The Steps You Need To Follow To Get Started With Bitcoin
Over the past few years, you have likely heard of bitcoin, one of several cryptocurrency investment opportunities that experienced a huge market crash in 2018. Although it has fallen in popularity in recent years, it remains an attractive investment for its high-risk, high-reward factors, appealing to new and veteran investors alike.
But how does one get started investing in this strangely volatile cryptocurrency market? If you’re interested in getting into bitcoin, you’ll want to decide where and how you’ll want to purchase it, actually make the investment, and then work hard to manage it cleverly.
Read on to find out more about what bitcoin is and how you can start investing in it today.
What is Bitcoin?
Bitcoin is a cryptocurrency. What is a cryptocurrency, you may ask? These types of currencies are digital currencies that exist under no government entity, are not backed up by physical assets, are verified by blockchain technology, drive their value from mathematical equations, and cannot be counterfeited or manipulated by governments.
You obtain them by purchasing them through a cryptocurrency exchange and store them on a digital wallet.
The primary drawback of cryptocurrencies is that they have no physical backing. This makes them, at least currently, extremely volatile in value. Investing in bitcoin and other cryptocurrencies is incredibly risky, so it’s recommended that you only invest a small portion of your overall investment portfolio.
If you’re responsible for your cryptocurrency investments, you have the potential to make huge investment wins.
Step One: Decide Where – and How – to Buy
Before you do anything else, you’ll need to find a provider who specializes in cryptocurrencies. They are usually found within investment firms but can also be standalone providers. They will provide you with something called a “digital wallet,” which you will need to store your bitcoin purchases.
Next, you’ll want to find a cryptocurrency exchange, which will allow you actually to purchase bitcoins. Sometimes these are attached to your digital wallet providers, but they can also be separate entities.
You can make a purchase with a credit or debit card or through a direct bank transfer. You also don’t have to purchase bitcoin, although this is the easiest way directly. If you’d rather go a different direction, you may also invest in bitcoin trusts, ETFs, and other investment variants. You’ll want to choose your route based on your current circumstances and financial goals. Identity verification will be likely, such as with an ID or a social security number.
Step Two: Purchase Your Investment
Once you’ve decided on your provider, exchange, and method of payment, you can make your first bitcoin purchase. You can buy and sell bitcoin and shares of bitcoin in much the same way you can buy and sell stock shares.
However, bitcoin is much riskier than the stock or Forex market because its value is volatile and much more difficult to predict, unlike the stock market. A general rule of thumb is to never invest more than 10% of your investment portfolio into cryptocurrency.
Step Three: Manage Your Investment
There are several options for managing your investment, depending on your trading style. If you’ve dabbled in other investment opportunities such as the stock market or forex market, you likely already have a pretty good idea of your preferred investing style. However, if you’re new to investing entirely, this may be a difficult question for you.
Some people prefer something called more casual day trading. You typically monitor bitcoin’s value throughout the day and sell if the value increases and purchases when the value drops.
Others will buy low and hold out for the long term, hoping that the value will dramatically increase in the long term. Whatever your trading style, you should always consult the advice of experts before investing.
Bitcoin Investment Options
As previously stated, there are a variety of investment options that you can choose from if you’d prefer something other than purchasing standard bitcoin.
Here are some of your choices:
– Directly purchasing bitcoin from a cryptocurrency exchange.
This is the most simple, straightforward process. However, it is the highest risk (yet also has a high reward).
The Grayscale Investment Trust (GBTC) is currently the only publicly traded bitcoin trust in existence. They trade like a stock, so you don’t need to set up a digital wallet or go through an exchange.
However, there is a price for this convenience, as on the GBTC, bitcoin trades at higher values, so you’ll be spending more. Also, it is still high risk, as any cryptocurrency would be.
– Cryptocurrency Index Funds.
Like any index fund, a cryptocurrency index fund is designed to track and mimic cryptocurrency assets’ performance. It allows you to invest in a variety of assets without having to research each one.
With this, you can have a much more balanced portfolio, but again, it’s still relatively high risk.
ETF’s are the lowest-risk of all the options but are still highly risky. Unlike the other options, you invest in businesses that are invested in cryptocurrencies and blockchain technology.
It allows you to invest in cryptocurrency as a whole without investing in cryptocurrencies themselves. These can be purchased through an online broker and function similarly to the stock market.
Investing in cryptocurrencies is a good option for those looking for an investment opportunity that is high-risk but has a high reward potential. Bitcoin is a cryptocurrency that has gained popularity over the past few years, and it’s relatively simple to begin investing.
First, you’ll need to find a provider, set up a digital wallet, and find a crypto exchange to begin purchasing bitcoin through. You’ll make your purchase using a credit or debit card, and then you’ll begin monitoring and managing your investments.
There are also several alternatives to directly investing in bitcoin if you’d rather go a different route. Regardless, if you follow these steps, you’ll be able to begin your cryptocurrency investing journey.