How to Invest In Bitcoin And Make Money _ Complete Guide 2022
In the past few years, Bitcoin has become more and more popular among investors today. At the same time, there was a lot of controversy about Bitcoin and other cryptocurrencies-its proponents believed that this was the future of currency and investment, while its critics believed that it was a risky investment option that might not produce lucrative Return.
In order to better understand its true value in the market, we must pay attention to its latest trends. Recently, the valuation of Bitcoin has risen by more than 763% in just one year, easily surpassing the traditional increase in the stock market. More and more people are buying Bitcoin to become a decentralized global currency. In particular, a tailwind was the acceptance of Bitcoin by several well-known individuals and companies.
Elon Musk, behind Tesla and SpaceX, recently announced that his automotive empire will not only buy $1.5 billion in Bitcoin, but also intends to accept this cryptocurrency as a payment method in the future. Several popular FinTech (financial technology) companies such as Square and PayPal have also announced their intention to support the development of cryptocurrencies. Nevertheless, the most important development of Bitcoin may be the recent IPO (initial public offering) of Coinbase Global, Inc. (Nasdaq: COIN), today’s leading cryptocurrency trading platform.
There is no doubt: Bitcoin’s momentum is definitely building. Recent developments have contributed to the rapid increase in the value of Bitcoin, and supporters of the asset believe this is just the beginning.
What is Bitcoin?
Bitcoin was created by one or a group of programmers under the name “Satoshi Nakamoto“. But the true creator 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 cryptocurrency systems rather than physical cash. Coins have no intrinsic value, nor are they backed by gold or silver.
Bitcoin was created to solve several major cryptocurrency flaws. First, it aims to prevent cryptocurrency from being fraudulently copied. Think about how easy it is to copy computer data (documents, photos, files, etc.). If anyone can copy coins and create an unlimited amount of currency for themselves, then cryptocurrency will be impossible. You can’t just copy a 20-dollar bill, can you? Likewise, people need to prevent people from copying cryptocurrencies.
Understand Blockchain Technology
Bitcoin uses a digital technology called “blockchain“, which is an advanced coding mechanism that can spread a single code across thousands of different computers. For example, suppose your coin is constructed according to the code “XDA146DDS”. The blockchain divides the code into smaller pieces and stores these code pieces on multiple computers. If hackers want to access the code, they must hack into various computers to gain access to the entire code.
Blockchain also employs a “public ledger,” which uses thousands of computers (called “nodes”) to keep track of coins and their owners. If the coin’s data changes, nodes will cross-reference their records to verify that the change is accurate and whether the coin’s owner initiated the change.
What is the use of Bitcoin?
Once you have purchased coins, you can use them for online transactions wherever they are accepted. Remember, when you use coins for transactions, you are not withdrawing actual funds from your bank account. The money will only leave your bank account when you buy the coin itself, not when you use the coin to make a purchase.
Like cash currency, the value of coins may fluctuate. This is why some investors are excited about Bitcoin and other types of cryptocurrencies. Investors speculate that if the market soars, the value of Bitcoin may rise sharply. I will explain the arguments for and against cryptocurrency investment later.
At present, investors should especially consider the adoption rate of Bitcoin and other related cryptocurrencies. Unlike traditional stocks, when more people are interested, the value of Bitcoin will increase, and today more people are interested in buying Bitcoin than ever before. Whether it is pure belief or the inherent fear of missing the largest transfer of wealth in American history that many people have predicted, transaction volumes continue to grow exponentially. In fact, Bitcoin transaction volume has been steadily increasing for most of the year. Therefore, Bitcoin regularly tests new highs.
What do I need to invest in Bitcoin?
You don’t need to invest too much in Bitcoin! All you need is the following:
- Personal identification documents
- Bank account information
- Secure internet connection
Remember-if you plan to buy coins through a stockbroker, you may not need to provide your personal or financial information, because your stockbroker may record all this information.
How to invest in Bitcoin in 5 steps
Are you ready to delve into cryptocurrency? You are lucky because buying Bitcoin is easier than you think. Here is how to invest in Bitcoin, in 5 simple steps:
- Join the Bitcoin exchange
- Get a Bitcoin wallet
- Connect your wallet to a bank account
- Place your Bitcoin order
- Manage your Bitcoin investment
1. Join the Bitcoin Exchange
First, you need to determine where you want to buy bitcoins. Most Bitcoin investors use cryptocurrency exchanges. There is no official “Bitcoin” company because it is an open source technology, but there are several different exchanges that can facilitate Bitcoin transactions. These exchanges are intermediaries for cryptocurrency investments, just like stock brokerage companies.
If you decide to buy from an exchange, you must decide which exchange you want to buy from. Here are some of the most popular options:
- Coinbase: A very popular cryptocurrency exchange that ensures losses in the event of security breaches or fraudulent transfers
- Binance: Founded in 2017, Binance is a cryptocurrency exchange focused on altcoins
- Kraken: This San Francisco-based exchange allows you to invest in Bitcoin using various currencies from all over the world
- Gemini: Launched by Cameron and Tyler Winklevoss in 2015, Gemini provides services with different user interfaces and fee structures for casual and sophisticated Bitcoin investors.
- Bitfinex: The longest-running cryptocurrency exchange, optimized for advanced traders and lenders (unfortunately, Bitfinex does not currently accept US customers)
As you might have guessed, as more options begin to spread, it becomes more and more difficult for investors to choose Bitcoin exchanges. Find everything you need to know about Binance and Coinbase and start investing immediately.
2. Get a Bitcoin Wallet
When you buy a coin, it is stored in the “wallet”, and all your cryptocurrencies are stored in the wallet. You can get two types of wallets: “hot wallet” or “cold wallet”.
A hot wallet is a wallet operated by your cryptocurrency exchange or provider. Some exchanges will automatically provide you with a hot wallet when you open an account. In any case, a hot wallet is convenient because you can access your coins through the Internet or software programs.
Some notable hot wallets are:
- Electrum: software that enables you to store coins on your computer
- Mycelium: Mobile application only for Android and iPhone users
However, hot wallets are not the safest form of coin storage. If the hot wallet provider is hacked, your coin information may be compromised.
A cold wallet is the safest method of coin storage. A cold wallet is an actual piece of hardware used to store your coins, usually a portable device similar to a flash drive. The price of most cold wallets is between $60 and $100. Some popular cold wallets are:
If you only want to buy a small number of tokens, then using a hot wallet with an insured cryptocurrency exchange may be no problem. However, if you want to trade a lot of coins, then the cold wallet will be very worth your investment.
3. Connect Your Wallet to a Bank Account
After obtaining the wallet, you need to link it to your bank account. This allows you to buy coins and sell coins. Or, your bank account may be linked to your cryptocurrency trading account.
4. Place Your Bitcoin Order
Now you are ready to buy Bitcoin. Your cryptocurrency exchange will have everything you need to buy. The biggest question is, how many bitcoins should you buy?
Some coins are worth thousands of dollars, but exchanges usually allow you to buy a small portion of a single coin-your initial investment may be as low as $25.
Investing in Bitcoin is very risky. Before buying any Bitcoin, be sure to carefully determine your risk tolerance and review your investment strategy. We will discuss this in the next section.
5. Manage Your Bitcoin Investments
After buying Bitcoin, you can:
- Use your coins for online transactions
- Hold your coin for a long time, hoping it will appreciate
- Use your coins for day trading-that is, buy and sell coins with other Bitcoin owners, which can be done on cryptocurrency exchanges
Your cryptocurrency exchange will provide you with everything you need to buy and sell coins.
Is Bitcoin a Good Investment?
This is one of the most frequently asked questions about Bitcoin: Is Bitcoin a good investment?
Well, the real answer is that no investment is essentially “good” or “bad”. It all depends on your risk tolerance, investment strategy and financial goals. Before considering Bitcoin as an investment, you should carefully consider your goals and determine what you want to achieve in your investment activities. Do you want to develop passive income? Become a full-time investor? Save money for retirement? Answering these questions will help you determine whether Bitcoin is the right investment option for you.
Bitcoin is a very high-risk investment because it is a volatile asset. This means that the value of Bitcoin may rise or fall sharply in a short period of time-even as fast as a few hours or days.
Like all cryptocurrencies, Bitcoin has no intrinsic value. It is not backed by any physical assets, such as gold or silver, and there is no central regulatory agency to ensure that its value remains stable. In addition, the value of Bitcoin has nothing to do with the profits of any company. The value of Bitcoin depends on market demand. When more people buy Bitcoin, the value increases. When fewer people buy Bitcoin, the value will drop.
To make a substantial profit on Bitcoin, you may need to rely on “seizing the market opportunity”, which is a difficult and often unwise investment strategy. Nevertheless, there is still potential for profit.
Bitcoin and Other Investments
Choosing which investments to make and which investments to avoid can be a very confusing decision. Your choice will determine whether you will enjoy great returns in the next few years or lose everything. It is impossible to turn on the TV or read the investment blog without hearing about Bitcoin. This is currently one of the hottest topics in the world, but it is not the only way to invest. This raises the question: How does Bitcoin compare to other wealth accumulation tools?
Although Bitcoin is its own investment tool, it is important to note that it can actually transcend investment boundaries. In fact, Bitcoin can be used simultaneously with some of today’s most important assets. Especially real estate can benefit a lot from the so-called “tokenization”. Tom Winter, CRO and co-founder of DevSkiller, said, “Tokenization is the process of creating virtual tokens that represent the ownership of real estate rights that exist on the blockchain (the core technology behind Bitcoin).” Winter suggested “Tokenization has the potential to revolutionize the global real estate market. Compared with existing investment options, it provides investors with many advantages.”
The unique fusion of real estate and Bitcoin may bring attractive profits to investors, but how do the two investment tools themselves compare?
- Many experts believe that Bitcoin is a bubble, which means that it is overvalued and may collapse at any time.
- The value of Bitcoin is unstable; it is also prone to sharp rises and price drops.
- Bitcoin is completely digital, which means that it is more vulnerable to security breaches than tangible assets.
- Real estate is an investment backed by a good historical record and the safety of tangible assets.
- Rising home values and rents are an excellent way to fight against inflation.
- Depreciation, utilities, insurance, and maintenance all make real estate investors eligible for valuable tax benefits.
- Rental properties provide stable monthly cash flow and are worthy of your trust.
Advantages of Bitcoin investment
The main benefit of Bitcoin investment is that you may be able to generate a huge profit return, which may be as high as 200% or more. Of course, this is a challenging thing, but it is possible.
If you buy a lot of bitcoins, you may be able to take advantage of the surge in the market and sell your bitcoins at higher prices when there are many buyers. Bitcoin may also truly become the currency of the future or a more popular trading asset, and you can expect to get a return from holding it for a long time. However, it should be noted that the value of Bitcoin generally decreases every year.
Your success may depend on correctly “seizing the market opportunity.” In other words, you will buy tokens when the price is low and sell them when the price is highest. High-risk investors who pay close attention to the market may generate huge returns when adopting this strategy. They may even generate returns that are extremely unlikely in the realm of company stocks or government bonds. For this reason, Bitcoin has incredible liquidity. Shaun Heng, vice president of growth and operations at CoinMarketCap, said, “Bitcoin is one of the most liquid investment assets you can have, and it is more liquid than any other cryptocurrency.” Therefore, almost anything that can be achieved is actually Achieve immediately.
Disadvantages of Bitcoin Investment
Unfortunately, the high volatility of Bitcoin makes it a dangerous investment, and if you are not careful, you may lose money.
Jim Pendergast, senior vice president of altLine, said: “Based on your knowledge of Bitcoin in recent months, it seems to be one of the best investments, but government policy blows are making Bitcoin’s value drop, especially now.”
Bitcoin and other types of cryptocurrencies also face the high risk of the “surge and collapse” plan. Predatory investors will contact amateur or humble investors and persuade them to invest a lot of money in Bitcoin. The resulting surge caused the price of Bitcoin to rise rapidly.
Predatory investors are smart. They will sell all the stocks they hold before the end of the buying wave, thus making huge profits. But when investors stop buying, the value of the coin drops to a very low price. The final valuation of a coin purchased for $200 may be only $30. Unsuspecting investors will throw their money away.
You can always profit by selling your tokens before the price plummets, but it is impossible to predict when the buying boom will stop-the price may drop by 50% within a few hours. This is why any volatile asset, such as cryptocurrency and penny stocks, is considered a high-risk investment.
You should also know that pump and dumping schemes and pyramid schemes are illegal. Although taking advantage of market surges (whether natural or man-made) is not necessarily illegal, you may not want to be associated with such practices. Even if you did nothing wrong, you could be the target of an IRS audit or criminal investigation.
How to Invest in Bitcoin: Different Methods
There are several different ways to invest in Bitcoin, both directly and indirectly.
First, you can invest in a company that utilizes Bitcoin technology. Although Bitcoin is a risky investment, plenty of companies sell successful products that incorporate Bitcoin and blockchain technologies. You can find several exchange-traded funds (ETFs) that include shares from various blockchain-related companies, like the Amplify Transformational Data Sharing ETF (BLOK). You’re not directly investing in cryptocurrency but in corporate stocks of companies that utilize Bitcoin. It’s safer, and most ETFs in this category outperform the market.
Second, you can participate in Bitcoin mining. Bitcoin mining is simply allowing your computer to be used as a node for the public ledger. It’s a topic worthy of its own blog post, but you should know that Bitcoin miners are rewarded with actual Bitcoin for their contributions. You could receive free Bitcoin without actually ever purchasing it.
Outside of 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.
Buy Standalone Bitcoins
The most obvious Bitcoin investment strategy is to buy independent Bitcoins. Buying bitcoin directly from apps like Coinbase allows investors to obtain “physical” ownership of assets. This is an important difference, because Coinbase allows investors to actually buy bitcoins and store them in their own crypto wallets. By doing so, investors will simultaneously obtain the price performance of the asset and use it as currency for subsequent transactions. Owning an independent Bitcoin is no different from owning any other currency, not to mention the drastic fluctuations in value.
It is worth noting that not every online platform or application allows investors to own independent bitcoins. For example, online trading platforms like Robinhood allow people to invest in Bitcoin, but they do not allow investors to own Bitcoin (or their respective keys). Coinbase grants investors the “key” to hold bitcoin so that they can transfer assets to their wallets, while Robinhood does not. Therefore, investing in Bitcoin on Coinbase will allow investors to own the asset and treat it as a currency. On the other hand, Robinhood investors can only use price changes in their accounts, and cannot transfer their holdings to crypto wallets. Investors who intend to buy independent bitcoins need to understand the limitations of their trading platform before investing their money in any cryptocurrency.
How to Invest in Bitcoin and Make Money
Tips For Investing In Bitcoin
If you decide to try Bitcoin investment, please pay attention to the following tips:
- Know your risk tolerance: As mentioned earlier, Bitcoin is a high-risk investment, and you should carefully review your risk tolerance before investing. If you feel uncomfortable about investing in volatile assets or have only a small amount of money available for investment, you may need to consider other investment options.
- Diversify your investment portfolio: The best way to protect yourself from investment losses is to diversify your investment portfolio. Your main investment should be low-risk, such as government bonds or index funds. Next, you should make medium-risk investments, such as real estate or company stocks. High-risk investments, such as penny stocks or Bitcoin, should be your smallest and least preferred investment. Bitcoin is essentially “icing on the cake”: this kind of investment can generate considerable profits, but you can still do well without it.
- Start small: If you are on the fence, start small. Cliff Auerswald, president of All Reverse Mortgage, recommends investing $10 a week. “Many people are still not sure whether cryptocurrency will succeed. Nevertheless, with all the buzz surrounding encryption, many people are still interested and don’t want to miss it,” he said. “One of the most effective ways to invest in BTC is to invest only $10 a week. This way, if it does not succeed in the end, there is no risk-but over time, you will have a healthy investment.”
Strategies for Investing In Bitcoin
Although there are many differences between buying Bitcoin and buying other stocks (such as stocks), some inherent similarities must be resolved. In fact, the actual strategy of investing in Bitcoin is not much different from its stock strategy. In other words, many strategies for buying Bitcoin must do more within the investment time frame. In particular, investors may adopt one of the three most popular Bitcoin investment strategies:
- Buying and “Hodl” Bitcoin
- Long-term holding of Bitcoin
- Trading Bitcoin with short-term volatility
Long-term holding of Bitcoin
No different from the first strategy, investors who want to hold Bitcoin for a long time believe that it will appreciate in value over a long period of time. However, unlike the “hodl” strategy, long-term holders may be inclined to sell once they are satisfied with the return. These investors believe that Bitcoin will appreciate and may be used as a new store of value (such as gold), but they are not opposed to selling at an appropriate time for profit.
Trading Bitcoin with short-term volatility
One of the most popular strategies for investing in Bitcoin relies on the volatility of assets. If nothing else, Bitcoin has become synonymous with violent valuation fluctuations. Just look at the chart for a year to determine Bitcoin’s volatility, which bodes well for short-term traders. Not surprisingly, this strategy will allow investors to ride the waves, sell at peak times and buy at low levels. This is definitely the most difficult of the strategies discussed and exposes investors to the greatest risk; however, it may also compound returns faster than the previously mentioned.
Bitcoin is a popular cryptocurrency that uses a large number of interconnected computers to store and protect your digital assets. Bitcoin is a highly volatile asset, and its value is prone to large and rapid fluctuations, which brings opportunities for huge returns, but also brings huge risks. Before making any decision, it is important to learn how to invest in Bitcoin responsibly. Be sure to diversify your investment portfolio to protect yourself from market fluctuations.
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