Bitcoin is a digital payment and asset system. Every transaction undergoes a verification process by network nodes using cryptography. These transactions are then recorded in blockchain which is a public dispersed ledger. The primary purpose of creating Bitcoin was to give them as a reward for mining. Bitcoin owners can buy different products and services and even exchange them for different currencies.
If you are planning to invest in Bitcoin, William Schantz of Mid Atlantic Financial, LLC will walk you through the different ways of doing so.
5 Steps of Investing in Bitcoin
Join a Bitcoin Exchange
According to William Schantz, the first and most common way of investing in Bitcoin is by buying coins on a Bitcoin exchange. Exchanges are businesses that allow customers to buy or sell cryptocurrencies in exchange for other assets, such as conventional fiat money or other digital currencies.
Bitcoin is traded primarily through bitcoin exchanges and brokers, though some over-the-counter trading does occur. Some popular cryptocurrency exchanges include Coinbase, Kraken, Bitstamp, and Gemini.
Get a Bitcoin Wallet
Before you can start investing in Bitcoin, you will need to set up a digital wallet to store your Bitcoin. A Bitcoin wallet functions like a regular wallet, except it stores your digital currency. There are two types of bitcoin wallets, a cold wallet, and a hot wallet.
Hot wallets are operated by exchanges and allow 24/7 access to your bitcoin. These wallets are convenient because they allow you to buy, sell, and trade your Bitcoin quickly. However, hot wallets are riskier because they are connected to the internet and susceptible to hacking.
Cold wallets are offline devices that store your Bitcoin. These wallets are much more secure because they are not connected to the internet; however, they are less convenient because you cannot access them as easily.
Connect Your Bank Account to Your Wallet
Once you have set up your wallet, you will need to link it to a bank account. This will allow you to buy and sell Bitcoin. To do this, you will need to provide your bank account information to the Bitcoin exchange or broker. Once your account is linked, you will be able to transfer money into your Bitcoin wallet.
According to William Schantz, once you have set up your wallet and linked it to your bank account, you will be able to purchase Bitcoin. Most exchanges accept payment via bank transfer or credit card, and some are willing to work with Paypal transfers. Bitcoin can also be purchased through specialized ATMs, but fees are high, and the availability of machines is limited.
How much bitcoin you should invest in depends on your goals and circumstances. You may want to invest all your money into Bitcoin, or you may want to invest only a portion of your portfolio.
If you are investing for the long term, it is best to buy and hold Bitcoin. This means buying Bitcoin now and holding it until it reaches its full potential.
Manage Your Bitcoin Investments
Now that you have purchased Bitcoin, it is important to manage your investments. This includes monitoring the market, setting up a budget, and diversifying your portfolio.
The price of Bitcoin can fluctuate greatly, and this can either be a good or bad thing depending on your investment goals. If you are looking to make a quick profit, you will want to buy Bitcoin when the prices are low and sell when the prices are high.
However, if you are investing for the long-term, it is best to buy and hold regardless of the current market conditions. Over time, the price of Bitcoin will likely increase, giving you a profit.
Investing in Bitcoin can be risky, but there are measures you can take to make your investment as secure as possible. Always remember to diversify your investments and never invest more than you can afford to lose. William Schantz has given a comprehensive explanation of what steps you need to take to invest in bitcoin.