How to invest in Bitcoin?
In recent years, investments in Bitcoin have increased; however, the attitudes to this asset remain mixed. Those who argue in favor of Bitcoin claim that it is the currency of the future. Their opponents state that this asset has too many risks and is unlikely to generate much return.
Looking at the latest events – increased Bitcoin’s market value, its acceptance by influencers, like Elon Musk, and Bitcoin’s recent IPO – there is hardly any doubt that the momentum is building. We need to know how to invest in Bitcoin. So, what is Bitcoin, and how to determine whether it is the right investment or not?
What is Bitcoin?
Bitcoin is one of the best-known and most widely spread cryptocurrencies. The cryptocurrency system replaces traditional cash, like banknotes and coins, with virtual “tokens”, which are not backed by either gold or silver.
The real creative force behind Bitcoin remains unknown, although the programmer who developed it goes by the name “Satoshi Nakamoto”.
Understanding blockchain technology
Arguably, Bitcoin is more reliable than other cryptocurrencies. Its creators solved the problem of fraudulent duplication by developing “blockchain” technology. Each Bitcoin is built from a unique code, which blockchain technology “breaks up” into smaller segments and disperses across different computers. In the past, a hacker only needed to hack one computer; now, they have to hack a few to piece the code together!
Another feature of blockchain technology is a “public ledger”. Since coins and codes are disseminated across multiple pieces of equipment, it is necessary to keep track thereof. The public ledger does it with the help of the so-called “nodes” that cross-reference the records if the coin’s holder decides to change the Bitcoin’s data.
If you are buying Bitcoin via a stockbroker, they will probably have this information on file.
How to Invest in Bitcoin?
If you are thinking of how to begin investing in Bitcoin, the process takes 5 simple steps.
1. Join a Bitcoin exchange
Bitcoin is an open-source technology. If you wonder how to invest in Bitcoin stock, you need to join a Bitcoin exchange or a third-party company that provides secure Bitcoin contracts. More and more Bitcoin exchanges appear which makes it more difficult to choose the one. It is a good idea to read several reviews before registering.
2. Get a Bitcoin wallet
Bitcoins are stored in either “hot” or “cold” wallets. A hot wallet is often automatically provided by a cryptocurrency exchange. Investors can access them via the Internet or special software. Unfortunately, they are prone to hacking, so they are best suited for small investments.
For big investments consider a cold wallet, which is a piece of hardware, akin to a portable hard drive or a flash drive.
3. Connect your wallet to a bank account
This step is simple and it enables you to buy and sell Bitcoin. You can connect your bank account either to your wallet or to your exchange account.
4. Place your Bitcoin order
How much money to invest in Bitcoin? Since this is a risky investment, you can start by paying as little as $25 and buy fractions of Bitcoin. Review your investment strategy regularly to evaluate and re-assess your risk tolerance.
5. Manage your Bitcoin investments
Having purchased Bitcoin, you can:
- Use it for online transactions;
- Put your investment on hold and wait for it to rise in value;
- Trade Bitcoin on cryptocurrency exchange.
To reiterate, a cryptocurrency exchange is a one-stop for all Bitcoin transactions.
Is Bitcoin a Good Investment?
Profitability aside, the actual question is: how safe is to invest in Bitcoin? It is a high-risk, volatile asset, whose value depends entirely on demand for it. Therefore, think strategically and diversify your portfolio.
The principal benefit of investing in Bitcoin is capitalization. An investor needs to buy Bitcoins at a low price and sell them when the prices peak. Bitcoin is a highly liquid asset, so ROI may be spectacularly high.
Bitcoin counterfeiting is actually impossible, as other network participants constantly check all blocks.
How to destroy a digit on the screen? No way. Bitcoins are as durable as their owner needs. If the only copy of the key is on your computer and you throw it away, then those BTC «die» along with the hard drive. And to destroy the entire network, you have to break all the hardware that runs the software.
Advice for Investment in Bitcoin
Investors in Bitcoin follow the same rules that are applicable to any other investment strategy:
- Evaluate your risks: if you are not comfortable investing in high-risk assets, there are many other, more secure investment options to choose from.
- Diversify your portfolio: when creating an investment portfolio, focus on low-risk and medium-risk options.
- Start small: this advice is for those who are not sure, do not have enough money, or just do not want to risk.
Bitcoin is a new, popular type of cryptocurrency. These digital assets are stored and protected by blockchain – a large pool of computers that are connected to each other.