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Bitcoin investing for beginners A complete guide

Bitcoin investing for beginners: A complete guide

  • 2 June 2022
  • 201 View

In recent years, Bitcoin has become increasingly popular among today’s investors. During this time, there has been much debate about Bitcoin and other cryptocurrencies – its proponents argue that it is the future of currency and investing, while its detractors argue that it is a risky investment option that may not generate great returns. So what exactly is bitcoin and how can you tell if it’s the right investment for you? Read our guide to Bitcoin investing for beginners.

What is Bitcoin?

Bitcoin was created by a programmer or group of programmers under the name “Satoshi Nakamoto”. But the true creator(s) of Bitcoin is still unknown to the public.

Bitcoin is one of the most widely used types of cryptocurrencies. Virtual “coins” or “tokens” are used in a cryptocurrency system in place of physical cash. Coins have no intrinsic value and are not backed by gold or silver.

Bitcoin was created to fix some major cryptocurrency failures. First, it was designed to prevent crypto coins from being fraudulently duplicated. Think about how easy it is to make copies of your computer’s data – documents, photos, files, etc. Cryptocurrency wouldn’t be possible if someone could duplicate a coin and create an unlimited amount of currency for themselves. You can’t just make copies of a $20 bill, can you? Likewise, people must be prevented from reproducing crypto coins.

How does bitcoin work?

Bitcoin uses a digital technology called “blockchain,” an advanced coding mechanism that distributes a single code across thousands of different computers. For example, let’s say your coin consists of the code “XDA146DDS”. Blockchain segments the code into smaller pieces and stores the pieces of code on many computers. If a hacker wanted to access the code, they would have to hack different computers to access all the code.

Blockchain also uses a “public ledger” that uses thousands of computers (referred to as “nodes”) to track coins and their owners. When a coin’s data is changed, nodes will cross-reference their records to verify that the change is correct and that the coin’s owner initiated it.

Every time money flows from one bitcoin wallet to another, it gets logged. Bitcoin wallets store a private key or seed that is encrypted. This data is used to sign transactions and mathematically prove their origin. The signature also prevents anyone from altering the transaction once it has been given. All transactions are sent to the network and within 10-20 minutes mining begins to confirm them.

According to Bitcoin.org, mining ensures a chronological chain, and network neutrality, and allows multiple computers to agree on the system state. To be confirmed, transactions must be encapsulated in a cryptographic block.

Modifying previous blocks invalidates all subsequent blocks, therefore previous blocks cannot be modified. Mining also creates a competitive lottery that prohibits anyone from adding new blocks to the network one by one. As a result, no group or individual controls the blockchain.

Bitcoin investing for beginners: A complete guide

Bitcoin investing for beginners: What is Bitcoin used for?

Once you have bought coins you can use them in online transactions wherever they are accepted. Keep in mind that no actual money is withdrawn from your bank account in a coin transaction. Money only leaves your bank account when you buy the coin itself – not when you buy with a coin.

Like cash, the value of a coin can fluctuate. For this reason, some investors are excited about Bitcoin and other types of cryptocurrencies. Investors are speculating that the value of Bitcoin could increase significantly if the market rises. I will explain the arguments for and against cryptocurrency investing later.

For now, investors should pay particular attention to how quickly Bitcoin and other relevant cryptocurrencies are being adopted. Similar to traditional stocks, Bitcoin increases in value when more people are interested in it, and more people are interested in buying Bitcoin today than ever before. Whether it’s a sheer conviction or an inherent fear of missing out on what many say is the largest wealth transfer in American history, trading volume continues to grow exponentially. Bitcoin trading volume has been steadily increasing for most of the year. As a result, Bitcoin regularly tests new highs.

Bitcoin investing for beginners: What do you need to invest in Bitcoin?

You don’t need much to invest in Bitcoin! You only need the following:

  • Personal identification documents
  • Bank Account Information
  • A secure internet connection

How to Invest in Bitcoin in 5 steps

  • Join a BTC exchange
  • Get a bitcoin wallet
  • Connect your wallet to a bank account
  • Place your bitcoin order
  • Manage your bitcoin investments

1. Join a bitcoin exchange

First, you need to determine where you want to make a bitcoin purchase. Most Bitcoin investors use cryptocurrency exchanges. There is no official “Bitcoin” company as it is an open-source technology, but there are several different exchanges that facilitate Bitcoin transactions. These exchanges are the middlemen of cryptocurrency investments, like a stockbroker.

When you decide to buy on an exchange, you need to decide which exchange you want to buy on. Here are some of the most popular options:

  • Coinbase: A very popular crypto exchange that insures losses in the event of a security breach or fraudulent transfers
  • Binance: Founded in 2017, Binance is a crypto exchange with a strong focus on altcoins
  • Kraken: This San Francisco-based exchange allows you to invest in Bitcoin using different currencies from around the world
  • Gemini: Launched in 2015 by Cameron and Tyler Winklevoss, Gemini offers services for casual investors and experienced Bitcoin investors with different user interfaces and fee structures for both
  • Bitfinex: The longest-running cryptocurrency exchange optimized for advanced traders and lenders (unfortunately, Bitfinex does not currently accept US clients)

2. Get a bitcoin wallet

When you buy a coin, it is stored in a “wallet” that stores all of your cryptocurrency. There are two types of wallets you can get: a “hot wallet” or a “cold wallet”.

A hot wallet is a wallet that is either operated by your cryptocurrency exchange or by a provider. Some exchanges automatically provide you with a hot wallet when you open your account. In any case, hot wallets are convenient because you can access your coins via the internet or a software program.

Some notable hot wallets are:

  • Electrum: Software that allows you to store your coins on your computer
  • Mycelium: A mobile-only app for Android and iPhone users

However, hot wallets are not the most secure form of coin storage. If the hot wallet provider is hacked, your coin information may be at risk.

A cold wallet is the safest way to store your coins. A cold wallet is a real piece of hardware that stores your coins, usually a portable device similar to a flash drive. Most cold wallets cost between $60 and $100. Some popular cold wallets are:

If you’re only buying small amounts of coins, it might be okay to use a hot wallet with an insured crypto exchange. But if you trade large amounts of coins, then a cold wallet would be worth your investment.

3. Connect your wallet to a bank account

When you receive your wallet, you need to link it to your bank account. This allows you to buy coins and sell coins. Alternatively, your bank account may be linked to your cryptocurrency exchange account.

4. Place your bitcoin order

Now you are ready to buy bitcoin. Your cryptocurrency exchange has everything you need to buy. The big question is how much bitcoin should you buy?

Some coins cost thousands of dollars, but exchanges often allow you to buy fractions of a single coin – your initial investment can be as little as $25.

Investing in bitcoin is very risky and it is important that you carefully determine your risk tolerance and review your investment strategy before buying bitcoin. We’ll go into that in the next section.

5. Manage your bitcoin investments

After you buy bitcoin you can:

  • Use your coins to make online transactions
  • Hold your coins for a long time in hopes that they will appreciate in value
  • Day trade your coins – that is, buy and sell coins with other bitcoin holders, which can be facilitated on the cryptocurrency exchange
  • Your cryptocurrency exchange gives you everything you need to buy and sell coins

Bitcoin investing for beginners: Is Bitcoin a Good Investment?

Here is one of the most frequently asked questions about Bitcoin: Is Bitcoin a good investment?

Well, the real answer is that no investment is inherently “good” or “bad.” It all depends on your risk tolerance, investment strategy, and financial goals. Before considering Bitcoin as an investment, you should carefully review your own goals and what you want to achieve from your investing activities. Do you want to build a passive income? Become a full-time investor? Saving for retirement? Answering these questions will help you figure out if Bitcoin is the right investment option for you.

Bitcoin is a very risky investment as it is a volatile asset. This means that bitcoin values can rise or fall dramatically in a very short period – even as fast as a few hours or days.

Like all cryptocurrencies, Bitcoin has no intrinsic value. It’s not backed by physical assets like gold or silver, and there’s no central regulator to ensure the value remains stable. In addition, the value of Bitcoin is not tied to the profits of an individual company. The value of Bitcoin depends on market demand. As more people buy bitcoin, the value increases. If fewer people are buying bitcoin, the value will go down.

To make a significant profit from Bitcoin, you may need to rely on “market timing,” which is a difficult and generally ill-advised investment strategy. Nonetheless, there is upside potential.

Bitcoin investing for beginners: A complete guide

Bitcoin investing for beginners: Bitcoin vs. other investments

Deciding which investments to jump on and which to avoid can be a very confusing decision. Your choice will determine whether you enjoy great returns or lose everything for years to come. It’s impossible to turn on the TV or read an investment blog without hearing about Bitcoin. It’s one of the hottest topics in the world right now, but it’s not the only way to invest your money, begging the question: how does Bitcoin compare to other wealth-building vehicles?

While Bitcoin is its investment vehicle, it’s important to note that it can exceed investment limits. Bitcoin can be used concurrently with some of today’s largest assets. Real estate, in particular, could benefit enormously from so-called “tokenization”. According to Tom Winter, CRO, and co-founder of DevSkiller, “Tokenization is the process of creating a virtual token that represents ownership of an interest in real estate that exists on a blockchain (the core technology behind Bitcoin).” Winter suggests that “Tokenization has the potential to revolutionize the global real estate market. It offers investors many advantages over existing investment opportunities.”

The unique convergence of real estate and bitcoin may reward investors with attractive returns, but how do the two investment vehicles compare individually?

Bitcoin:

  • Many experts believe Bitcoin is a bubble, meaning it is overvalued and could crash at any moment.
  • Bitcoin’s value is volatile; it is equally prone to massive price spikes and price declines.
  • Bitcoin is entirely digital, which means it is more vulnerable to security breaches than a tangible asset.

Property:

  • Real estate is an investment backed by a strong historical record and the security of a physical asset.
  • Rising property values and rents are an excellent hedge against inflation.
  • Depreciation, utilities, insurance, and repairs allow real estate investors to qualify for valuable tax benefits.
  • Rental properties provide a steady monthly cash flow you can count on.

Bitcoin investing for beginners: The advantages of Bitcoin investments

The main advantage of Bitcoin investing for beginners is that you can potentially get a huge profit return, maybe up to 200% or more. Of course, it’s a challenge, but it’s possible.

If you buy a large amount of bitcoin, you may be able to take advantage of a market surge and sell your coins for a much higher value when there are many buyers. There’s also a slim possibility that bitcoin really will become the currency of the future or a more popular traded asset, and hopefully, you could see returns from long-term holdings. However, it should be noted that bitcoin values generally go down every year.

Your success may depend on the right “timing of the market”. In other words, you buy coins when they are at a low price and sell them when they are at the highest possible price. High-risk investors who keep a close eye on the market can potentially achieve massive returns with this strategy. You could even achieve returns that are highly unlikely in the world of corporate stocks or government bonds. To that end, Bitcoin is incredibly liquid. According to Shaun Heng, VP of Growth and Operations at CoinMarketCap, “Bitcoin is one of the most liquid assets you can have and is more liquid than any other cryptocurrency.” As a result, any realization can realize almost instantly.

Bitcoin investing for beginners: The disadvantages of Bitcoin investments

Unfortunately, Bitcoin’s high volatility makes it a dangerous investment and you could lose money if you’re not careful.

“Depending on how much you’ve seen about bitcoin over the past few months, it seems like one of the best investments,” says altLine SVP Jim Pendergast, “but government policy crackdowns are causing bitcoin to depreciate.”, especially now.”

Bitcoin and other types of cryptocurrencies are also at high risk of pump-and-dump schemes. Predatory investors will approach amateur or humble investors and convince them to put big money into Bitcoin. The resulting surge causes bitcoin prices to rise rapidly.

The predatory investors are smart and sell all their holdings before the buying wave ends and make a huge profit. But when investors stop buying, the value of the coins falls to extremely low prices. A coin bought for $200 could end up being worth as little as $30. The ignorant investors would throw their money away.

You could always turn a profit by selling your coins before the price collapses, but it’s impossible to predict when the buying spurt will stop – prices could fall by 50% in a matter of hours. Because of this, all volatile assets like cryptocurrencies and penny stocks are considered high-risk investments.

You should also know that pump-and-dump schemes and pyramid schemes are illegal. While it’s not necessarily illegal to profit from a market surge – whether it’s natural or man-made – you may not want to be associated with such practices. You could be the target of an IRS audit or a criminal investigation even if you didn’t do anything wrong.


Why Bitcoin cloud mining?

An unknown individual or group called Satoshi Nakamoto introduced the Bitcoin network in 2009. In 2021, there will be more than 10,000 different projects in cryptocurrencies. So each of them has its role in building the future of money.

The market value of cryptocurrencies reached $ 1 trillion for the first time in January 2021. It passed $ 2.5 trillion less than three months later. So it shows that this market is one of the growing markets favoring its investors.

Minerland Bitcoin Cloud Mining is the process by which you participate in a mining pool to a cloud miner website and purchase a certain amount of hash power. In this pool, the profit will distribute equally among all participants who have participated in the mining pool. It will happen based on hash power. Also, the cloud mining platform allows you to mine your BTC without installing any hardware and at no extra cost. So Minerland, the best crypto cloud mining service to earn Bitcoin, helps you invest in Bitcoin easily and with low risk. For more information about us, you can follow Minerland’s Instagram account.


Bitcoin investing for beginners: Different Methods

There are different ways to invest in Bitcoin, both direct and indirect.

First, you can invest in a company that uses Bitcoin technology. Although bitcoin is a risky investment, many companies are selling successful products that incorporate bitcoin and blockchain technologies. You can find several exchange-traded funds (ETFs) that hold stocks of various blockchain-related companies, such as the Amplify Transformational Data Sharing ETF (BLOK). They don’t invest in cryptocurrency directly, but rather in company stocks of companies that use Bitcoin. It’s safer, and most ETFs in this category outperform the market.

Second, you can participate in bitcoin mining. With bitcoin mining, your computer can simply be used as a hub for the public ledger. It’s a topic that deserves its blog post, but you should know that bitcoin miners are rewarded with real bitcoin for their contributions. You could get free bitcoin without ever buying it.

Aside from what was just discussed, let’s take a look at some of the most popular ways people are investing in Bitcoin today and what they mean for investors.

Purchase of standalone bitcoin

The most obvious bitcoin investment strategy is buying standalone bitcoin. Buying Bitcoin directly through an app like Coinbase allows investors to take “physical” ownership of the asset. That’s an important distinction, as Coinbase allows investors to buy Bitcoin and store it in their encrypted wallets. In this way, investors simultaneously gain access to the asset’s price history and use it as a currency for subsequent transactions. Owning standalone Bitcoin isn’t all that different from owning any other currency, aside from the incredibly volatile fluctuations in value.

It is important to note that not every online platform or application allows investors to own standalone bitcoins. Online trading platforms like Robinhood, for example, allow people to invest in bitcoin, but they don’t go as far as letting investors own bitcoin (or the corresponding keys). While Coinbase grants investors the “keys” to their bitcoin holdings so they can transfer the assets to their wallets, Robinhood does not. As a result, investing in Bitcoin on Coinbase will allow investors to own the asset and treat it as currency. On the other hand, Robinhood investors can only exploit the price movements on their accounts and cannot transfer holdings to an encrypted wallet. Investors intending to buy standalone Bitcoin must understand the limitations of their trading platforms before investing any capital in a cryptocurrency.

Bitcoin Investment Trust (GBTC) by Greyscale

Founded in 2013, Greyscale’s Bitcoin Investment Trust has grown into a leader in the cryptocurrency industry. Greyscale became a trusted name in a fast-growing sector, emphasizing Bitcoin’s democratization for the masses. While Bitcoin decentralizes, Greyscale is giving more people more access to the burgeoning digital currency. More specifically, Greyscale is a capital markets investment platform building transparent, trusted investment vehicles for a growing asset class with unlimited potential.

Greyscale owes its current success to making Bitcoin more accessible to everyone. Greyscale helped bridge the gap between the informed and the uninformed. To that end, Greyscale has made investing in Bitcoin easier than ever. For example, Greyscale allows investors to hold bitcoin in certain IRA, Roth IRA, and other brokerage and investor accounts.

Amplify Transformational Data Sharing ETF (BLOK)

As the name suggests, the Amplify Transformational Data Sharing ETF is an exchange-traded fund that trades on the stock exchange. Investors can buy shares of BLOK on the secondary market and increase their exposure to Bitcoin. More specifically, however, BLOK is an actively managed ETF that specializes in blockchain technology.

This means that fund managers are constantly looking for and investing in companies that focus on blockchain technology. Therefore, anyone investing in BLOK is investing in a basket of blockchain technology companies. While BLOK may not give investors access to standalone Bitcoin, it does give them access to the companies that use blockchain and its transformative data exchange technologies.

Bitwise 10 Private Index Fund (BITW)

An investment in the Bitwise 10 Private Index Fund is an investment in the Bitwise 10 Large Cap Crypto Index. For those unfamiliar with the Bitwise 10 Large Cap Crypto Index, it tracks the returns of the 10 largest cryptocurrency assets on the market. Therefore, investors buying shares in this particular fund are investing in the 10 largest “crypto-assets” measured and weighted by free-float market capitalization. When assets perform well, investors realize gains in proportion to the stocks they own.

Bitcoin investing for beginners: Tips for investing in Bitcoin

If you decide to try Bitcoin investing for beginners, be sure to keep the following tips in mind:

Understand your risk tolerance: As mentioned earlier, Bitcoin is a high-risk investment and you should carefully review your risk tolerance before investing. If you’re not comfortable investing in volatile assets, or only have a small sum of money to invest, you might want to consider other investment options.

Diversify your portfolio: The best way to protect against investment losses is to diversify your investment portfolio. Your primary investments should be low-risk, such as government bonds or index funds. Next, you should look for medium-risk investments like real estate or company stocks. Risky investments, like penny stocks or bitcoin, should be your smallest and least prioritized investments. Bitcoin is essentially the icing on the cake: the investment that could yield a significant profit, but which you could still well do without.

Start Small: If you’re on the fence, start small. Cliff Auerswald, President of All Reverse Mortgage, recommends investing $10 a week. “Many people are still unsure whether cryptocurrencies will catch on or not. However, with all the excitement surrounding crypto, many are still interested and don’t want to miss out,” he says. “One of the most effective ways to invest in BTC is to put in just $10 a week. That way, if it doesn’t work out in the end, it’s not a risk – but over time you’ll have a healthy investment.”

Bitcoin investing for beginners: Strategies for investing in bitcoin

Despite the many differences between buying Bitcoin and buying other stocks like stocks, there are inherent similarities that need to address. The actual strategies for investing in Bitcoin aren’t all that different from their stock counterparts. However, many of the strategies for buying bitcoin have more to do with investment timeframes. Specifically, investors can engage in any of the three most popular bitcoin investment strategies:

  • Buy and hold bitcoin.
  • Hold bitcoin for the long term
  • Trade Bitcoin for short-term volatility

Buy and hold bitcoin.

Those familiar with Bitcoin are probably already aware of the concept between buying and holding. However, those who aren’t can be caught up quickly. “Hodl” (an intentional misspelling of Hold) is just an investment philosophy. Short for Hold On for Dear Life, it suggests that the best bitcoin investment strategy is to hold it forever. Those who subscribe to this strategy are more than aware of the volatility of the asset but have strong beliefs in its prospects. Therefore, this strategy requires investors to weather the many ups and downs of bitcoin price swings without selling.

Hold bitcoin for the long term

Not much different from the first strategy, investors who want to hold Bitcoin for the long term will convince that it will appreciate over long periods. However, unlike the “Hodl” strategy, long-term holders may be inclined to sell once they will satisfy with the returns. These investors will convince that bitcoin will appreciate, perhaps as a new store of value (like gold), but don’t mind when the time is right to sell for a profit.

Trade Bitcoin for short-term volatility

One of the most popular strategies for investing in Bitcoin relies on the volatility of the asset. Last but not least, Bitcoin has become synonymous with violent valuation fluctuations. A simple look at a one-year chart shows just how volatile Bitcoin can be, which bodes well for short-term traders. Unsurprisingly, this strategy will have investors ride the ups and downs, selling on the highs and buying on the dips. This is the most difficult of the strategies discussed and exposes investors to the greatest risk; however, it can also produce quicker gains than those previously mentioned.

Summary

Bitcoin is a popular type of cryptocurrency that uses a large chain of interconnected computers to store and protect your digital assets. Bitcoin is a highly volatile asset, prone to large and rapid swings in value, presenting an opportunity for great returns but also a huge risk. You must learn how to responsibly invest in Bitcoin before making any decisions. Make sure you diversify your investment portfolio to protect against market fluctuations.

21 responses to “Bitcoin investing for beginners: A complete guide”

  1. Herve Fodouop says:

    Very good

  2. Isaac ihaza says:

    The main advantage of Bitcoin investing for beginners is that you can potentially get a huge profit return it’s a challenge, but it’s possible.
    There are other crypto that is taking over bitcoin today

  3. Rodrigo Melara says:

    Its amazing, i learned new things, thanks minerland for this lessons

  4. Momo says:

    Very Nice Post.

  5. Dominic Mwangi Gatumu says:

    Woow excellent information. The information about Bitcoin is very helpful to new people in this digital industry who are interested to learn and understand more about crypto currency.

  6. Alfred Tetteh says:

    Bitcoin is becoming the world number one e currency and I have really learn alot about this article

  7. Christian Jara says:

    Excelent…. Bitcoin is becoming the world number one e currency. Just jump in.

  8. Khairul aznan says:

    Membantu kepada yang baru belajar tentang bitcoin dan crypto

  9. Cameron says:

    Great Information

  10. Salman says:

    it’s interesting. This plan can be useful. Thankful.

  11. Joao Oliveira says:

    Among the complexity of crypto world it’s always welcome such straight forward articles leading us all to better understand on how it works, keep up the good work!

  12. sree says:

    good post

  13. Amobi Izuchukwu says:

    Bitcoin is going to hit 100usdt by the end 2022.
    So go back more btc

  14. Vedant Gunda says:

    Yeah in future day by day the bitcoin will becoming the currency of some country soo it is good to investmsnt

  15. Jeff says:

    Good article

  16. Fidele Tuyambaze says:

    Great

  17. Kristaps says:

    Hi my name is Kristaps its good to know new information

  18. Angel Ken says:

    Being looking for a legit platform like this, great

  19. Joel Nando Bertorelli says:

    Everything that was said in this article was true and correct. So there is very little or else to comment on. Bitcoin is old and almost finished.

  20. Angela says:

    Very useful article for the peple interested in Bitcoin investing for beginners: Strategies for investing in BTC.

  21. Isaac ihaza says:

    Lovely thanks for the information.

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