This guide will be explained in detail on how to start a Bitcoin investment which should give the aspiring cryptocurrency investor a headstart.
Since the ultimate breakthrough of Bitcoin back 2013, this volatile digital currency has dominated the news on many occasions. The views have been bipolar so far. Moreover, because this digital coin is based upon strong fundamentals it has many believers but also a lot of haters. This does not change the fact that the price, appreciation, and acceptance is on the rise. Also, before continuing our journey in starting a Bitcoin investment let’s rewind and see how it all started.
What is Bitcoin?
Back in 2009, as a result of the financial banking crisis, a former cryptographer called Satoshi Nakamoto released his source-code for a new digital currency and named it Bitcoin. Additionally, it is a cryptocurrency or virtual currency, which is controlled by a decentralized system and it is not subject to the policies of central banking authorities or those of any government.
Bitcoin is a cryptocurrency because its model is built on the foundation of crypto technology. Fast forward today, there are dozens of cryptocurrencies in existence, however, Bitcoin is by far the most popular one. At the time of writing, Bitcoin has a total market cap of 125 billion us dollars and is priced at about $6900 per coin.
How to Start a Bitcoin Investment?
Before we enter the process of buying this volatile cryptocurrency, I want to point out that investing comes with risk and that you should only invest money that you can afford to lose. This being said, an aspiring Bitcoin investor has to take care of the following things when entering this heavy volatile market:
- Do your own research
- Decide what type of investor you are
- Acquire the needed tools
- Buy Bitcoin with credit card
- Never sell for fiat currency(only if you need to)
First Step: Do your own Research(DYOR)
First of all, if you are new to this kind of technology it’s very important as an investor to know what you are planning to buy. Of course, you don’t need to become an expert in blockchain technology and cryptocurrencies. However, it could help you a lot if you know what exactly it is you are buying and in case of Bitcoin to know how to send transactions over the network for example.
Firstly, if you are serious and want to be part of this rising online community it’s very important to have reliable resources. A good place to start is two websites and every Bitcoin investor knows them: the Coinmarketcap website and Blockchain.com. Both sites are essential and give you a good view of the technology as well as the data involved in blockchain networks.
Not only some deeper knowledge about Bitcoin technology is very important but it’s also good to know what websites have the most actual news. In addition, the biggest ones out there are Cointelegraph, Coindesk, or Investopedia.com. Besides, I wrote two articles that go deeper into the technology behind cryptocurrencies. As well as Blockchain technology explained in an easy way.
Step 2: Decide what kind of investor you are
Nowadays buying Bitcoin at an online platform is much easier if you compare it with the days when it all started. However, starting a Bitcoin investment can be easy, but how to be profitable in the long run? Most Bitcoin investors that are successful in the market have been there for many years and therefore it’s important to know that it can’t make you rich overnight. Of course, there are exceptions but don’t take those guys as an example!
In general, there are two kinds of investors in the cryptocurrency markets and it’s very important for you to find out what kind of investor you are. Of course, there are more options available as an investor, however, Bitcoin investors can be divided into two groups: HODLER’s and traders.
Hodlers vs Traders
Hodling is a slang among crypto enthusiasts which goes back to the first bull-market in Bitcoin back in 2013. At that time the crypto community was very active on Bitcointalk forum, where price action was discussed on a daily basis. A very strong Bitcoin believer(obviously been drinking some whiskey) tried to explain his investment strategy. To summarize his explanation: he was not willing to sell his Bitcoin for fiat currency anytime soon. With his statement, he gained a lot of respect from other traders who copied his investment strategy.
Hodling, or holding Bitcoin, is a very successful investment strategy that has a proven track record when you consider holding Bitcoin for years to come. For example, at the end of 2013, the Bitcoin price was trading against $500. Additionally, if you had stuck to your holding strategy until today you would make a stunning 13800% on your initial Bitcoin investment!
Trading Bitcoin or any other crypto
On the other hand, if you aren’t willing to wait that long and like to take a little more risk trading cryptocurrency is also an option. Therefore, you should have a strong stomach, because you need it in these very volatile markets! For instance, at the start of 2020, the price of Bitcoin was trading around $7000 per coin.
Additionally, not long after that in February Bitcoin reached 10K US dollar the highest price so far that year. Furthermore, we all know that the Coronavirus had a big impact on all markets, and Bitcoin was no exception. This COVID-event was the reason for Bitcoin to drop another 40% in one day to 4K US dollars. To summarize, at the start of the year Bitcoin rose 40% till ATH and after that, it collapsed 60% in price in just one quarter! Of course with this high volatility, big money can be made but you have to be a pro in this.
Notably, as a trader to be prepared for this kind of volatility I wrote an extensive article about trading in the Bitcoin markets and I would strongly advise you to read this before starting in the markets. Also, later on in this article, I’ll explain some useful tools for investors as well as cryptocurrency traders.
Finally, it’s for you to decide what type of Bitcoin investor you are and what’s at stake here. For instance, if you have a lot of free time, trading could certainly be an option. On the other hand, it’s also very easy to play the waiting game and let the profits grow over time.
Step 3: Acquire the needed tools
What’s next after you have decided what kind of Bitcoin investor you are? Starting investing in Bitcoin automatically allows you to be prepared for anything. Therefore you must make use of tools to guide you through these volatile markets. In fact, if you invest in Bitcoin you also invest in new technology that relates to it. Moreover, Bitcoin is a cryptocurrency, and to use it you need a cryptocurrency wallet to send and receive crypto. Indeed, the first tool you need is a cryptocurrency wallet, and to make it simple I give you two options: hardware and software wallets.
Cryptocurrency wallets: A hardware wallet
Many insiders consider hardware wallets the safest way to store cryptocurrency. In fact, if you make use of a hardware wallet you actually take your Bitcoin offline and away from internet criminals with bad intentions. Also, it’s very important to know when using hardware wallets you are responsible for your private keys and security. In other words, there is no central party(like a bank) that can save you in case you have lost your password or private keys. This is very important! What are currently the best options available for hardware wallets? To store Bitcoin offline, I would advise you to use Nano Ledger a compact USB stick with BlueTooth connection.
Cryptocurrency wallets: A software wallet
Besides a USB stick that functions as a wallet, it’s also possible to download software and install a wallet on desk-top, laptop, or mobile phone.
Software wallets can be divided into two categories :
- Hot wallets – These are wallets that have a live connection to the internet. This is very important if you want to have access to your cryptocurrencies 24 hours a day and from anywhere in the world.
- Cold storage wallets – These are wallets that don’t have access to the internet(offline wallets) and you can only access it by a specific device that runs the software. Additionally, your cryptocurrency will be stored on the local hard disk of this device.
My favorite software wallet is Electrum(Bitcoin only!) and you can download it here. If you are planning to buy several different cryptocurrencies besides Bitcoin, then it’s better to use a multi-crypto wallet. Good examples of these are Exodus and Jaxx.
Technical analysis with Tradingview
First of all, if you are considering being a trader its essential to own a tool to do a proper market analysis. Also, you need to know how to do technical analysis which is the study of price patterns. A good place to learn this is Investopedia. There are also several tools out there for using daily charts, but the most popular is Tradingview. You can start there with a free account and add(up to three) technical indicators in your charts.
TradingView’s diverse offerings make it palatable to most types of traders but I think there is a bias among the members towards medium-short term trading. First off, the free account plan is perfect for most investors and longer-term swing traders who don’t require more than three indicators on their charts. Besides them, I think the general demographic of TradingView is ranging from starting Bitcoin investors to pro-cryptocurrency traders.
Social media tools
As stated above, to have access to channels with the latest market information is essential in being successful as a Bitcoin investor. Also, with the rise of different social media the info about the markets has become very fragmented and confusing. Below is the table I’ll share the Twitter accounts and Telegram channels which give me much value in making proper decisions.
Most Famous Crypto Twitter accounts and Telegram groups
|@PhilakoneCrypto(104K followers)||Mystery Wave(4464 members)|
|@Misssbitcoin(10,2K followers)||WCSE R&A CHANNEL(12056 members)|
|@TheCryptoDog(185K followers)||Unfolded(10450 members)|
| @TrueCrypto28(52,4K followers) ||CryptoBullet(18197 members)|
|@BitcoinBirch(48,2K followers)||Wey Wang Channel(4339 members)|
|@LisaNEdwards(33,2K followers)||Bitcoin Sniper(6629 members)|
|@LordCatoshi(46,6K followers)||AlexClay(4371 members)|
|@Beastlyorion(56,8K followers)|| |
|@ZeusZissou(105,7K followers)|| |
Step 4: Buy Bitcoin with a credit card
Next in the process of starting a Bitcoin investment is actually buying Bitcoin with a credit card. At the time of writing acquiring Bitcoin with fiat currency is a lot easier compared with the early days of Bitcoin. Also, it totally depends on what kind of investor you are(see step 2!), but in general, there are two options.
Option 1: Buy Bitcoin at a Cryptocurrency Exchange
This is the most common option in the process of buying new Bitcoin as an investment. Moreover, with this option, you don’t need to own a cryptocurrency wallet, because this platform will generate one for you. At first glance, this sounds very tempting because you don’t have to set-up your own wallet and store your private keys.
However, most cryptocurrency enthusiasts don’t like this option because you don’t really own the Bitcoin as the private keys are managed at the platform. This is a very fundamental issue and therefore HODLER’s favor the option to lock down their own private keys. Of course, if you are a trader and want to buy and sell, a centralized platform offers value. In fact, to be safe from hackers I would advise you to use Coinbase because of their trust and liquidity.
Option 2: Buy Bitcoin without Centralized Exchange
Another option in buying Bitcoin is at a platform that doesn’t store your private keys after the purchase. In other words, buying at these platforms is only possible if you already own a cryptocurrency wallet. As explained above there are a lot of Bitcoin investors that favor this option to be in full control over their assets. Besides, buying at centralized cryptocurrency exchange could be limited to certain countries. However, if you want to buy Bitcoin at platforms like Coinmama or Changelly you can do it from anywhere in the world. Additionally, this doesn’t only go for buying Bitcoin or any other crypto. For instance, it’s also possible to sell Bitcoin and receive money by SEPA or SWIFT. Besides, to know more about these kinds of platforms, I wrote an extensive Coinmama review to introduce this platform.
To enumerate, now that I have guided you in the process of how to start a Bitcoin investment, you are maybe the proud owner of some Bitcoin, so what’s next? As explained earlier in this article, it’s for you to decide what type of Bitcoin investor you are and if you have the courage to start trading with it.
As a ‘Bitcoin veteran’ in this new and growing industry, I would advise you to never sell for fiat-currency(if possible). Moreover, over the years Bitcoin has witnessed many boom-bust cycles but overall the trend has always been upwards. Also, in the future, it’s a big chance that cryptocurrencies are a way to acquire goods and services online. Therefore, the need to sell(or convert back) to fiat currencies like USD and EUR will become less necessary.
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