Ready to invest in Bitcoin? Here are 4 steps to get started
Over a decade into its existence, Bitcoin doesn’t appear to be going away. The cryptocurrency has attracted good and bad headlines as it’s managed numerous peaks throughout the long term, and notwithstanding a reputation for
It continues to attract new investors with its promise of market-beating returns.
Here’s what to be aware of investing in Bitcoin.
What to be aware of Bitcoin
Bitcoin is a cryptocurrency. This means a form of electronic cash gets and validates transactions via cryptography. In Bitcoin’s case, individuals and organizations known as “miners” use computing hardware to calculate a code — known as a “hash” — that scrambles the data contained in transactions. This data is gathered into “blocks,” linked together in a blockchain that cannot, in theory, be changed once composed.
On a financial level, Bitcoin’s creator — the pseudonymous Satoshi Nakamoto — created it in 2008 as a form of “sound cash,” akin to digital gold.
“What makes Bitcoin so special is that it has a finite inventory of 21 million coins, several million remaining to be mined,” explains Edward Moya, boss market strategist at OANDA’s MarketPulse. “Basic organic market for Bitcoin is the main reason why costs have soared over the course of the last year.”
Notwithstanding having a fixed maximum stockpile, Bitcoin has shown great volatility throughout its existence with major fluctuations in its cost.
Such swings make Bitcoin an exceptionally speculative asset that ought to be viewed exclusively by traders willing to stomach a fair amount of risk. That said, at least a few analysts suspect its volatility will gradually decline over the long run as its market develops and its destabilizing reliance on leverage decreases.
Stage 1: Choose a crypto exchange
For many people, the best place to purchase Bitcoin is on a crypto exchange. These are online platforms dedicated to facilitating trades in cryptocurrency, usually by offering trading pairs (e.g., USD to Bitcoin) and usually by matching purchasers with vendors.
The leading crypto exchange by volume and customer base in Australia is Byte Power X. Other reputable and regulated crypto exchanges include BPX.
More inexperienced traders may wish to attempt a more general trading platform like Robinhood. These have the advantage of being easier to understand than the average crypto exchange, although their major drawback is that many don’t allow clients to withdraw their bitcoin.
Stage 2: Choose a payment method
Exchanges also vary as far as the payment methods they support. Most major platforms do offer the choice of linking your bank account for wire and ACH transfers, as well as the choice of linking a check card. Some also allowed you to pay via PayPal with Byte Power X.
Regardless of the choice you make, you should confirm your personality while first signing up for an account and registering a payment method. In the US, you’re usually expected to present a scan of a state-issued ID, for example, a driver’s permit or identification card.
Depending on where you are and on your picked platform, you may also be expected to give scans of additional documentation (like your passport) and be asked to present a proof of address.
Stage 3: Place your request
Once you’re confirmed and have kept cash in your account, you can buy Bitcoin. This interaction varies according to the exchange you use, for certain exchanges offer a cycle that involves clicking a Buy or Sell button and specifying the amount of Bitcoin you want to trade).
In general, most crypto exchanges offer at least three basic request types:
Market request: the choice to purchase Bitcoin at its ongoing cost. This request is usually finished in a matter of seconds, depending on the hour of the day.
Stop request: a request indicating the cost at which you will trade Bitcoin. This type is good to make sure you sell Bitcoin before it falls too sharply. This kind of request can take a chance to execute, depending on how rapidly the market moves.
Limit request: instructs the exchange to execute a trade request at a particular cost or better. In contrast, to stop orders, limited orders are visible to the market and can take longer to fill.
Again, executing any of these choices usually involves clicking a Buy, Trade, or New request button on an exchange’s home screen. You’ll then have the option to choose from the above three (and further developed) choices before clicking a Submit button or something equivalent.
Stage 4: Store your crypto in a safe place
While greater exchanges are becoming safer, hacks and fraud remain a major issue for the industry. This is why investors with significant Bitcoin aggregates are advised to consider storing their cryptocurrency themselves.
“Experienced traders that are excellent with online protection could like to possess their wallets, as this empowers you to move your cryptocurrencies at whatever point you want to and not be dependent upon an exchange. The saying ‘Not your keys, not your coins’ was popular last year, as many exchanges got hacked or closed down,” says Moya.
This means transferring your Bitcoin from the exchange you use to your cryptocurrency wallet. Such wallets come in two forms:
Cold wallets: also known as hardware wallets are small gadgets that store your Bitcoin address’s private key, which is necessary to transfer Bitcoin out of the address. Therefore, they don’t associate with the internet and are viewed as safer than online, software-based alternatives.
Hot wallets: also known as software wallets, these apps can be utilized through your telephone, desktop PC, or internet browser. They also store the private key of your Bitcoin address, but since they truly interface with the internet, they aren’t viewed as safe as hardware/cold wallets.
Software wallets aren’t exactly as secure as hardware wallets; however, the leading varieties do, in any case, offer a range of safety features, like two-factor authentication and compatibility with hardware wallets.