can.

The decision depends on you, and your patience as an investor.

But what you can try is to hold onto a certain number of Bitcoin for long-term investment, and then make use of a certain number of Bitcoin for short-term investment.

Step # 3 – Cash out your Bitcoin

After you’ve hold onto your Bitcoin for a while, you might see that its value has increased.

This is the time when you should make a move to sell your Bitcoins or at least some of it.

There are two ways to do this:

  • Sell your Bitcoins online
  • Sell your Bitcoins directly to another person

Selling your Bitcoins online is the easier way to accomplish this, as you can do this without a hitch at Coinbase or any other Bitcoin trading platform.

Here’s what you need to do:

  • Go to the “sells” page.
  • Type the amount of Bitcoin that you want to sell.
  • Choose the wallet where you want to sell from.
  • Choose the account where you want your cash funds to be deposited to. You can choose to deposit the amount to your credit or debit card, or to your bank account.
  • Confirm the order.
  • Click “sell Bitcoin”.

You can also sell in other Bitcoin exchanges such as Kraken and Circle. These platforms connect buyers and sellers, holding the money until the two parties are able to confirm the transaction.

Now if you choose to sell the Bitcoin in person, you have to know that this removes the privacy and anonymity of the transaction since the seller will know who the buyer is.

But if you don’t mind, then go ahead and secure the transaction. To do this, you just have to scan the QR code on the buyer’s device and take the cash value of the Bitcoin you’re selling.

It’s also a viable move to advertise your Bitcoins on LocalBitcoins.com. Here, you can post information about the Bitcoin you are selling so you can connect with possible buyers in your local area.

Just make sure that if you’re going to meet up with a stranger, you follow the basic safety rules so you don’t get yourself into trouble.

Choose a crowded place like a restaurant or a mall as your meeting point. It would be better if you could bring another person with you during the transaction so you don’t have to meet with the stranger all by yourself. Now, if something does not feel right, do not go on with the process.

Tips for Investing in Bitcoin

So now you know about the simple process of investing in Bitcoin, you need to get to know more about tips on how to do this safely and successfully.

Be sure to keep these tips in mind:

Tip # 1 – Set realistic expectations about Bitcoin investment

Since you’re a beginner in Bitcoin, you need to keep this in mind: there’s so much for you to learn.

Just because you’ve read an article or two on Bitcoin that says that it has everything you need to know about cryptocurrency, it does not mean that you’re automatically an expert.

It takes many years before one can consider himself/herself as an expert.

Once you’ve recognized this fact, it’s so much easier to avoid the common mistakes of beginners, as you’d be treading the waters a lot more carefully.

You’ll also take the time to do plenty research not only about Bitcoin but about cryptocurrency in general.

It’s imperative to educate yourself about Bitcoin and cryptocurrency so that once you get into it, you’ll know what exactly you’re doing.

You also need to keep yourself updated with the latest cryptocurrency news and trends. Remember the crypto world is highly unpredictable and it might be difficult to keep up with it if you don’t work as hard and fast as others.

It’s always a good idea to follow the top crypto news sites and to keep yourself updated with the latest price changes. You can see this information at Coin Market Cap.

You also need to realize the Bitcoin is not a get rich quick scheme like some people are claiming.

You won’t become a millionaire in a week or two. It takes a lot of hard work, time and effort to start getting the results that you are close to what you want.

Knowing what to expect can help you avoid frustrations in the end.

Tip # 2 – Learn from the experts

The good thing about the internet is that it overflows with information.

But the bad thing about it is that it overflows with both correct and incorrect information.

As a newbie in Bitcoin and cryptocurrency, you need to distinguish between the two so that you don’t make the mistake of following the wrong advice.

Check out only reputable online resources that provide valuable advice about investing in Bitcoin and other cryptocurrencies.

Some of the best ones that you should follow include:

Tip # 3 – Secure your investment

Any Bitcoin investor should exert extra time and effort in securing his/her Bitcoin investment.

If you’re not going to do this, then you should not get into Bitcoin investments at all. It will just be a waste of your time.

You need to remember that Bitcoins are vulnerable to hacking so you need to take security measures seriously.

In the world of cryptocurrency, if your digital wallet gets stolen or hacked, there’s no one to help you out. You are on your own.

Here are some safety tips that you should always follow:

  • Create a strong password – A strong password is one that is long, unique and difficult to guess. It’s best to make use of a combination of letters, numbers and symbols. Never use anything obvious like your birthday or your pet’s name. Do not use the passwords that you also use for your email or other accounts. Never give your passwords to anyone you do not trust.
  • Create two-factor authentication – This is applicable to every account that is important to you. This should be employed in your email account, Coinbase account and other accounts that can lead to your digital wallet.
  • Use a secure digital wallet – Choose a hard wallet such as LedgerNanoS or Trezor if you want to hold on to your Bitcoins for a long time. It’s also a good idea to make use of a paper wallet, but just be absolutely sure that you keep it in a safe place, somewhere that you can’t possibly lose it.
  • Leave your keys to a trusted friend or family member – If you are the only person who knows about your passwords, if something happens to you, all your investments will be lost just like that.

Tip # 4 – Don’t become a victim of scams

Of course, you’d do everything you can so you don’t fall into any trap or scam.

But you have to know that scammers have become really good at this game that even if you’re cautious enough, it’s still possible to get lured into a scammer’s trap.

So you can avoid this from happening, trust only reputable online resources for information, and legitimate Bitcoin trading platforms.

It’s also a good idea to always trust your instinct. Your gut feel will tell you right away if something is wrong, and you’d want to remove yourself from the situation before it’s too late.

Read up on the latest updates about cryptocurrency scams so you know what specific red flags to watch out for.

There are the obvious like do not believe offers that are too good to be true, and you should not sign up for anything that will make you send payments to become a member or to register an account.

Tip # 5 – Be aware of the risks

Just like any type of investment, there are risks involved in Bitcoin investment.

Keep in mind that Bitcoin is vulnerable to the following:

  • Unpredictability
  • Uncertainty
  • Confusing rules and regulations
  • High market price volatility

If you want to be aware of what specific risks you’re going to face and how to overcome each of this, it would be a smart move to consult an expert financial advisor who specialize in Bitcoin investments.

And remember: never invest any money that you cannot afford to lose.

Before getting started with Bitcoin investment, make sure that you have the patience and the heart for it.