James Atkins
Editor
Editor
Are you interested in investing in bitcoin and you don’t know where to start? Well, today is your lucky day as we have put together a list of helpful tips that should show you everything you need to know about investing in bitcoin in 2021. Whether you’re just getting started with bitcoin or you have some knowledge about this technology, rest assured that today’s guide is for anyone looking to make profits from investment in bitcoin. But before we get into the nitty-gritty of today’s post, let’s run you through the basics.
It is safe to say Bitcoin is an inevitable force to be reckoned with in the crypto space, and you may well regret passing up on the opportunity to invest in this impeccable technology.
If you are thinking of Bitcoin or digital currency, then this is your best read as there are some helpful tips, or should we call it beginners trump cards you need to have before you even think about investing in bitcoin. So we’ll talk about these tips, alongside some basic knowledge of what bitcoin is, how to invest in bitcoin, why bitcoin needs to be taken seriously as an asset, how to properly buy bitcoins either with a credit card or bank account and lastly, how to protect and secure your bitcoins in what we call a digital wallet.
In the world of trading, there have been many exchanges for the value of goods and services from trade by barter to cowry shells to coins to paper money to ATM cards (online banking), and now, to digital currency. This digital/ virtual currency is becoming the new rave in the world of trading, and the first-ever created is BITCOIN, with its value skyrocketing every day.
It was created by a programmer or group of programmers named “Satoshi Nakamoto ” in 2009. The name of the real creator(s) of bitcoin is still not known to date. Within a couple of years, since it launched, bitcoin has evolved into one of the most intriguing investment trends, and now its price and those of other cryptocurrencies have risen to remarkable heights as a result of the massive adoption being experienced in the industry.
Thanks to the impeccable technology powering bitcoin, its scarcity and impressive performance, other cryptocurrencies (called “altcoins”) such as Etherium, Litecoin, Ripple, Cardano, Bitcoin Cash, Dogecoin, Tether, Monero, Binance Coin, Ethereum Classic, and more have been launched and are equally doing well.
One of the significant reasons why bitcoin was created was to solve some of the major flaws of the traditional financial industry which is prone to fraudulent activities. With bitcoin, you have impeccable transparency and robust security.
There are tons of ways to invest in Bitcoin, directly or indirectly, and we’ll discuss a few of them shortly.
Ever heard of the acronym ‘Buy and Hodl? This is an intentional misspelling of hold. It means to “hold on for dear life.” This set of people believe in the long-term prosperity of bitcoins.
You can easily buy bitcoins and store them in your bitcoin wallet. This method is probably the most complex, but it is highly recommended. With this option, you’ll need to find a bitcoin exchange, deposit some money and then go right ahead to exchange fiat for bitcoin. Once that is done, you will need to get a bitcoin wallet to move your bitcoins into your wallet for safekeeping and patiently wait for the price to appreciate.
With this, you won’t be buying actual bitcoins. Instead, you’re buying a contract that tracks bitcoins price or mimics the behavior of the coin. That means if the coins go up in price, you can sell the coins at a profit, but if the coins price drops, you run at a loss. With derivative trading, you don’t need a wallet since you don’t have actual bitcoins. All you need to do is just open an account, deposit money and start trading. Another benefit of derivative trading is that it also allows for leverage trading. You can borrow money to increase the amount you want to trade, this option can be considered riskier and suitable for only experienced traders.
Investing in a bitcoin ETF also means you’re buying a contract that correlates to bitcoin’s price. What we mean here is that you are not buying an actual coin. ETFs are traded on regulated stock exchanges and mimic bitcoin’s price moves, although they might not accurately reflect the prices. There is only a handful of bitcoin ETFs available, and they are geared towards investors that don’t want to open an account or download the wallet. You can invest in ETFs the same way you invest in stocks through your bank or conventional trading.
Buying Bitcoin through Paypal is also an incredible option, and we have two ways to purchase it. One of the most convenient ways is to open a Paypal account and use it to purchase your cryptocurrency easily. The other option is to make use of your Paypal account balance to purchase crypto from a third-party provider. However, this option is not as convenient as the first because there are limited sites that allow third-party purchases of Bitcoin using the Paypal platform.
Cryptocurrencies like Bitcoin, Etherum, Litecoin, and Bitcoin Cash can be expressively purchased through the Paypal platform. There are still limitations to these luxuries based on the region. For example, residents of all the states can either use their old or existing accounts to purchase cryptocurrency or set up new accounts, all except those who live in Hawaii.
You can easily set up a crypto account with Paypal, and the following information is required: your name, date of birth, physical address, and tax identification number.
You can buy bitcoin through PayPal when you have these requirements;
You can not possibly use a credit card to purchase Bitcoin using Paypal. A price will be displayed during the purchasing process. These prices are subject to change very quickly, which means their purchasing process is highly unstable and volatile. Always make sure you have enough funds in your account to make the purchase.
Despite the many risks that come with bitcoin investment, it is getting to be considered an investable asset. Understandably, it is treated as a new asset class because it doesn’t behave as intuitively expected as opposed to other assets, given the transition from analog to digital gold.
I mean, it’s not every day we get to witness the uprising of a new asset class, even though Goldman’s rubber stamp of approval is now on bitcoin.
It is safer to treat bitcoin as an asset because it will help you use all of the standard laws regarding actual assets, but if you decide to treat it as a currency, it tends to make things a lot more complicated than they should be. Bitcoin holds real value against real-world fiat currencies, and for example, you can easily exchange bitcoin as part of a transaction because it is a legal tradable commodity.
Here are the highlighted reasons why Bitcoin is an asset;
As an aspiring Bitcoin investor, there are several things you need to know. Things like a cryptocurrency account on an exchange, if you are using a KYC (Know Your Customer) platform, you need personal identification documents, a method of payment, and a secure internet connection. It is also highly recommended that you have a personal wallet outside the exchange, more like a vault inside a vault. The different valid methods of payments can include bank accounts, credit cards, and debit cards. You can also get Bitcoin at ATMs and P2P exchanges that are specialized just for this purpose. But keep in mind that Bitcoin ATMs are starting to require government-issued IDs from early 2020.
Another thing to be aware of as a Bitcoin investor is the issue of privacy and security. Though we might not have physical bitcoins, it’s not exactly a great idea to boast about large holdings as this might put you at risk of criminals. Remember that you have public and private keys, and anyone who gains access to your private keys especially can make transactions on your behalf; your transactions can be monitored from the public address that you use, so be careful to keep significant investments that are not directly connected to the ones that are used for transactions. Always keep your private key a secret.
Let’s talk about these Four easy steps to buying your bitcoins;
A cryptocurrency exchange will allow you to buy, sell and hold cryptocurrency; all you need to do is sign up on an exchange platform. It is a known practice to choose an exchange that allows you to withdraw your crypto into your wallet for safekeeping, and this is usually the best decision.
There are various types of cryptocurrency exchanges. One of the distinct features of the Bitcoin ethos is decentralization and individual control or ruling. Some exchanges allow users to remain anonymous and do not necessarily need users to enter their personal information.
This sort of exchange operates autonomously and is practically decentralized, meaning that there is no point of central control.
The downside of this sort of privilege is that it can be used for nefarious activities; it does still help the unbanked population of the world. We have those living in countries with zero access to infrastructures for government credit or banking; in this case, anonymous exchanges can very well come in handy and help bring them into the mainstream economy.
It will interest you to know that the most popular exchanges require KYC compliance. Some of these exchanges include; Kraken, Coinbase, Gemini, and Binance. They have significantly grown in the number of features they offer to their users, which means increased popularity and ground.
While Binance serves more advanced traders, helping them provide a more secure trading atmosphere and functionality with better varieties, Coinbase, Gemini, and Kraken are some of the most accessible exchange platforms that allow beginners to transcend into the investing world of crypto smoothly.
An integral practice when opening an exchange account will always be to use safe internet practices. Examples will be to follow through the process like using two-factor authentication and a unique password that includes a variety of upper case, lower case, specialized characters, symbols, and numbers.
When you are done choosing an exchange platform, the next thing to do is to gather your documents. Depending on the type of exchange chosen, you might likely need information such as your social security number or driver’s license, your source of income or funds, and probable details of your employer. This process is highly dependent on the country you live in and the laws binding it.
When your identity and legitimacy have been confirmed, you can connect your payment option. Most exchanges allow you to connect your bank account directly, or you can just connect a debit or credit card. But this is something you can objectively avoid as banks usually do not take too kindly to the idea and may choose to stop deposits to crypto-related exchanges; it is advisable to confirm first if your bank is open to allowing deposits at your preferred exchange.
There are fees attached to deposits through a bank account, debit, or credit card. For example, Coinbase, an amazing exchange for beginners, has a 1.49% fee for bank accounts and a 3.99% fee for debit and credit cards. It is imperative to research the costs associated with each payment method in line with choosing the exchange platform you want. By doing so, you know what you want and what works for you best.
Like how we get to pay transaction charges when we make regular bank transactions like withdrawals and transfers, crypto exchange platforms demand fees per transaction. These charges can be a flat fee or a percentage of the trading amount, depending on if the trading amount is low.
After completing the first two crucial steps of choosing an exchange platform and then connecting your payment method successfully, you can now go ahead to buy Bitcoin and any other cryptocurrency of your choice. That sounds like a good start, right?.
Cryptocurrency exchanges have grown in recent years due to their significance in terms of liquidity and their large spread of agreeable features. Also, they are slowly going mainstream, and needless to say, they are the future currency. An industry that was once questionable and felt like a plague is now slowly evolving into a legitimate practice that is drawing interest from all the powers in the financial service industry.
Cryptocurrency is now standing almost side by side with its stock brokerage counterparts, all you need now is an exchange platform with a connected payment method, and you are ready to invest away. Crypto exchanges offer amazing ways to set up continuous investment opportunities and allow their clients access to dollar-cost averages into their choice of investments.
This last step is the most important of all the steps because this is the only reason you would sleep with both eyes closed at night. Bitcoin and other cryptocurrency wallets are where you can safeguard your assets more securely. It is vital to keep your crypto outside of exchanges and in your wallet so that you can have control over the private key to your funds. In a situation whereby your exchange platform is hacked or compromised, you can avoid this risk if your funds are already stored in your wallet.
It is important to note that most exchange platforms might offer wallets for their users to store their funds, but their primary business is not security.
Some wallets provide more features than others. Some only accept Bitcoin, while others give room for the choice to store different types of altcoins. On the flip side, other wallets offer the ability to swap one token for another.
When it comes down to choosing a Bitcoin wallet, you need to understand that crypto wallets have a concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).
Hot Wallets: Also known as online wallets, this type of wallet runs on internet-connected devices like phones, tablets, and computers. They help you to access your wallet on the go easily and are very convenient. Still, the disadvantage is that it is more susceptible to a hack as it becomes vulnerable because these wallets generate the private keys to your coins on these internet-connected devices.
People usually don’t use enough security when using these hot wallets, resulting in their funds being stolen. Although this is not a usual or frequent occurrence, it can easily happen in various ways. For instance, going to brag on a public forum about how much cryptocurrency you hold and your hot wallet security is very thin, calling the wolves to a thread-fenced chicken house. That being established, you can have guaranteed security provided all precautionary processes are followed duly.
These wallets are not meant for large amounts of cryptocurrencies; you can freely use them for small amounts of cryptocurrency that you are using to trade actively on an exchange platform. Hot wallets only cover mobile, desktop, web, and exchange account custody wallets. Take, for example, the conventional financial wisdom of having only spending money in a checking account. In contrast, most of our money is tied to various forms of investment or savings platforms.
Cold wallets: This type of wallet can be referred to as offline wallets or hardware wallets, and guess what? It has far less risk of being hacked or compromised. Simply put, it can store a user’s private key on something not connected to the internet and can come with software that works in parallel so that users can easily view their portfolio without putting their private key at risk.
The most probable way to securely store cryptocurrency offline is via a paper wallet.
This type of wallet can be generated off certain websites. It can produce both public and private keys that you can print out on a piece of paper. The only possible way to access the token in these addresses will be when you have that piece of paper. People go as far as laminating these paper wallets and storing them in various safety deposits like boxes or a safe in their homes or the banks.
Another common type of cold wallet is a hardware wallet which is in the form of a USB drive that helps store a user’s private keys securely offline. These sorts of wallets have significant advantages over other types of wallets because they are above situations such as viruses that could be on one’s computers. They hardly ever come in contact with your potentially vulnerable software and this allows the community to decide for themselves its safety through code audits rather than the vocal assurance of a company saying it is safe to use.
Cold wallets need a lot of knowledge to set up, but they are the most secure way to safe-keep your Bitcoin or cryptocurrencies.
An excellent way to set up your wallets would be to have; an exchange account that you can use to buy and sell, a hot wallet to hold just enough amounts of crypto you wish to trade or sell, and lastly, a cold wallet to help store more extensive holdings for long term durations.
Cryptocurrency is the future of currency; if you aren’t investing in it yet, then you haven’t started investing at all. Get into the suitable investment today and see yourself scaling in the wings of profit.
A bitcoin investment is precisely what it sounds like, using fiat currencies like dollars and euro to buy bitcoin. Bitcoin investment can also mean using a part of your retirement funds from a 401k or other funds to invest in a safe and qualified bitcoin IRA.
How you invest in bitcoin depends on what country you actually reside in. And just so you know, developed countries have myriads of options and more liquidity when it comes to bitcoin investment.
Coinbase is one of the largest bitcoin exchanges and is available to users in the US, Canada , most of Europe and Singapore.
In many ways, buying bitcoin is pretty much like buying any other currency. To this end, you need to keep in mind that the price rises and falls, especially compared to other currencies.
The difference between bitcoin and other traditional investments is that you either need to hold the coins in your preferred wallet or trust a third party to offer that service.
If you decide to hold the bitcoin in your own wallet, you risk losing it if you don’t store your private keys properly. And if you decide to let a third party hold it on your behalf, you may soon become a victim of a hack. More so, unlike storing stocks or dollars, once the coins are hacked, they are almost impossible to replace.
For example, if a bank were to be robbed in the US, the government would make restitution to the bank through what is called the Federal Deposit Insurance Corporation (FDIC). What this means is that there is no risk of losing your savings.
On the flip side, things are different with bitcoin. For one, bitcoin is limited in supply as only 21 million bitcoins will ever exist. To this end, it isn’t easy to replace. Once they are gone, you may never have access to them.
Also, if the institution holding your bitcoins gets hacked, they may be able to cover the loss and that’s because they can afford to. Plus, it helps protect their name and boost investors’ trust in the platform. Binance did something similar in 2019.
While some exchanges may offer to pay back stolen bitcoins, there aren’t any legal obligations to do so. Nevertheless, there is an upside to accepting risks like this though. On one hand, it is good for business and on the other, it will boost investors’ trust in the platform.
Again, keep in mind that bitcoin cannot be artificially inflated like US dollars. Here is the thing, when your government prints more money, it effectively reduces the worth of the dollar over time. If you used to buy a bottle of soda for let’s say $0.10, you may end up buying the same soda today for $1.50.
The reason for the difference is inflation. The cool thing about bitcoin is that it is a deflationary asset. What this means is that the coins will become valuable over time and not less. And good enough, there are tons of amazing ways to buy bitcoins today than there were many years ago. So while holding bitcoin can be risky, so also is holding investments in dollars. At the end of the day, it’s up to you to decide which one you trust.
The best way anyone can invest $100 in bitcoin today is to buy bitcoin on an exchange like Coinbase or Binance. These platforms let you make recurring bitcoin transactions on a regular schedule. And if you prefer one-time purchases, they also offer that service.
While using exchanges like Coinbase or Binance, investors are usually required to verify their identity, which can either take some hours or days, depending on the exchange you opt for. Also, keep in mind that there are higher fees if you decide to purchase bitcoin using a credit card.
As of September 2021, $100 worth of bitcoins gets you something close to 0.002135 BTC. And sure enough, these numbers change often as the price of bitcoin rises and falls.
As with any investment or market, nothing is guaranteed. And that’s because the price of the number one cryptocurrency by market cap fluctuates every now and then. More so, predicting the price of bitcoin in the near term is anyone’s guess.
The upside is that the price of bitcoin has generally increased over time. And after any massive surge in price comes a slow and steady downfall that stabilizes with time. If you want to make a better-informed decision, you can use all of the online tools like the bitcoin price chart to understand bitcoin’s price history.
Another thing you must understand is that bitcoin is global. To this end, the price of bitcoin can’t be affected by any single country’s financial situation or stability, which is a pretty good idea.
For instance, rumors of the Chinese Yuan devaluing have in the past increased more demand from China, which also affects the exchange rate in the US and Europe based on a cryptocurrency exchange.
Similarly, we have also seen bull markets in bitcoin in countries like the US result in large arbitrage opportunities in markets with small liquidity due to capital controls, in countries like South Korea.
Getting Bitcoin into Korea to explore the large premium sounds like a brilliant idea. The only problem is getting the fiat out after you must have sold your bitcoin. Ironically, such control only fuels the price of bitcoin even more, as individuals realize that bitcoin could perform just like fiat because it can be used for cross-border payments in any amount without getting permission from a regulatory authority.
All of these instances give you a glimpse of how global chaos is generally considered beneficial to Bitcoin’s price, especially since Bitcoin is apolitical and is outside the control of a single entity.
Investing in bitcoin comes with plenty of risks especially when compared with traditional assets. But guess what? With all that risk comes opportunities for insane reward.
Like every other major financial decision, it’s always a smart move to speak to a financial expert before putting your money into bitcoin. If and when you’re ready to make your first purchase, today’s guide should help you make an informed decision.
I have been writing copy for blockchain-related projects since 2017. I understand the importance of being able to communicate clearly and effectively with both technical and non-technical audiences. By leveraging my understanding of the crypto industry trends, I can help increase adoption in this rapidly evolving landscape.
