How to Invest in Bitcoin: Everything You Need to Know in 2024

TLDR

This guide explains every possible aspect of how to invest in Bitcoin. Assessing the pros and cons of Bitcoin helps investors determine whether Bitcoin investing is worthwhile.

First, investors must register at any reputed cryptocurrency exchange that facilitates Bitcoin. Subsequently, they must create a crypto wallet and link it with their bank account.

Once done, they can purchase and sell Bitcoins anytime, anywhere. To invest in Bitcoin responsibly, one must adhere to some tips. These tips include diversification of portfolios, assessing risk tolerance, and investing small.

What Is Bitcoin Investing?

Regarding cryptocurrency investment, digital assets like virtual ‘tokens’ or ‘coins’ are used instead of cash. However, these coins fail to have intrinsic value as no gold or silver backs them up. One such digital asset is Bitcoin.

It was created to prevent and stop the fraudulent double spending problem. Imagine everyone being capable of duplicating a crypto coin. In that case, they would generate huge wealth for themselves, and the concept of crypto investment would cease to exist.

Although this section is about Bitcoin investing, you must be aware of the conventional principles of the stock exchange.

Short-Term Bitcoin Investing

In traditional business, short-term investment means funding any operation, entity, or stock for less than a year. Cryptocurrencies are extremely volatile as conventional investments, and things can change drastically within a year. Compared to that, cryptocurrencies like Bitcoin are even more volatile.

Regarding Bitcoin, short-term investing means purchasing these digital assets with low prices and value.

• It also involves holding on to that purchased Bitcoin and waiting for the market to go high enough to make a sale yielding the desired profit.
• You can leverage those profits to purchase more Bitcoins or other cryptocurrencies to flip or sell whenever the market and timing are right.
• Although trading cryptocurrencies involves high risks, it can turn out to be a profitable activity with the right investment strategy.

Long-Term Bitcoin Investment

Bitcoin investing for the long run is quite the same and different from short-term investment. For long-term bitcoin investment, hold the bitcoins for over a year before flipping or selling it.

Following the crypto news and recent crypto blogs is crucial when considering investing in Bitcoin for the long run. However, investing only a limited amount of your capital is advisable, especially when you are confused about whether to invest in Bitcoin.

When investing in Bitcoin for the long term, you’ll have to look for the Bitcoin prices in the coming years and decades, not hours or minutes ago. You won’t have to track the Bitcoin price now and then, as there won’t be any need to sell for at least the next few years.

Step-By-Step Guide On How To Invest In Bitcoin

Investing in Bitcoin or a cryptocurrency exchange-traded fund can be a cakewalk if you know all the steps. Here are the five simple steps to help you invest in this digital asset quickly.

• Register on a cryptocurrency exchange that supports Bitcoin.
• Create your own Bitcoin wallet.
• Interlink your bank account with the Bitcoin wallet.
• Place an order to purchase Bitcoin.
• Manage and monitor your Bitcoin investments.

Step 1: Register on The Binance Bitcoin Exchange

The preliminary step will be determining the platform from where you want to purchase or trade Bitcoin. The majority of Bitcoin investors rely on the top-rated crypto exchanges. One such renowned exchange is Binance.

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Tradable Coins

• 600+

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• +3

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• 0.1 – 0.5%

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Binance is a great combination of low fees, deep liquidity and multiple cryptocurrencies and trading pairs. We have tested every aspect of it and it STILL holds its reign as the top exchange in the world. In our view, it is the perfect crypto exchange for both newbies and advanced traders alike.

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  Biggest exchange in the world.

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  Industry's lowest trading fees.

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  Advance trading options like leverage trading.

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  600+ crypto options, 150+ for the US.

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  Lucrative on-site staking options.

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  Hiccups in account verification.

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  Less regulated than some competitors.

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  The corporate structure is not transparently.

Binance is ranked among the best crypto exchanges facilitating and supporting Bitcoin transactions. This cutting-edge crypto exchange platform serves the purpose of a mediator for Bitcoin investment. So, if you’re wondering why only Binance, here are the following things it has to offer you:

• Priority towards anonymity
• Reputation and experience
• Exchange fee
• KYC compliance
• Availability of coins
• Smoothness of transactions
• Security and privacy

Now, these are just the basic features you get from Binance. To be more specific, Binance has the following benefits that make it a pioneer in the crypto exchange world:

• Quick and instant transactions
• Ability to trade Bitcoin and multiple other cryptocurrencies
• Leverages Secure Assets Fund for Users and Multi-Tier System Framework for funds’ safety
• Offers great discounts on trading charges

Step 2: Create a Bitcoin Wallet

A Bitcoin wallet, an essential means for crypto investors, is a digital storage unit where you store your Bitcoins after buying them. In the crypto space, you get two wallets. These include a ‘cold wallet‘ and a ‘hot wallet.’

Your Bitcoin exchange or provider is most likely to operate the hot wallet. Some popular crypto exchanges offer a hot wallet right after you open an account on their platform. No matter the situation, hot wallets are effortless and convenient as they allow access to Bitcoins via a software program or the internet.

However, investors must note that hot wallets aren’t as secure as cold wallets regarding coin storage. Your Bitcoin information will be at risk if the hot wallet gets hacked.

So, what’s the alternative? A Cold Wallet! This crypto wallet is the safest and most secure storage solution for your Bitcoins. This hardware is much like any flash drive and can store all your Bitcoins. However, they can be expensive.

Going for a hot wallet from an insured Bitcoin exchange is advisable if you buy only a small percentage. However, a cold wallet has always been a go-to option for investors who prefer investing in Bitcoin in huge volumes.

Step 3: Interlink Your Bank Account With The Bitcoin Wallet

Once you create and have your Bitcoin wallet, move on to the next step of interlinking it. Connect or interlink it with your bank account. Skipping this step will make you incapable of purchasing and selling Bitcoins.

Step 4: Purchase Bitcoin By Placing an Order

Wallet? Check! Interlinked with a bank account? Check! So, what’s the next step? Nothing, now you’ll have to make your Bitcoin purchase. Many investors stumble on this step. That’s because they couldn’t decide how much Bitcoin to buy.

We all know some Bitcoins can cost you tens of thousands of dollars. But we are not Elon Musk. So, what’s the alternative? Fractional purchases! Yes, you can purchase a certain portion of a single Bitcoin at a cost as low as $25.

Let’s face it! Bitcoin investment can be risky. So, assessing your risk tolerance and proper planning and strategizing your investment objectives before making any Bitcoin purchase is crucial.

Step 5: Bitcoin Investment Management

Your job isn’t over after purchasing Bitcoin. Consider it just the beginning. Once you make the purchase, you will be able to:

• Hold the Bitcoins for a long run, intending to sell them when their price goes high.
• Use the Bitcoins for various types of digital transactions.
• Use Bitcoins for day trading.

From the purchase to the sale of exchange-traded funds, the best Bitcoin exchange – Binance, will offer every facility to make your Bitcoin investment quick and effortless.

How Does Bitcoin Work?

Bitcoin currency is a widely accessible digital asset that one can store easily in a digital wallet or cryptocurrency exchange. Every single coin demonstrates the current value of the Bitcoin price. However, one can also buy a fraction of Bitcoin by owning partial shares of every coin.

Bitcoin prices are usually very high for a single unit. So, any regular trader at the current price may find it hard to purchase a single Bitcoin. Moreover, if you look at the Bitcoin price from hours ago, you’ll find it’s not the same now.

That’s where purchasing partial shares of Bitcoin comes to aid. Anyone can now own a Bitcoin – be it partially or fully. Interestingly, this has emerged as one of the most common Bitcoin investment strategies among investors with limited capital.

Blockchain Technology

Blockchain technology, a popular open-source code, powers and supports the Bitcoin network. This technology generates a shared public ledger of transactions arranged and set into individual ‘blocks’ that are interlinked or ‘chained’ together to avoid meddling.

Blockchain comprises smart contracts that act as crucial building blocks of products like Bitcoin in the crypto space. Thanks to blockchain, you get a permanent record of all transactions. It enables crypto traders to operate or trade Bitcoin with the same knowledge and comprehension of who owns what.

Public & Private Keys

You will find both – a private key and a public key within a Bitcoin wallet. These keys function together, enabling the Bitcoin owner to commence and digitally sign transactions. This allows users to enjoy the core Bitcoin function – safe and secure ownership transfer from one user to the other.

Bitcoin Mining

Mining is a well-known process in the Bitcoin space. Since its advent, it has enabled Bitcoin miners to validate and confirm transactions on the Bitcoin network.

Bitcoin mining is created to confirm and assure that new Bitcoin transactions are compatible and in tune with other past transactions. This ensures investors cannot spend Bitcoin they previously used or don’t have. Again, this solves the Bitcoin double spending problem.

Is Bitcoin Investment Worthwhile?

Cryptocurrencies involve high risks as they are an extremely volatile asset class that often gets affected by external factors and regulatory or political events. The general advice is to spend only a small percentage of your capital on risky investments like Bitcoin or other cryptocurrencies. On average, 5% of your investment portfolio should involve cryptocurrency investing.

The individual circumstances of the investors play a key role in determining whether investing in Bitcoin is worthwhile for their diversified portfolio. Nevertheless, check out these pros and cons when deciding whether Bitcoin investment is worthwhile.

Pros of Bitcoin Investment

• Fast & Cost-Effective Transactions: If you hold Bitcoin in your crypto wallet, you can make transfers effortlessly. No matter when or where, you can easily make Bitcoin transactions, reducing your potential expense and time of any transaction.
• Decentralization: Due to the Great Recession and the ongoing crunch in financial resources, several investors have switched to an alternative approach – decentralized currency. Bitcoin is one such currency that isn’t controlled or regulated by any financial regulatory or political entity. It doesn’t have to abide by any governmental policies.
• Privacy: When trading in financial instruments like Bitcoin, your transactions won’t comprise personal details. Although you can link yourself to a particular crypto wallet, Bitcoin transactions are typically more private and confidential than other transactions. However, the exchange or the provider reserves all intellectual property rights.
• High-Growth Capability: Several investors who indulge in cryptocurrency investing claim that once Bitcoin matures and becomes the go-to currency for trading, more people will trust and use it. So, eventually, its value will increase multifold.

Cons of Bitcoin Transactions

• Extreme Volatility: Over the past few years, the crypto space witnessed a surge in Bitcoin prices. Despite that, the fortune of the investors varied extensively based on their investment strategy and timing.
• Prone To Hacks: It’s true that Bitcoin is powered by Blockchain, which is way more secure than conventional ETFs. Even after that, numerous cases of high-profile hacks have been registered. For instance, someone hacked and stole $40 million worth of Bitcoin in 2019 from the crypto exchange Binance.
• No Protection From The SIPC: The SIPC or the Securities Investor Protection Corporation greatly benefits investors. It ensures a maximum of $500,000 coverage for stolen closed-end funds or brokerage failure. However, this insurance won’t cover the losses of cryptocurrency investing. The Federal Deposit Insurance Corporation (FIDC) does not also insure Bitcoin and other cryptocurrencies.

3 Best Tips To Follow For Bitcoin Investment

If you’re hyped and ready to start your Bitcoin investment, follow these tips throughout the investment journey.

Know Your Risk Tolerance

Bitcoin, as mentioned earlier, comes with high volatility and risk. Thus, it makes it essential for investors to assess their risk tolerance before making any Bitcoin investment. Consider other investment alternatives if:

• You have a limited amount of money available for investment
• You are reluctant to invest your funds in volatile and risky assets

Have a Diversified Portfolio

Diversification of your investment portfolio is crucial. After all, it is an ideal approach that has always helped investors to safeguard themselves from losses. Experts advise investing your large chunk of money into low-risk funds. These will be your primary investments.

So, choose something less risky like index funds or government bonds. Afterward, invest in funds with mid-level risk involvement, such as corporate or real estate stocks. Consider investing only a small proportion of your money in high-risk investment options like new bitcoins.

Always Begin With Small-Sized Investments

Any beginner to cryptocurrency investing must start small. If you’re passionate about Bitcoin but don’t want to lose a significant amount, investing only $10 weekly is the ideal solution. At least that’s what experts like Cliff Auerswald, President of All Reverse Mortgage, say. Eventually, you’ll make a good investment without taking any considerable risk.

Summary

• Bitcoin is unquestionably the most talked about and highly popular cryptocurrency one seeks to invest in.
• It is a highly volatile digital asset that leverages Blockchain technology to store and safeguard your coins.
• Investors can purchase Bitcoins for both short-term and long-term, depending on their preference.
• Investors can store Bitcoins in either a cold wallet or a hot wallet.
• Any cryptocurrency exchange platform provides the latter. However, a cold wallet is more secure than a hot wallet.
• Since the pros of Bitcoins outweigh the cons, most investors consider Bitcoin investment worthwhile.
• You can invest in Bitcoin in a few simple steps. First, register at any Bitcoin exchange. Create a wallet and interlink it with your bank account. Purchase Bitcoins through the wallet and start trading them.
• However, you must consider some tips to invest in Bitcoin responsibly. For instance, assess your tolerance, diversify your portfolio, and invest small amounts.