Even if you’re not a finance expert, you’ve probably heard of the term Bitcoin. This cryptocurrency has taken the business world by storm. Professional and novice investors alike want to get their hands on this digital currency.
Before you spend any amount on Bitcoin, it’s crucial to learn the basics first. After all, investing in it varies from transacting with money. This article will discuss Bitcoin in detail, including how it works and how beginners can invest in it.
In 2009, Satoshi Nakamoto — likely a pseudonym — created Bitcoin. Nakamoto’s Bitcoin report describes the crypto type as an electronic payment system based on cryptographic proof instead of trust.
There are thousands of cryptocurrencies worldwide, but Bitcoin is the most popular type today. Understanding how cryptocurrencies work is the key to Bitcoin success.
A cryptocurrency or crypto is a digital payment method supported by blockchain technology — a decentralized system managed by users instead of financial institutions.
As a crypto investor, you manage your transactions online, which the system documents in code on an open ledger. This record tracks movements in blocks that form chains of previous transactions.
Crypto investments differ from traditional financial system dealings. These are some reasons they appeal to many investors:
- Eliminates the usual overhead costs banks pass to consumers
- Offers lower international transaction fees
- Provides investors with a finite supply independent from market movements
Today, Bitcoin remains the most valuable blockchain-based cryptocurrency. Recent Bitcoin consumer statistics reveal over 70 million users worldwide, about 46.5% of the total cryptocurrency market.
While websites often depict Bitcoin as a physical coin, it’s a virtual currency you can use to send or receive payments. Every time a user makes a transaction, lines of computer code travel from one owner to another.
Bitcoin usage is common among investors, techies, and libertarians for the following reasons:
- Offers transaction anonymity
- Allows easy movement across borders
- Does not incur banking fees
- Enables users to transact via mobile gadgets
Bitcoin users have to mine such currencies — a process where the crypto type enters into circulation. It involves using modern hardware that solves complex math problems. This task might seem tedious, but you can buy and sell these coins using fiat currencies such as the U.S. dollar.
Recent Bitcoin figures reveal an estimated 18.7 million coins in circulation out of a maximum of 21 million. This figure changes about every ten minutes every time a user mines Bitcoin. While some organizations now accept Bitcoin as payment and a portfolio diversification tool, owners still face challenges with mainstream acceptance.
Buying Bitcoin is a fun way to diversify your portfolio. However, like with any investment, it’s crucial to buy only what you can afford to lose. Because of its price volatility, it’s common for investors to enjoy massive profits or experience devastating losses quickly.
If you’re ready to invest in Bitcoin, follow the steps below.
You need a Bitcoin exchange to buy crypto. These platforms enable you to exchange Bitcoin for other assets like fiat or digital currencies. Make sure to choose a secure, cost-effective, and convenient platform. Some of the most notable ones in the market are eToro, Coinbase, and Bisq.
There are two ways to store your Bitcoin. First, you can choose offline wallets called cold storage. For convenience, you can also use hot wallets or virtual storage solutions you can access online.
Next, decide how much Bitcoin you want to buy. As it’s a risky asset, it’s best not to invest anything above 10% of your portfolio for Bitcoin.
After purchasing Bitcoin, you can use it to make online transactions, store it until its value increases, or try your hand at day trading. You can perform all these tasks through your crypto exchange.
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If you know how to manage your investment, buying Bitcoin can become a lucrative venture. Before leaping into the exciting world of crypto, learn everything you can about it first.
Check out Wealtheo’s personal finance courses to begin your financial literacy journey with a bang.