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How to Invest in Bitcoin

You don’t need me to tell you that Bitcoin has soared in popularity since it first came on the scene. While there has been a lot of volatility in cryptocurrency prices over the years, Bitcoin continues to be one of the most valuable investments on the market today. 

If you have decided that you want to get in on the action and invest in Bitcoin, you may be wondering where to begin! Don’t panic, as I have got you covered. I have invested in Bitcoin myself, and I’ve tried out a number of exchanges and trading platforms over the years. Below, I will take you through the steps to follow, revealing some of the various ways you can invest in Bitcoin.

Bitcoin.org homepage

Table of Contents

Why should you invest in Bitcoin?

Before I take you through the steps needed, let’s first take a look at the reasons why you may want to invest in Bitcoin. 

One thing I must stress, though, is that there are no guarantees and you could lose your money. As is the case with any investment, there are no certainties. The price of Bitcoin has been very volatile over the years. While it has increased, on the whole, there have been periods of sharp drops. 

Because of this, make sure you never invest more than you can afford to lose. 

So, now I’ve gotten that out of the way, why would you want to invest in Bitcoin? What makes it such an attractive option?

  • You could make lucrative returns on your money – Let’s be frank; the main reason why people invest in Bitcoin is that they want to make money. A lot of people worry that they have missed the boat with Bitcoin. However, there is still a lot of untapped potential. For example, if technology linked with Bitcoin is adopted into the mainstream, the value would most likely rise. 
  • Enable innovation and then benefit from it – Your investment in Bitcoin is an indication of social proof, i.e. you show others that you have confidence and trust in the project’s vision. Secondly, it ensures Bitcoin has the means to keep innovating and expanding, which is only going to be a good thing for investors. 
  • Make your portfolio more diverse – Any good investor knows the importance of making their portfolio as diverse as possible. If you put all of your eggs in one basket, you are going to be highly exposed. However, if you invest in a number of different areas, you won’t be as impacted if one starts to lose its value.
  • Have complete control over your investment – Only the person holding the cryptocurrency has the means necessary to access their investment. This is done via a private key. A private key will give you full control over the purchasing, sending, and receiving of cryptocurrencies, such as Bitcoin. Nevertheless, if any government decides to do so, cryptocurrency could be outlawed with the stroke of a pen, as was the case in China. Nevertheless, this does not seem to be in the plans for places like India, the UK, and the US, as they are looking to better regulate and understand cryptocurrencies so that fail-safe measures can be introduced. 
  • Protect your wealth from inflation – Inflation is a topic we have been discussing a lot lately because it is on the rise quite considerably. Inflation reduces the value of fiat currencies over a period of time, yet it does not have the same impact on cryptocurrency. This is because of the decentralised nature of Bitcoin and the cap on its supply. Because of this, banks and governments cannot simply manipulate crypto at their own will. Nevertheless, this does not mean Bitcoin is completely free from inflation. If more crypto is mined, their value will theoretically go down, yet there have been measures implemented to prevent this. 

 

How can you invest in Bitcoin?

If you want to purchase Bitcoin, there are four simple steps that you need to follow:

1. Select a cryptocurrency exchange

To purchase any type of cryptocurrency, Bitcoin included, a crypto exchange where buyers and sellers meet to exchange their fiat currency for crypto coins is a must. 

There are literally hundreds of exchanges to select from. However, if you are only just getting started, you need one that has high security and low fees. Some of the best options include Coinbase, Binance, and eToro. You can check out my latest eToro review for more information. 

eToro crypto

When deciding on an exchange, consider whether or not the one you choose has a Bitcoin wallet included in the platform. If this is not an option, you will need to find your own wallet. 

2. Pick your payment option 

Once you have selected an exchange, you must fund your account before you can begin to invest in Bitcoin. 

Depending on the exchange, you can fund your account through bank transfers from a savings or current account, credit card payment, debit card payment, or a cryptocurrency wallet. 

As the fees you are charged will lower the amount of money you can invest, it does make sense to use an electronic transfer from a bank account over other methods in most cases. 

3. Place your order

After you have funded your account, you are ready to place your first Bitcoin order. The manner in which you do this does depend on the platform you use. You may have to enter Bitcoin’s ticker symbol, which is BTC, or you may simply tap a button. Most platforms will make it as easy as possible. Simply input the amount you want to buy.

Once you have completed your transaction, you will own Bitcoin! A lot of people only own portions of a Bitcoin today, as the price is so high at the moment. It all depends on the money you have available. If you cannot afford to buy one Bitcoin at the moment, you’d basically buy a percentage of a Bitcoin, so that is how you are still able to get in on the action. 

4. Select somewhere safe to store your Bitcoin

As mentioned earlier, a lot of cryptocurrency exchanges also have a Bitcoin wallet integrated. Some people, though, would rather not store their Internet online, as they are worried about hackers. Both online and offline wallets have their pros and cons, so I’ll take you through both below so you can get a better understanding. 

Cold wallets

Firstly, we have cold wallets. This is an offline wallet. Because it is not connected to the Internet, the risk of it being compromised is less. 

These hardware or offline wallets will store the user’s private key on something that is not connected to the web. You will be able to use software that means you can view your portfolio without your private key being put at risk. 

While cold wallets are widely considered more secure, they do demand more technical knowledge. 

In most cases, people will use a USB drive device, which stores their private keys offline securely. These sort of wallets are unaffected by viruses that could impact someone’s computer, and this is the main reason people use them. 

Hot wallets

The other option is to use a hot wallet, which is basically an online wallet that is used on devices such as tablets, mobile phones, and computers. These wallets will generate a private key for your coins. 

If you do not create sufficient security for your wallet, you run the risk of losing your Bitcoin to theft. Some of the different measures that must be considered include two-factor authentication, encryption, and the use of strong passwords. 

A hot wallet is typically best when storing a small amount of cryptocurrency or storing cryptocurrency that you are going to be trading on the exchange on an active basis. 

Purchasing Bitcoin with a credit card

Using a credit card to purchase Bitcoin is very similar to an automated clearing house (ACH) transfer or debit card payment. However, not all Bitcoin exchanges allow you to use a credit card because of the risk of credit card fraud and the associated processing fees.

When a payment is processed via credit card, extra fees can be added to the transaction, and these can be passed onto the buyer. Credit card companies treat Bitcoin purchases as cash advances, meaning hefty interest rates and fees are applied.

Purchasing Bitcoin with PayPal

You can also purchase Bitcoin via a payment processor, with PayPal being the obvious choice. There are two ways of buying Bitcoin through PayPal. You can either use your balance on PayPal to buy cryptocurrency from a third-party provider or you can connect your bank account or debit care.

PayPal also allows you to buy services and products using cryptocurrencies, via the “checkout with crypto” feature. 

PayPal Crypto

If you purchase Bitcoin directly from PayPal, the company will earn money from the crypto spread, or the difference between the market price of Bitcoin and the exchange rate. The company will also charge a transaction fee for every purchase made. 

One of the reasons why PayPal is not always the best choice for cryptocurrency is because you are not able to transfer your Bitcoins outside of PayPal to an eternal crypto wallet or your personal wallet. Plus, there are only a few traders that enable the use of a payment  processor to purchase payment. eToro is one platform that does enable PayPal purchases of Bitcoin. 

Some of the other ways you can invest in Bitcoin

There are a number of other ways you can invest in Bitcoin as well. Here is an overview of them:

  • Mainstream brokerages – Robinhood Markets, Inc. is one exchange that provides crypto tradining facilities. You will not be charged any commision on crypo trades and purchases. Instead, the brokerage makes money from the payment for order flow, passing the trade volume onto other brokerages or platforms. 
  • P2P exchanges – There are some peer-to-peer (P2P exchange services like Local Bitcoins that offer a more direct connection between users. Once an account has been created, you can post request to purchase or sell Bitcoin, including data about prices and payment methods. Although P2P exchanges do not provide the same anonymity as decentralised exchanges, they enable users the chance to shop around for the best deal. A lot of these exchanges also offer users a rating system so they can evaluate possible trade partners before completing a transaction. 
  • Bitcoin ATMs – Bitcoin ATMs are like bitcoin exchanges, only in-person. You can insert cash into a machine and you will be able to buy Bitcoin, which is transferred to an online wallet. These ATMs have started to become more and more popular, with retail giant Walmart Inc. housing many of them. There are two charges you will be subject to if you go down this route though; a conversion fee for converting a fiat currency to Bitcoin and a purchase fee. Both fees are quite substantial when compared with other options.

Final words on investing in Bitcoin

So there you have it: everything you need to know about investing in Bitcoin. I hope this simple guide has given you a better understanding of the steps you need to take if you wish to invest Bitcoin.

As is the case with any investment, you should never put in more money than you can afford to lose. Even though Bitcoin is flying high at the moment, nothing is guaranteed, so you do always ended to be cautious.

FAQ about how to invest in Bitcoin

  • Who holds the most Bitcoin? Satoshi Nakamoto, the creator of the currency, is believed to have approximately 1.1 million Bitcoin. He claims he has never touched this throughout the years. 
  • Can I lose more than I invest in Bitcoin? If you use your own money to invest in Bitcoin, without using any advanced trading techniques, you should not lose more money than you invest. However, there are some methods that can see people owing more than they initially invested, which is why you do need to be careful and know exactly what you are getting yourself into.
  • Is Bitcoin real money? Bitcoin is a decentralised digital currency, which you can purchase, sell, and exchange directly, without needing a bank or another type of intermediary. The creator of Bitcoin, Satoshi Nakamoto, original described the need for an electronic payment system that is not based on trust, but rather on cryptographic proof. 
  • Can you get rich with Bitcoin? It is certainly true that there are some people who have become millionaires because of Bitcoin. At the same time, there are also a lot of people who have lost significant sums of money due to investing in cryptocurrency. It is always important to look at both signs of the coin. 
  • Is it worth investing in Bitcoin? This is always a personal decision. However, investing in Bitcoin is considered a smart move for anyone who wants to take a chance of thriving financial technology that could play a monumental role in our monetary future. Some people believe that we could see cryptocurrencies replace fiat currencies in the future. I’d say this is a very, very long way off, but it is definitely possible that Bitcoin could become even more mainstream. 



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