Anyone a bit familiar with the crypto landscape must have heard about the monumental rise of Bitcoin. The coin, which was worth just $1000 in 2016, crossed the $60,000 threshold in 2020, showing a percentage increase unseen before in the investment history. This lucrative track record of Bitcoin keeps luring more and more investors towards it as no other crypto has managed to surpass the clout of Bitcoin till now.
In this article, we have explored Bitcoin’s investment domain, what is Bitcoin, and how to invest in Bitcoin if you want to capitalize on it. However, before dipping your toes in any cryptocurrency investment, be aware that all digital assets, including Bitcoin, are dangerously volatile and can lose significant value in a very short duration.
What is Bitcoin? How does it work?
Known as digital gold, Bitcoin is a blockchain-based virtual currency that can be exchanged, bought, and sold in a decentralized manner. Bitcoin’s transactions that are recorded on the public distributed ledger are transparent and immutable, making the whole system notably secure & viable. While Bitcoin was initially introduced as a payment network, with time, it gained significance as a “store of value” because people decided it has value like – gold.
Regarding the current scenario, after Bitcoin touched an all-time high of nearly $68,000 last November, it has constantly been plummeting since then, losing around 70% of its worth. However, investors are strikingly hopeful that the next Bitcoin spring will come soon, considering the asset’s limited supply, widespread adoption, and historical cycles.
How to invest in Bitcoin – 4 easy steps
If you are new to the crypto scene and want to learn how to invest in Bitcoin during this attractive “buy the dip” period, you have come to the right place. Investing in Bitcoin has become easier than ever, as you can easily become a BTC holder within minutes by following the steps below.
Here is a step-by-guide, explaining how to invest in Bitcoin:
1. Select a cryptocurrency exchange
Cryptocurrency exchanges offer the most convenient and efficient way to purchase Bitcoin. While you can also invest in Bitcoin via some other means, including traditional stockbrokers, and Bitcoin ATMs, exchanges extend the most cost-effective, simple, and swift process for holding Bitcoin.
Nowadays, a large number of crypto exchanges are facilitating Bitcoin transactions where investors can easily buy BTC within minutes. Most present exchanges are centralized, which require identification documents from users. Though some decentralized exchanges (DEXs) are also available that maintain user anonymity and do not require personal information.
Here is a list of a few globally-popular exchanges for buying Bitcoin:
Binance: It is the largest cryptocurrency exchange that offers notably low fees and an extensive range of cryptocurrencies. The platform caters to both beginner and professional investors with its advanced functionalities and multiple trading products.
Coinbase: The exchange includes more than 170 cryptocurrencies, including Bitcoin, and a highly secure framework.
FTX: It is a global crypto exchange with wide crypto offerings and a low-cost fee structure. FTX also supports advanced crypto trading options.
Gemini: It is a suitable crypto exchange for new investors, integrating more than 60 cryptocurrencies and additional products, like yield earning and trading platforms.
2. Purchase Bitcoin via the connected payment channel
Most crypto exchanges allow investors to buy Bitcoin via credit/debit cards, e-wallets like PayPal (in some cases), or directly through the bank. Users just need to add their bank details or link a card to start purchasing Bitcoin.
Note that deposit fees differ with the selected method, where credit card transfers are generally the most expensive.
P2P exchange – an alternative method for buying Bitcoin
In some jurisdictions, cryptocurrency exchanges do not support banking channel deposits due to contrary local laws. In such a scenario, investors can buy Bitcoin via a peer-to-peer exchange network supported by most crypto platforms like Binance. P2P refers to a decentralized crypto market where locals buy or sell cryptocurrencies directly with one another.
When someone buys Bitcoin via P2P exchange, he pays the selling party in local currency through a regional payment channel and receives the respective BTC after the completion of payment.
3. Store your Bitcoin in a cryptocurrency wallet
At the time you start thinking about how to invest in bitcoin, you should also decide how you want your Bitcoin to be stored. After purchasing Bitcoin, the next step is to safely hold it in either a hot wallet or a cold wallet.
A hot wallet is an online crypto wallet that is suitable for active investors with limited holdings. Most crypto exchanges consolidate a hot wallet where all user-crypto funds are naturally stored after purchases. Besides exchange-integrated wallets, non-custodial hot wallets are also available for investors who want to be in full control of their Bitcoin. Mycelium, Exodus, and Electrum are some popular non-custodial hot wallets.
Cold wallets or offline wallets are a more fitting option for advanced investors who prefer robust security. Cold wallets store the crypto keys in an offline hardware, canceling the hacking risks associated with online storage. Trezor and Ledger are the two most prominent hardware wallets.
4. Handle your Bitcoin investment as per your needs
After buying and storing Bitcoin, you can manage your Bitcoin investment according to your financial goals. If you consider Bitcoin a good value store, you can hold it in your wallet for the long term. Whereas, if you want to want to be more active and prefer day trading, you can buy and sell Bitcoin via leverage trading. Moreover, nowadays, many merchants accept Bitcoin as payment, so you can also execute online BTC transactions for buying real-life goods & services.
The Bitcoin craze is nowhere near subsiding despite the ongoing turbulent crypto phase. This digital gold still incorporates the largest market cap and highest trading volume in the crypto space as investors believe in its inherent potential.
Considering such massive investors-interest in Bitcoin, in this guide, we explored what is Bitcoin and how to invest in Bitcoin. However, a word of caution for Bitcoin investors is that they must properly understand the risks linked with crypto investing before jumping into this territory.