Bitcoin is widely known as a digital currency that possesses value. It has been used as a medium of exchange, fulfilling transactions between peers without involving any financial institution or government. A unique feature of the bitcoin system is the fact that it uses a digital technology called blockchain that ensures the security of the user’s bitcoin. The main idea behind Satoshi Nakamoto creating the bitcoin in 2009, was to abrogate the need for middlemen like banks in completing transactions.
The cryptocurrencies market in most cases is unpredictable. Just as bitcoin was without worth years ago, when the first transaction a bitcoin was used, was to purchase a pizza for 10,000 bitcoins. Now a bitcoin value weighs more in value over cash currency. And its system prevents duplication of coins through fraudulent means.
What’s Needed to Invest in Bitcoin
There are certain important things you must have before venturing into investing in bitcoin. Although the must-haves aren’t much but are vital to begin an investment. And they are;
- Secured internet connection
- Documents containing personal information
- Bank account information
Some of these essentials are only needed when you will be investing by yourself. But when purchasing through a stockbroker, you need not supply either your bank or personal information.
How to Invest in Bitcoin
The assumed sophistication of bitcoin must have driven most people to believe that investing in such is complex. But it’s the complete opposite, as investing in bitcoin is as simple as it can be. To affirm that, here are steps on how to invest in Bitcoin.
Joining a bitcoin exchange
The first step to put into action is to know which bitcoin exchange you would prefer in performing a bitcoin-related transaction. Bitcoin doesn’t have an organization, because it’s a technology that’s open-sourced, yet various platforms help facilitate Bitcoin transactions. The exchange platform popular among the investor is the cryptocurrency exchanges. These exchange platforms act as middlemen in the cryptocurrency investment market, just like the duty of a stock brokerage.
When you’ve decided on purchasing an exchange platform, then you will have to make another important decision about the platform you want to purchase bitcoin from. Here are some of the popular exchanges;
Kraken: This is an exchange that is based in San Francisco, and allows for investment of bitcoin using currencies of various countries.
Binance: this is among the largest exchange, and focuses majorly on altcoin.
Bitfinex: it’s an exchange that’s majorly optimized for more experience lenders and traders. Currently, Bitfinex doesn’t deal with US traders.
Coinbase: there are popular for their insuring features, where they insure losses that were caused by fraudulent transfers or when there is a security breach.
Choosing the perfect exchange for your purchase of bitcoin is a great step to begin the investment of bitcoin. Although most investors have difficulty choosing the perfect exchange, once you figure what you expect from an exchange, it helps narrow it down.
Have a Bitcoin Wallet
To make purchases of bitcoin, you would need to have a wallet, where purchased coins get stored in. To buy a coin into your wallet, you would need to decide on which exchange you wish to make use of, then follow these easy steps to buy into the wallet:
Sign up to a wallet app or an exchange platform
Go to the setting bar of the platform/app
click on the transfer button
Then select the bitcoin currency and enter the amount you is to buy
Next, click on the continue button and select your payment method
follow through to complete the transaction
When a purchase has been made for bitcoin, it gets stored in your wallet, where all cryptocurrencies are stored. There are two types of wallets you can have, the hot wallet and the cold wallet.
A cold wallet is known as the wallet method with the safest storage for coins. The cold wallets are similar to a flash drive, hardware where your coins are stored in a portable device. When trading a large number of coins, a cold wallet is the best fit that would be worth your investment, because of its storage features. Its prices are quite on the high side, costing about $60-$100for wallet.
The hot wallet is a wallet that is operated by a certain provider or an exchange. Most times, these hot wallets are given automatically by some exchange when an account is being opened. Its deemed convenient as you can gain access to your coin through the internet. Although a hot wallet isn’t considered the safest method of storage of coins, because if an exchange is hacked, you are liable to lose your coins and information regarding it. But some of these exchanges offer to insure the investor coins against such events.
Connect the Wallet with your Bank Account
After getting a bitcoin wallet, then you would need to connect your bank account, debit, or credit card with your wallet to purchase your bitcoin. For a new investor, it takes up to four days to make a transaction when a bank account is used. But when the bank account has been linked with the wallet, one can easily carry out transactions, buying and selling bitcoin.
The use of a debit card or credit allows for a very swift process of buying bitcoin. Although it helps in purchasing, it doesn’t facilitate the selling of bitcoin.
Link a Bitcoin Exchange
The bitcoin exchange is a platform that facilitates the trading of bitcoin, exchanging the coin with traditional currencies. When a bitcoin exchange user purchases bitcoin online, two options are always offered to them. Bitcoin exchanges all have different features that make them unique and also offer different services, no bitcoin exchange is the same. Their feature varies in reputation of the exchange, security, availability of cryptocurrency, its processing fee. So to find a perfect market, you must perform adequate research on numerous exchanges before finally choosing the right that suits your needs.
Placing an order
When all the steps above have been completed, you can now begin buying and selling bitcoins. And while making a transaction, you must put in mind that the prices of bitcoin can increase and reduce, which means you must be analytical in your buying and selling, to avoid huge losses.
Listed above are the steps for a beginner who is just about entering the market of cryptocurrency and looking to invest in bitcoin. Following each of these steps ease your investment process and helps reduce the risk of making a setup mistake. To be successful in the investment of bitcoin, you must understand some of its technicality and ensure you know how the market works.