Bitcoin Series #5: Getting Started with Bitcoin Investing
Common sense advice to make millions and not get scammed!
Did you know that Bitcoin has gone from $0.0008 to $58,959? Is your FOMO kicking in yet?
Before you are able to start using Bitcoin, it is important to learn as much as you can about the technology to ensure you make no costly mistakes.
In this article we’re going to go through the following:
- Taking your first steps.
- Creating a Wallet.
- Deciding on a reputable exchange.
First steps
If you don’t have a clue about Bitcoin, altcoins, blockchain or any of the other words thrown around, then take a look at the rest of my Bitcoin series here:
Creating a wallet
Before you are able to purchase Bitcoin, you will need a place to store your digital currency. This is known as a wallet. This is similar to a physical wallet.
The special thing about your Bitcoin wallet, however, is that your Bitcoin wallet is is represented by a code or address which is best kept safe. This address is used across the entire blockchain network and will lead to your individual wallet.
Bitcoin wallets come in a variety of forms — there are desktop wallets, mobile wallets and paper wallets.
Desktop wallets
These live on your desktop computer and are the most secure. These can be accessed from your computer, located on the platform, such as a Bitcoin exchange, which holds the coins for you.
The advantage of this is that it is very difficult for your account to be hacked or your deposit stolen.
The biggest disadvantage with a desktop wallet is that if the platform was to collapse, you could potentially lose your entire stash. Another disadvantage with desktop wallets is the lack of flexibility. They can’t be taken everywhere and don’t fit into your pocket nearly as well as a mobile device.
Mobile wallets
These are similar to desktop wallets; however, the software is run on a mobile phone and hence provide a greater level of flexibility.
The disadvantage is that if your phone was to be stolen, your deposits may be potentially at risk of being looted.
Paper wallets
This is a printed piece of paper containing both your public and private keys that are required to receive and send Bitcoins from your wallet.
The advantage of paper wallets is that they are in no way stored digitally, meaning they are completely safe from hacking and cyberattack.
Paper wallets are vulnerable, however, as they can easily be lost or destroyed which would ultimately mean the keys are lost and therefore funds are inaccessible.
Adding funds to your wallet
The easiest way to sell and purchase Bitcoins is to head over to a bitcoin exchange and make your first transaction there.
There are desktop and mobile apps available for all the major Bitcoin exchanges and they make purchase and sale of Bitcoins as easy as shopping on Amazon.
You need to create an account at a Bitcoin exchange of your choice. Most of exchanges nowadays also require you to enter your personal details and a form of ID to comply with money laundering laws and frauds. This is a good thing as this shows that Bitcoin has moved away from being used only by geeks or criminals.
You can then add funds to your wallet using your credit card, bank account, Paypal, cash deposit or any other method that is provided by the wallet.
Finding a reputable exchange
Just because Bitcoin has become more mainstream and widely accepted does not mean that you won’t encounter fraud.
You will ideally want to decide on an exchange that is reputable, established and treats users fairly. There are a number of ways this can be done by asking yourself some fundamental questions.
Where is the Bitcoin exchange located?
It is best to buy Bitcoin from an exchange that is located within your own country. This is important as the laws and regulations can vary country to country, and this can affect their dealings with you.
You can choose an exchange outside your country, but make sure the exchange accepts multiple currencies to avoid having to double dip with exchange rates. You can find all this out by searching through the website of an exchange.
How can I buy Bitcoins?
Different exchanges will have different payment methods available. The payment methods which are most common are wire transfer, cash deposits, credit cards, PayPal as well as other minor methods.
Keep in mind your privacy and safety when making a decision to go with a payment method that requires you to provide personal details, such as a credit card, or which may be untraceable such as wire transfer.
How much is the exchange fees?
The exchange you decide on should be quite open about their exchange fees and allow you to compare them with the rest of the market. Shop around to get the best deal.
Is my exchange transparent?
Make sure that the exchange you choose publishes its audit information. This will tell you if the exchange is liquid and covering all Bitcoin exchange sales or is this another one of those frauds.
How secure is my exchange?
Make sure that the exchange you are using protects your privacy and has security features to avoid your information
It should provide secure logins, as well as two-factor authentication, before creating an account.
How quickly can I access my Bitcoins post transaction?
Bitcoin prices are highly volatile. In most cases, exchanges will offer you a locked price which means that you pay no more or no less than the price presented on screen, even if it might take some time for the Bitcoins to arrive in your wallet.
Other exchanges will deposit instantly into your wallet, and you are able to access them before any major fluctuations occur.
So in short, before choosing a Bitcoin exchange, make sure of these things:
- Find an exchange located in your country. If there is none, understand all the associated fees and taxes.
- Payment methods accepted by the exchange are the ones you are comfortable with.
- Shop around for the lowest exchange fees.
- Make sure the exchange is transparent and secure.
- Choose an exchange with locked prices or instant purchase.
Conclusion
Bitcoin and crypto trading is all the rage these days. While investing in cryptocurrencies can be financially very rewarding, make sure that you do your due diligence to make safe choices and avoid being a victim of fraud.
