How to Invest in Bitcoin
Bitcoin is one of the best-performing investment assets of the last decade. While it has had several bubbles and bursts, the coin has generally attained a return on investment of over 17000% since its launch. With such a great reward for investors, you may be wondering how to invest in Bitcoin. Here is how to go about it.
- Research Bitcoin and allocate investment
You should have a basic idea of how Bitcoin works. This will help you decide on whether or not to invest in bitcoin and even the amount of funds to allocate for Bitcoin investment.
Additionally, Bitcoin is a very volatile asset meaning its prices can change significantly within a short time. The price you saw last week could be completely different from the price today. Ensure that you know the current bitcoin price. Exchanges often give approximate average prices of Bitcoin. You can also use other websites with the reliable live price index of Bitcoin. You can also study the price trend to help you make a more informed investment choice.
- Figure out the amount you can afford to invest
Before you start the process, you should determine the amount you want to invest. While Bitcoin can earn you a decent profit, you can also end up in losses if the market forces turn against you. And with high price volatility, making huge profits or losses can only be a matter of days or hours. The golden rule has always been, ‘Invest what you can afford to lose’.
- Choose an exchange
The next step is finding a platform where you want to purchase your Bitcoin. While there is no official Bitcoin company to purchase bitcoin, there are some popular cryptocurrency exchanges that many people consider reputable. Coinbase, Binance, Kraken, KuCoin, Bitstamp, Bitfinex, and Gemini are a few examples of leading exchanges.
Some of the major factors to consider when selecting an exchange are:
- Availability: Is the exchange available in your region? Are its services accessible/
- Fees: What are the platform fees that the exchange charges?
- Supported Coin: Does the exchange support Bitcoin that you want to buy?
- Security: What are the security features that the exchange has in place to protect users’ funds? Has it ever been hacked?
- Payment method: What payment methods does the exchange support?
- User experience: How user-friendly is the exchange? Does it require technical knowledge to operate
Once you have found the answers to the above questions, you can go ahead and select the most appropriate exchange for you. You can get more insight by reading comments and reviews by users.
- Get a cryptocurrency wallet
You need a cryptocurrency wallet to keep your bitcoins. While most exchanges offer users wallets, such wallets are the least secure of all wallets. Having a private wallet is much safer. After buying Bitcoins, you should send them to your private Bitcoin wallets and keep them secured there until you are ready to sell them. You can work with a cold wallet or a hot wallet, depending on your needs.
- Connect your wallet to a bank account
Linking your wallet to a bank account will help you purchase and sell coins. Alternatively, you may link your bank account to your cryptocurrency exchange account.
- Place your bitcoin order
With a funded wallet and an exchange, you are ready to make a purchase. While one Bitcoin may cost tens of thousands of dollars, you can buy a fraction of a Bitcoin with any amount you want to invest. Your initial investment could be as low as $25.
- Manage your Bitcoin Investment
You can use your Bitcoin assets in various ways once you have purchased them.
You can perform day trading, that is buying and selling coins with other Bitcoin owners to make a profit. This type of trade takes advantage of Bitcoin volatility. You can buy low and sell high. It is a quick way of making profits. However, riskier since you can lose funds quickly in case the price movement goes against you.
Alternatively, you can hold your coins for a longer period hoping that they appreciate in value. The holding period can be several months or years. In such a case, you can use a cold wallet to store your coins since they are safe and convenient for long-term storage.
Other ways of using your Bitcoin asset are lending them to lending and borrowing platforms, staking pools, and even yield farms. The returns from these methods are not dependent on the price of Bitcoin, which makes them safer.
Overall, Bitcoin presents an unprecedented investment opportunity that can have extremely high returns. However, it is not risk-free. Its volatile nature makes it riskier than most traditional investments. Therefore, ensure you do your own research. Finally, remember to invest only what can afford to lose.