Bitcoin is a virtual currency that was invented in 2009. It has the highest value compared to other cryptocurrencies. Because of its popularity, Bitcoin can be used as a medium of exchange, and it is most popular among peer-to-peer exchange platforms. One of the main factors that promote Bitcoin’s popularity is that transactions made via cryptocurrencies are not prone to the interference of intermediaries such as banks or the government.
Bitcoin works through Bitcoin technology. This technology ensures that transactions are secure and are free from interference by third parties. The supply of Bitcoin is capped at 21 million coins, which protects the system from hyperinflation.
Bitcoin was invented by Satoshi Nakamoto, but his or her identity has remained anonymous. According to the Bitcoin whitepaper, the idea behind investing in this virtual currency was to ensure transaction processing does not need intermediaries such as banks. This makes transactions cheaper, as the cost of intermediaries is reduced.
Despite Bitcoin’s growth, the crypto market is faced with the issue of heightened volatility. This happens when the prices of cryptocurrencies increase and decrease randomly, leading to massive price gains or losses. When Bitcoin was launched in 2009, it cost nearly zero, but by November 2021, the value had skyrocketed to $68,700. The price of Bitcoin can be hard to predict, and while some investors believe that prices could reach $100K, the price could either be headed to a dip or even a major uptrend.
One of the main factors that influence Bitcoin’s uptrend is investor trust. When investors believe that Bitcoin will rise in value, they rally up demand, and this action causes price gains. Other factors such as adoption also affect prices.
If you are a new crypto investor who wants to invest in Bitcoin, there are several things you need to have before getting started. These things include personal identification documents such as a driver’s license or government-issued ID, reliable internet connection, a bank account, digital wallet, and more, depending on the type of exchange you are using.
This article will take you through all the steps you will take when investing in Bitcoin. The guide is well-detailed for a beginner investor to ensure you do not miss out on any crucial details.
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How Do Beginners Invest in Bitcoins?
Follow the below steps to start investing in Bitcoin.
- Get a Bitcoin Wallet
- Link Your Wallet to a Bank Account
- Open a Crypto exchange account
- Purchase Bitcoin
Step-by-Step Guide to Investing in Bitcoin:
Step 1: Get a Bitcoin Wallet
The first step in investing in Bitcoin is to get a BTC wallet. This digital wallet will store your Bitcoin safely and keep it safe from any online threats. The wallet also keeps records of all your transactions. Bitcoin wallets come in different forms, and choosing the one best suited for you depends on factors such as the size of your Bitcoin investments and your budget.
The two main types of Bitcoin wallets are software wallets and hardware wallets. Software wallets are also known as hot wallets, and they keep your Bitcoin secure on online platforms such as mobile apps. These types of wallets are recommended if you want to trade Bitcoin frequently. Popular exchanges give users access to hot wallets.
Hardware wallets are also known as cold wallets. They are safer since they will store your Bitcoin offline. Hardware wallets are advisable if you purchase large amounts of Bitcoin or want to HODL for a long time. Some of the most popular hardware wallets are Ledger and Trezor.
Step 2: Link Your Wallet to a Bank Account
After creating a wallet, the next step is to link the wallet with a debit card, credit card, or bank account. The processing time for payments on the platform will depend on the method of transaction that you choose. It mostly takes around four business days for the card or bank account to be linked to the wallet.
Once your crypto wallet is linked to your bank account, you can later buy or sell Bitcoin. If you want to buy Bitcoin immediately, you can choose to link your debit card or credit card because it will allow you to purchase instantly. However, you will still need to link your bank account when you want to handle other transactions, such as selling Bitcoin or depositing money from the exchange to the bank account.
Step 3: Open a Crypto exchange account
A crypto exchange account is a platform that allows you to buy and sell Bitcoin. There are many crypto exchange accounts, and you need to assess several factors before settling on the one that is ideal for you. Some of the factors you need to assess include the fees charged, the cryptocurrencies supported by the platform, security, reliability and reputation.
You also need to research the exchanges that are supported in your country. Most exchanges support Bitcoin, and they will allow you to exchange Bitcoin for USD, GBP, EUR or other supported fiat currencies or trading pairs.
Step 4: Purchase Bitcoin
After setting up your exchange account and your crypto wallet, the other step is to start buying and selling Bitcoin. One thing you need to take into consideration before buying is the price of Bitcoin. Currently, one Bitcoin is worth around $43,500. However, you do not have to buy an entire Bitcoin, as it can be broken down into smaller units called Satoshis.
As a new trader, you also need to consider that the crypto market is highly volatile. The price of Bitcoin can be highly unpredictable. In 2014, Bitcoin lost nearly 80% of its value, whilst in 2021, it gained by almost 800%. The same trend happened in May 2021, when prices hit a peak of $63,500, before a crash happened shortly after, leading to Bitcoin losing nearly two-thirds of its value.
Hence, you need to learn about different trading strategies that will help you become a better trader. It is best to research everything to know about becoming a better trader if you are starting. You can also follow renowned crypto traders and market analysts for timely market insights. This will increase your chances of making profits.
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Virtual currencies are highly volatile. Your capital is at risk.