Are you thinking of investing in Bitcoin but have no idea how to get started?
Well, you can now rest easy because this article is a complete guide on how to start investing in Bitcoin for beginners.
Let’s get started!
Note:In this article, we’ll use Bitcoin with a capital “B” to mean Bitcoin – the system and bitcoin with a lowercase “b” to refer to bitcoin – the currency unit.
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Bitcoin is the gold rush for this age. Its value has grown tremendously since its inception in 2009, as many people are investing in it.
The early investors in bitcoin made millions of dollars in pure profits between December 2016 and December 2017. The value of the bitcoin rose from $750 to over $20,000 in just a year.
That means anyone who had invested in Bitcoin within that period suddenly became rich! Stories of Bitcoin success circulated everywhere and creating a lot of hype around the Bitcoin bubble.
Many people invested in the cryptocurrency as a result of the hype created around it, and all wanted to get a share in the bitcoin pie. As a result, the value of bitcoin took a dip, and people lost their life-long savings.
Before you can invest in Bitcoin, it’s crucial to acquire knowledge of what Bitcoin is, how it works, the risks involved, payment methods, and personal data protection.
What is Bitcoin?
From Satoshi’s whitepaper, Bitcoin is described as an electronic cash register system that operates independently peer-to-peer, with no banks or central governments involved.
It is a secure, global cryptocurrency that works on a blockchain system to store information and record transactions.
It was created in 2009 by an individual or a group of individuals named Santoshi Nakamoto. Santoshi’s identity remains a mystery as no one can put a face to the name or tell where he’s from, even until now.
During its inception, Santoshi set a limit to the number of bitcoins produced to 21 million. This limit is fast approaching, and therefore, the demand for bitcoins might rise, leading to an increase in its value.
How does Bitcoin work?
In your Bitcoin wallet, you can generate a Bitcoin address and share it with someone willing to pay you using bitcoin. You should use this Bitcoin address only once.
When a payment is made using bitcoin, computers on the Bitcoin blockchain quickly checks to verify the transaction’s authenticity. Once this is done, the computer solves a complex mathematical problem called hash and permanently stores the transaction as a block in the blockchain.
After successfully adding a block to the blockchain, the reward is bitcoin. This whole process is referred to as bitcoin mining.
What You Should Know About Bitcoin
Bitcoin price is volatile
Volatility means that the price of the bitcoin is unpredictable and can rise or fall over time. Its high volatility is because bitcoin cannot be controlled and continues to trade on a free market.
This volatility is likely to continue, maybe until the Bitcoin hits its saturation market-cap. In the meantime, you must learn to work with the volatility, carefully investing only the money you can afford to lose.
When you receive payment in bitcoins, don’t store the bitcoins in your wallet as you can lose it all. It would be best to convert the bitcoins to your local currency as soon as you receive them.
Payments with bitcoin are irreversible
Once a transaction is complete, it cannot be reversed. If a wrong transaction is made, the only way to recover the funds is if the receiver sends it back.
This applies to all cases. Whether you have been hacked, or you sent funds wrongfully, or you have been scammed, a reversal is not applicable.
No one controls the Bitcoin, and once a block has been added to the blockchain, it cannot be removed.
However, Bitcoin can detect typos on addresses and therefore protects you from sending money to invalid addresses. It’s always good to be careful.
Bitcoin is not anonymous
Anonymity would allow for crimes such as drug trafficking and terrorism. Bitcoin stores all transaction data publicly and permanently on the blockchain.
A Bitcoin address is generated to represent each transaction, but the person’s identity behind the address is hidden. Making the transaction data public reduces any possibility of malice and fraud.
Be vigilant to protect your privacy and keep your important data secure.
Bitcoin is still experimental
To think that nobody can predict the future of Bitcoin can be a little scary. In its experimental stage, Bitcoin continues to face new challenges as more people adopt it.
Its active development ensures that Bitcoin continues to improve and outgrow the challenges. Unlike other rising cryptocurrencies, Bitcoin appears to be far ahead and less experimental, but that doesn’t mean something unexpected could happen.
Because it cannot be entirely trusted, you must invest carefully, risking only money you can afford to lose.
Government regulations for Bitcoin
A virtual currency like bitcoin is not a legal currency. Even so, it is accepted in most developed countries like the United States as the government recognizes the potential of digital currencies.
Several other countries and federal governments have banned the use of Bitcoin and even arresting bitcoin miners.
Before making a decision to invest in Bitcoin, understand, and strictly follow the rules and regulations set by your country concerning Bitcoin.
Keep your wallet secure
Securing your wallet should be a priority for you because while transacting bitcoin, it is easy to lose your investment in a single click.
Therefore, choose a hardware wallet and store your private key offline. Use a secured internet connection every time you make a transaction and provide a strong password for your online wallet.
In the end, the responsibility to keep your wallet secure is all on you. Consider using wallets that have backup alternatives.
Step-by-Step Guide to Investing in Bitcoin for Beginners
As a new Bitcoin investor, you’ll need to have a digital wallet, personal identification documents, payment method, secure internet connection, and an account for cryptocurrency exchange.
You can use traditional payment methods such as bank transfers, credit cards, and debit cards to buy bitcoins on exchange platforms, and then transfer the bitcoins to your wallet.
Here’s a breakdown of steps you need to follow to buy bitcoin:
Get a Bitcoin wallet
A bitcoin wallet is a digital wallet that allows sending, receive, and store bitcoin, keeping a record of all the transactions undertaken. There are different types of bitcoin wallets, and knowing which one to choose is an important step.
Here are a few questions you can ask yourself while choosing a bitcoin wallet:
Is the wallet complicated or easy to use?
Is the wallet provider transparent in their operations, and is the wallet code open-source and up-to-date?
How secure is the wallet, and what are its security features?
Does the wallet provider have an encrypted backup for the wallet?
Is the wallet reputable and recommended by other users?
You have an option to choose either a ‘hardware’ wallet or a ‘software’ wallet. A hardware wallet works offline, and so, they are safer and more secure compared to a software wallet, which operates online and is prone to hackers.
A recommended hardware wallet is Ledger and a software wallet, Coinbase.
Connect your wallet to a bank account
Linking your bitcoin wallet to your bank account allows you to buy and sell bitcoin, as well as deposit money directly into your bank account.
You also have the option of connecting your bitcoin wallet to your debit or credit card. However, this poses a limitation as you can only transact in small amounts, and you cannot deposit money directly to your card.
For instant transactions, debit and credit cards are suitable. Bank account transactions take up to five days to process.
Add bitcoin to your wallet
Start by joining a Bitcoin exchange – an online marketplace where you can exchange bitcoin for a local currency like USD.
Coinbase is the best cryptocurrency exchange for beginners due to its user-friendly interface that is easy to navigate. It is also the most trusted Bitcoin exchange worldwide as trusted investors back it.
You can securely buy and sell bitcoin using your bank account, credit card, or debit card. Processing fees charged vary for bank accounts (1.49%) and cards (3.99%).
It has a variety of features to make trading easy. They include:
A portfolio where you can manage your transactions and keep track of them in one place.
You can schedule to buy cryptocurrency daily, weekly, or monthly.
A vault to store funds for extra security.
It is accessible on a mobile app, available for Android and IOS devices.
eToro provides its users with a cryptocurrency wallet that allows investors to trade their coins conveniently and easily. You can choose not to use their wallet; there is no obligation to use it as an eToro member.
Stormgain allows easy registration and has low commissions on every cryptocurrency you buy. To buy bitcoin with Stormgain, you will need first to create an account, then search for “Buy Crypto with card” on the platform.
Stormgain has an all-in-one app that comes in handy when it comes to exchanges, storing, and trading cryptocurrencies. With the app, you can enjoy 24/7 access to the platform, trading signals, charts, and technical analysis tools.
Cryptocurrency exchanges charge a commission that varies from one cryptocurrency to another. For bitcoin, a commission of 2% is charged
Stormgain offers a no-risk demo account that is a great tool for beginners to practice with it. The demo account is initially deposited with 50,000USDT for practice purposes, and you can switch from a demo account to a live account on the dashboard.
Opening an account with Stormgain has advantages such as express withdrawals and bonuses on deposits.
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