Your Guide to Bitcoin
Bitcoin has become increasingly popular among today’s investors. Its proponents suggest that it is the investment of the future, while its critics argue that it is a risky investment option with low returns.
While “Satoshi Nakamoto” was the name given to the group of programmers that built Bitcoin to preserve anonymity, the names of the creators remain unknown to the general public. Bitcoin’s value has recently increased by more than 763 percent in only one year, greatly exceeding traditional stock market returns. It is also evolving into a decentralized, global currency. In a cryptocurrency system, virtual “coins” or “tokens” are utilized instead of physical money. Regardless of the usage, these “coins”, financially, have no fundamental value.
Understanding Blockchain Technology
Bitcoin makes use of a digital technology known as Blockchain, a sophisticated coding system that distributes a single code across thousands of machines. Let’s imagine your currency is made from the code “XDA146DDS.” Blockchain breaks down the code into smaller chunks and distributes it across other computers. If a hacker wanted to get access to the code, they’d have to break into several devices.
Blockchain also includes a “public ledger,” which keeps track of currencies and the owners using hundreds of computers known as “nodes”. If the data on a coin is modified, the nodes will cross-reference their records to ensure that the change was made by the coin’s owner.
Nodes: the basic unit of a data structure
What Are the Requirements for Investing in Bitcoin?
To invest in Bitcoin, you don’t need a lot of money. Only the following items are required:
- Documents of personal identification
2. Information about your bank account
3. A secure internet connection
As a side note, if you’re buying coins through a stockbroker, you may not need to provide any personal or financial information because your stockbroker will most likely already have it on file.
The Four Steps to Investing in Bitcoin
Are you ready to jump into the world of cryptocurrency? You’re in luck. Purchasing Bitcoin is much easier than you may imagine. In four simple steps, here’s how to invest in Bitcoin:
1. Become a Member of a Bitcoin Exchange
To begin, you’ll need to decide where you’d want to buy Bitcoin. Cryptocurrency exchanges are used by the majority of Bitcoin investors. Because Bitcoin is an open-source technology, there is no official “Bitcoin” corporation although there are multiple exchange platforms that support Bitcoin transactions. Like a stock brokerage, these exchanges act as the intermediaries in bitcoin investing.
If you choose to buy from an exchange platform, you must first choose which company to buy from. Here is a handful of the most popular choices:
- Coinbase is a well-known cryptocurrency exchange platform that covers damages in the case of a security breach or fraudulent transactions.
- Binance is a cryptocurrency exchange platform that focuses on altcoins and was founded in 2017.
- Kraken is an exchange platform situated in San Francisco that allows you to invest in Bitcoin with your credit card.
- Gemini was founded by Cameron and Tyler Winklevoss in 2015, providing services for both novices and experienced Bitcoin investors with diverse user interfaces and cost structures.
- Bitfinex is the world’s oldest cryptocurrency exchange system, designed for skilled traders and lenders (Unfortunately, Bitfinex does not accept US users at this time).
2. Get Yourself a Bitcoin Wallet.
When you buy a coin, it’s placed in a “wallet” that holds all of your cryptocurrencies. A “hot wallet” or a “cold wallet” are the two types of wallets available.
A hot wallet is one that is managed by your bitcoin exchange platform or a third-party supplier. When you open up an account with some exchange program, they will instantly supply you with a hot wallet. Hot wallets are beneficial since you may access your coins over the internet via a software program.
The following are some prominent hot wallets:
- Electrum is a piece of software that allows you to keep track of your coins on your computer.
- Mycelium is a mobile-only software available for iPhone and Android users.
However, hot wallets are not the most secure method of storing coins. Your coin information may be in danger if the hot wallet provider is compromised.
The safest way to store your money is in a cold wallet. A cold wallet is a piece of hardware that holds your money, generally in the form of a portable device that looks like a flash drive. The majority of cold wallets range from $60 to $100 in price. The following are some examples of popular cold wallets:
- Trezor is a hardware wallet providing advanced security for handling Bitcoin and other cryptocurrencies’ private keys.
- Nano Ledger can be used to buy cryptocurrencies and secure and manage assets.
If you’re planning to buy a modest quantity of currency, a hot wallet with an insured crypto exchange could suffice. A cold wallet, on the other hand, would be well worth your money if you’re going to be trading huge quantities of cryptocurrency.
3. Make a Bitcoin Purchase
You’re now ready to buy Bitcoin.
Everything you need to buy will be available on your select Bitcoin exchange platform. The most important question is how much Bitcoin should you buy. Some coins are worth hundreds of dollars, yet exchange programs sometimes enable you to acquire fractions of a single coin for as little as $25.
Investing in Bitcoin can risk a volatile financial state therefore you should carefully assess your risk tolerance and reassess your investing plan before making any purchases.
4. Keep Track of your Bitcoin Holdings
After you’ve bought bitcoin, you can do the following:
- Make online purchases with your coins.
- Keep your coins for a long time in the hopes that their value will rise.
Use your coins for day trading — that is, buying and selling coins with other Bitcoin owners, which may be done on a cryptocurrency exchange.
Everything you need to start purchasing and selling coins will be provided by your bitcoin exchange platform.
Is Bitcoin a Good Investment?
This is one of the most often asked questions regarding Bitcoin.
The simple answer is that no investment is “good” or “bad” by definition. It is totally dependent on your risk tolerance, investing plan, and financial objectives. Before you consider Bitcoin as an investment, think about your personal objectives and what you want to achieve via your investing activity. Do you want to create a source of income that isn’t dependent on you? Do you want to become a full-time investor? Is it possible to save for retirement? These questions will assist you in determining whether Bitcoin is the correct investment option for you.
Because Bitcoin is such a volatile asset, it is a relatively high-risk investment. This means that Bitcoin’s value can fluctuate substantially in a short period of time, as little as a few hours or days.
Bitcoin, like all other cryptocurrencies, has no fundamental value. It is not backed by any physical object, like gold or silver, and there is no central regulator to keep its value constant. Furthermore, the value of Bitcoin is unrelated to the earnings of any single company. Bitcoin’s value is determined solely by market demand. The value of Bitcoin rises as more people purchase it and falls as fewer people invest in it.
You may need to rely on “timing the market” to earn a substantial profit on Bitcoin, which is a tough and typically ill-advised investing technique. Nonetheless, there is the possibility of profit, which seems to be what matters to investors.
Work Cited
https://www.fortunebuilders.com/how-to-invest-in-bitcoin/
https://www.marca.com/en/lifestyle/2022/02/20/62128af346163facb98b459f.html?intcmp=MNOT23801&s_kw=1
https://www.nytimes.com/interactive/2022/03/18/technology/cryptocurrency-crypto-guide.html
https://www.ft.com/content/9e787670-6aa7-4479-934f-f4a9fedf4829
https://www.investopedia.com/terms/b/bitcoin.asp
https://www.dawn.com/news/1655079
https://www.toptal.com/finance/market-research-analysts/cryptocurrency-market
