How to Invest in Bitcoin: A Beginner’s Guide – From Ask

How to Invest in Bitcoin as an Investment

In we will talk about How to Invest in Bitcoin It’s unlikely that Bitcoin will be the currency with which we buy and sell things ten years down the road. At this point, there are plenty of people who have a lot of faith in the virtual currency though. Just as it’s hard to imagine a world without pennies, or one without frequent flyer miles for that matter, it is a bit puzzling to predict what mode of money we’ll all be interacting with ten years from now! Undoubtedly more citizens will likely own cryptocurrency than currently do, however, many shops and restaurants around us begin to accept these alternative forms of money.

What is Bitcoin?

Bitcoin is a cryptocurrency that was invented 10 years ago by an individual known by the pseudonym Satoshi Nakamoto, who released it as open-source software. Unlike traditional currencies, which are issued and controlled by governing authorities like banks and governments, cryptocurrencies such as Bitcoin aren’t issued or controlled by any central authority. However, they are completely digital and can be traded anonymously online.

How does Bitcoin work?

As an innovative form of virtual currency, all transactions made using Bitcoin are recorded on a shared public ledger called the blockchain. However, the details of those using it are not shared, meaning that its users are anonymous unless an individual can be tracked to their Bitcoin address. In the early days of Bitcoin’s inception, this lack of traceability was attractive to criminals who used the cryptocurrency on the dark web for criminal activity, however, now other cryptocurrencies are still thought to be replacing it in these spaces.

However, just like most things in life, as you gain more popularity there will always be people waiting in line eager to listen to what you have to say only so they can throw stones at any imperfections.

Read more: Best Encryption Software

What Do You Need to Invest in Bitcoin?

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

  • Personal identification documents

  • Bank account information

  • A secure internet connection

How much is Bitcoin worth?

Bitcoin made its name on volatility, and it’s certainly living up to its name. The cryptocurrency started the year trading just below $8,000, but within a few months, it rose to nearly $20,000. However, after hitting this high it quickly dropped back down close to $8k by June. But in October it once again crossed the $20k mark before breaking through the 40k mark for the first time in history in mid-November 2018. These kinds of sharp movements are typical of Bitcoin.

For example, between September 2017 and December 2017 the cryptocurrency climbed from $3k to then-record highs above $14k, only to fall back under $5k four months later. This volatility is one reason why you should exercise caution when investing in not only Bitcoin but cryptocurrencies in general.

How can I buy Bitcoin?

Some popular Bitcoin websites on the Internet help you make payments. To do this, all you need to do is to sign-up with any exchange site and fund your account using one of the available payment options. You can then buy or sell your digital currency on the exchange, or store it in your digital wallet and carry it along anywhere you go while paying online by just entering your address.

You can check the current value of your investment by simply visiting some major cryptocurrency exchanges like CoinDesk or Google Finance, where you can compare prices at all times. At the time of writing Bitcoin was trading around the $39,000 mark for one, which is quite good compared to last year’s $1,000 price point.

How to Invest in Bitcoin

How to Invest in Bitcoin

Some believe cryptocurrency will help usher in a global economic revolution because of its underlying decentralized technology. Others are simply investors who’ve seen their coins skyrocket in value.

How to Invest in Bitcoin in 5 Steps

  • Join a Bitcoin Exchange
  • Get a Bitcoin Wallet
  • Connect Your Wallet to a Bank Account
  • Place Your Bitcoin Order
  • Manage Your Bitcoin Investments

Join a Bitcoin Exchange

First and foremost, you must decide where you wish to purchase Bitcoin. Cryptocurrency exchanges are used by the majority of Bitcoin investors. Because Bitcoin is an open-source technology, there is no official “Bitcoin” corporation, but there are several exchanges that support Bitcoin transactions. These exchanges, like stockbrokers, act as facilitators for cryptocurrency investments.

If you wish to purchase from an exchange, you must first choose which exchange to buy from. Here are a few of the most common choices:

  • Coinbase
  • Binance
  • Kraken
  • Gemini
  • Bitfinex

Passive investing

Bitcoin investors who use a passive investment strategy are typically risk-averse and will ‘hold’ onto Capital in the hope that its value will continue to grow. They keep it safe in a digital wallet and watch its value increase over time. They will exchange their Bitcoin when they see a satisfying return on their initial investment, but they don’t do so at a significant loss unless the buy-in price was excessive more than likely due to hype or other people investing large amounts of money into their Bitcoin wallet. While Bitcoin is extremely volatile and does not offer protection on your investment, this passive investment strategy can be considered the safest method of investing in an explicitly unsafe asset.

Read more: USB Bitcoin Mining

Active investing

Active investors use a more sophisticated approach than day traders. Generally, they rely on the cryptocurrency’s volatility to make significant gains. Investors with a long position will buy the currency when they believe the value is low and then sell it after perceiving an increase in value. In turn, investors running a short position will do the opposite by buying Bitcoin when its value is high and selling off once the value of the asset drops significantly. Both routes are extremely high-risk and require professionals to anticipate troubled times as well as good fortune to generate consistent profits (How to Invest in Bitcoin).

Is Bitcoin safe?

Unfortunately, there are a lot of scams involved with Bitcoin. Hackers create sites that act as fake exchanges and lure people in with the promise of cheap Bitcoins, while criminals use malware to change Bitcoin addresses so they can redirect transactions to themselves. As claimed by Bitcoin itself, transactions are “secured by military-grade cryptography” and “no one can take your money or make payments on your behalf”. However, hackers have compromised numerous exchanges overtime to steal stored Bitcoins (How to Invest in Bitcoin).

For this reason, some Bitcoin users store their Bitcoins offline temporarily such as on their PC desktop or even a USB flash drive (or cold storage), and keep important security details tucked away for safe-keeping until they decide to trade online again (How to Invest in Bitcoin).

Do I have to pay tax on Bitcoin?

Bitcoin is legal in most developed countries and it doesn’t affect any country’s balance of payments. If you are an individual holding crypto assets like Bitcoin as a personal investment, you may have to pay capital gains tax when you sell them because they are not eligible to be held in an ISA (a tax-free savings and investing account). They are also subject to income tax and National Insurance if you receive them from your employer as payment. If HMRC thinks you’re making money from cryptocurrencies as a business, you’ll be taxed in the usual way that applies to companies.

Bitcoin is highly volatile, so it usually isn’t recommended as a central part of your investment portfolio. But if you’ve got spare cash (no pun intended) and aren’t afraid to lose a little bit of it, you could put some of your hard-earned cash into this new cryptocurrency called ‘Bitcoin’ – which has just made a breakthrough after briefly climbing above 16k 2017 (How to Invest in Bitcoin).

Tips For Investing In Bitcoin

  • Understand your risk tolerance
  • Diversify Your Portfolio
  • Start Small

Strategies For Investing In Bitcoin

  • Buy and ‘Hodl’ Bitcoin

  • Hold Bitcoin Long Term

  • Trade Bitcoin On Short-Term Volatility

Bottom Line

Bitcoin is a prominent sort of cryptocurrency that stores and protects your digital assets by utilizing a huge network of interconnected computers. Bitcoin is a highly volatile asset with huge and rapid price fluctuations, which offers the potential for large gains but also carries a high level of risk. Before making any decisions, you must learn how to invest in Bitcoin properly. To protect yourself from market volatility, diversify your investment portfolio.

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