Have you been planning on investing in Bitcoin? Well, you just made a smart financial move. This guide breaks down all that you need to know regarding this investment.
One thing that you probably already know is that investing in Bitcoin is not like regular investments. There are several unique approaches to this kind of investment, considering that it is in the cryptocurrency domain. Besides purchasing the coins, you need to have an idea of how bitcoins earn their value and the top investing sites to use.
You have three approaches to follow when investing in Bitcoin.
1. INVESTING THROUGH BUYING AND STORING BITCOINS
2. INVESTING THROUGH ACTIVE TRADING
3. INVESTING THROUGH BITCOIN MINING
Table of Contents
Approach #1 – Investing Through Bitcoin Buying and Storing
For you to invest in bitcoins, you will definitely have to buy them from somewhere. The key question is, where?
You can buy your bitcoins either from traditional brokers or exchanges. Each of these options has its own sets of merits and demerits.
In the case of bitcoin exchanges, you need to review the many platforms available before making a decision. Some of the most popular include:
- Coinbase – Coinbase in the most popular exchange in the U.S. The simplicity in linking one’s bank account on the platform and the access to a wide range of cryptos contributes to its increased popularity.
- Binance – When considered from a global perspective, Binance takes the lead as one of the largest exchanges with a considerably high trading volume. Binance fees are also significantly low, with each transaction costing 0.1%.
- Gemini – Gemini is based in the United States and trades specifically in bitcoin, Litecoin, bitcoin cash, ether, and Zcash.
- Coinmama – Coinmama trades in 8 cryptos, with bitcoin taking the lead as the most traded cryptocurrency on the platform. Its fees are considerably high, 5.9% per transaction, in addition to a 5% charge on credit cards. Furthermore, there is a minimum purchase amount of $60.
At the moment, there are not so many traditional brokers from whom you can buy your bitcoins. Some few options you could consider are Robinhood and TradeStation. Several other brokers have announced plans to include bitcoin in their list of offerings.
Storing the bitcoins
A person who decides to buy and store bitcoins as an investment strategy looks at it from the perspective of long-term investment. That implies you will need a place to store your coins safely. You have a number of storage options that you can consider for this purpose:
- Hardware wallet – One of the safest methods to store your bitcoins. Hardware wallets are USB-like devices in which you load your bitcoin public address and private key. The devices have an LED display to show important information and side keys for scrolling.
- Paper wallet – Provide an almost similar level of security as the hardware wallet. Involves printing your bitcoin private keys on a piece of paper and securely storing it. You need to exercise general precautions to avoid destroying your paper wallet.
- Desktop wallet – There are some computer-based Bitcoin wallets. These programs are installed on your PC or iMac then loaded with bitcoins. Since the PC or iMac connects to the internet, you would be based-positioned investing in a decent antivirus.
- Mobile wallet – These are mobile-based programs installed on your smartphone or tablet. You are based positioned going for an application installable on both iOS and Android devices. That way, you are assured that you are not tied to just one operating system.
With the Bitcoin wallet connected to the exchange of your choice, you just have to decide how much you are going to invest. You can invest any amount of cash you want in Bitcoin. Most people prefer starting small and gradually increase their investment over time.
Approach #2: Investing Through Active Trading
In this approach, you buy bitcoins just as described above, but instead of storing the coins for the future, you frequently trade them.
The approach entails keeping an eye on the market for low prices and then selling when the price increase. Since there is a positive difference in the buying and selling price, you make a profit.
The periods within which a Bitcoin trader buys and sells the coins are relatively short. Thus, they mitigate a considerable number of possibilities for making a loss.
Investing via active trading does not involve market prediction. Due to the risks involved, it is wise to trade with moderation. Keep in mind that there are no guaranteed profits.
Approach #3: Investing Through Bitcoin Mining
Bitcoin mining involves approving transactions on the Bitcoin network, out of which you earn bitcoins for your services. That is, every transaction that you approve creates new coins that you are awarded.
To successfully perform bitcoin mining, you need to invest in decent hardware with considerable computing power.
The mining equipment is not cheap. They are designed specifically for this purpose and will have to be strong enough to meet the mandate. Due to the cost factors, some people prefer renting instead of buying.
Being a part of a mining pool increases your chances of successfully mining. The pool brings together miners with various computing powers for shared efforts and profits.
There is a wide range of factors that impact the profitability of Bitcoin mining. The key to making money here is that the costs incurred mining should be lower than the mined Bitcoin. That is the only way to make a profit.
Keeping track of your investment
Just buying and storing your bitcoins in a wallet is not enough. Considering that this is an investment, you need to understand how it is performing. The market is too volatile just to assume that everything is working out fine.
You can easily keep an eye on this investment with the aid of several investment-tracking tools. Some of the apps developed specifically for this purpose include:
- Altpocket
- CoinTracking
- Blockfolio
You do not have to rely on just one tracking tool. For better results, you might consider combining two to three tools.
Safety of Bitcoin investment
You have every reason to worry about the safety of your investments. After all, you’ve put your money in the bitcoin account and are expecting to make money in the long run.
Our analysis of different Bitcoin charts proves that bitcoin and its altcoins have had periods of high volatility. The volatility is attributed to the fact that these are new investment opportunities that the market is yet to learn about fully.
Fluctuations in the market segment keep on occurring, subsequently impacting each coin’s price within the space.
One cannot accurately predict the volatility periods. Even the most experienced traders will struggle to do so. However, through detailed research, you get to learn about different Bitcoin investment opportunities from which you make informed decisions.
Keeping off bitcoin investment scams
Investing in bitcoin is an online endeavor, as well as a financial landscape. The two domains have their own set of risks, which requires one to be vigilant. They are rife with scammers who are on the lookout for naïve investors.
To keep off from bitcoin investment scams, always analyze the investment opportunity on the basis of what it is offering. A rule to follow is that any opportunity that seems to be too good to be true probably is.
For instance, a company that claims to double your coins if you lend them is definitely a scam. Similarly, someone who sends you an email that they will double your coins if you send him first is without a doubt, a scammer.
Before you can put your whole in an investment, be sure to conduct thorough research. Go through the company’s website to determine if they are genuine.
What makes bitcoins valuable?
Currency is useful as long as it can store value. Otherwise stated, the usefulness of a currency will depend on its reliability as a way of maintaining relative value over a certain period of time without depreciating.
Different commodities have been used in ancient societies to pay for goods and services because these were deemed to have a stable value. Instead of individuals carrying around bags of beans for payment, they would simply use seashells or any other item to pay. Eventually, minted currency took over because they were more reliable and faced little depreciation.
Today minted currency comes in the form of paper money. Some people may also utilize electronic payment and currency methods. Most global currencies are fiat, meaning that it is issued by the government and not backed by any commodity.
Cryptocurrencies emerged to complement the modernization that is taking place in our societies where transactions are online-based. Bitcoin has proven to be the most stable of all cryptos out there. Its value is attributed to the same factors that make currency valuable:
- Scarcity – Supply is an integral factor in maintaining the value of a currency. Too much of it waters down the value as it causes a spike in goods prices. Bitcoin utilizes this concept to control value. Instead of being available in large quantities at once, the coins are mined gradually in smaller portions and at a decreasing amount.
- Utility – Currency must have real-world uses for its availability to make sense. Different merchants, such as Microsoft, have adopted the crypto as a means of payment. The same concept of utility holds that currency ought to be transferrable from one place to another. Bitcoin can be easily sent to anyone across the world in a matter of seconds.
- Transportability – Currency should be transferrable between participants in an economy. Thanks to wallets and other tools, you can transfer Bitcoin from your wallet to another wallet with minimal effort.
- Durability – Fiat currencies have always had a challenge with durability. It is easy to tear, burn, or render useless a dollar bill. Bitcoin does not face this challenge, consequently gaining tremendous value. That is not to say you cannot lose Bitcoin. For instance, a user who forgets the keys makes the bitcoins permanently unusable.
Conclusion
Investing in Bitcoin is one of the simplest undertakings to consider. However, one must exercise great caution not to fall victim to a scam. Similarly, you must be prepared to make descent investment in security lest you lose your investment.
