10 Things to Know Before Investing in Bitcoin 2024

What is Bitcoin?

Before you think about investing in Bitcoin, we at TradersBest thought we’d break down what Bitcoin is, what cryptocurrencies are and how it all works in an investment sense.

Bitcoin is a cryptocurrency used for transactions on a decentralised system. Bitcoin was the first cryptocurrency invented back in 2008 and released in 2009. It is now at its highest value and set to increase more in the future.

Bitcoin is the most popular cryptocurrency on the market currently because of its pioneering history and extreme volatility. Its constant movement on the market makes it valuable and one of the first cryptocurrencies recommended for those in the beginning stages of investing and trading assets.

We looked at cryptocurrencies as a whole and found that, like Bitcoin, they are digital assets used for transactions and investment trading. Digital currencies are not available on a public database, so they use a Blockchain system to record those transactions. Blockchain uses encryption techniques to ensure the data is secure and untampered, creating a chain of transactions known as blocks. It removes the middle-person like a payment app or a bank which makes it easier to access the Bitcoin investment.

What is a Digital Wallet?

A digital wallet is what you will use to ‘store’ your Bitcoin investment and other cryptocurrencies online. Because you don’t actually get a physical copy of the cryptocurrency when you purchase it, it is more so the record of transactions that are stored.

Your digital currency won’t be in any single location or exist in a physical form, so it’s not like a traditional ‘pocket’ wallet. In this instance, it is a more reliable way of securing your digital funds and your Bitcoin investment. You want to make sure the digital wallet you choose is protected and secure. We at TradersBest.com looked at several examples of the best Bitcoin wallets of 2021 to choose from.

Each digital wallet will have a personal address to send and receive digital currencies like your Bitcoin investment. This address is often accompanied by an option of a QR code to scan instead. The address is not permanent and will change when you want to start a new transaction, depending on the wallet you are using. It is usually made of a random mix of letters, numbers and symbols. When someone sends you Bitcoin or any other cryptocurrency, there is no actual exchange of real money. But the ownership of the coins now belongs to you in your wallet.

Where to Purchase Bitcoin

If you want more of an understanding on how to invest in Bitcoin, monitoring the price is a good start. The price of one BTC is relatively high, but you can always purchase a percentage of Bitcoin. If you wanted to start small, for example, you could buy 0.001 BTC, which would cost you around 50.78 USD or 40.72 GBP when writing this.

Buying Bitcoin may seem complicated, but is it relatively easy to do when you break it down. We recommend that you find a digital wallet first before going onto crypto exchange platforms. That way, you have a separate place to keep your funds.

You will need a crypto exchange account to buy Bitcoin. It is where your digital wallet will be transferring money into. It will have an exchange wallet address to move your fiat money into, or you can scan the QR code. On TradersBest.com, we thought about what to consider when looking for the best trading sites to buy Bitcoin Investment from.

Before you begin, some platforms will ask you to show your personal identification documents if you are using a KYC (know your customer) platform, whereas other platforms won’t. You will also need a secure internet connection and a payment method. The payment method could be your bank account, debit or credit cards. ATMs designed explicitly for Bitcoin exchanges exist, but they require some personal government-issued identification, i.e. a passport.

Crypto Exchanges

A cryptocurrency exchange allows you to buy, sell and hold cryptocurrencies, including Bitcoin. We at TradersBest.com have put together all the things to look out for and compare when choosing a Bitcoin exchange for you to check out before you think about a Bitcoin investment.

Suppose the exchange allows you to withdraw the crypto into your personal digital wallet. In that case, that is a bonus because it will enable the safekeeping of funds as not all exchanges allow this. These crypto exchanges operate on a decentralised basis, just like the cryptocurrencies, so there is anonymity.

The exchange you choose should allow you to connect your bank account or debit/ credit card to it so you can directly transfer or withdraw fiat money. You may be charged with some fees when you deposit into the exchange account, and they vary from platform to platform.

Once you’re all set up, you can place an order for Bitcoin. The processing time depends on the platform, but it is usually relatively quick. They all offer different ways on how to invest in Bitcoin, and we looked at NordFX on TradersBest.com and compared its features as an example.

Trading Bitcoin

Trading is another way you can invest your Bitcoin. Using trading platforms allows you to speculate and monitor the movement of a cryptocurrency’s price.

You can look at how our experts at TradersBest.com chose the best trading apps 2021, to help you choose which one is right for you – such as the excellent findings in our Zeply review.

Traditionally, Bitcoin investments were bought through an exchange platform in the hopes its price will increase over time, but now those who follow cryptocurrencies know it moves a lot in the market. It allows you to speculate on the rise and fall of Bitcoin’s prices and make the most out of its volatility and the most out of your Bitcoin investment.

Trading sites like Libertex are great at letting you to trade CFDs where the difference in the settlement between the open price and the close price is paid in cash if a profit is made or will take away the money if at a loss. Either way, trading Bitcoin does mean your capital is at risk, but trading platforms that allow you to speculate asset movements in either direction are advantageous in reducing that risk.

Is Bitcoin a Reliable Investment?

We have mentioned in this guide that Bitcoin investing does carry risks, but we think it is a good choice. You have to make sure that you are buying the cryptocurrency from a reputable company. On TradersBest.com, we reviewed the best crypto wallets to help with your decision.

Cryptocurrencies are not the traditional route for investment, but new digital assets are increasingly popping up, filling up the market. The risks are higher as Bitcoin has several possible outcomes. It could remain in this niche market, become mainstream or even hacked.

As cryptocurrency investing is relatively young, it’s still in its early phases of growth. In the future, more opportunities for impressive gains could be a reality because of its nature in the market.

Bitcoin Pricing and Future Bitcoin Predictions

As I write this, Bitcoin has a price of 57,081.30 USD or 40,724.36 GBP per BTC. It is the highest price it has ever been at since its release in 2009. The supply of Bitcoin is capped at 21 million units which are expected to be exhausted by 2140. As it is a supply that is predicted to come to an end, the demand will rise in the coming years, causing the price to rise.

The press Bitcoin gets also affects its overall market price. Recently, Elon Musk took to Twitter to discuss the price of Bitcoin and the result of this caused a spike in its price almost instantly. Similarly, negative press, like news of security breaches or doubts in its longevity, will affect the market price.

The impact of mining and continuously wanting to create more units will also affect the price of Bitcoin. Again, if the demand for Bitcoin rises, so does the price. We looked through multiple Bitcoin investment predictions and found extensive evidence of Bitcoin growing in the years to come.

Long or Short Term Bitcoin Investment?

If you consider trading Bitcoin, it is good to know its time frame for investment is quite flexible. You can choose whether you want your Bitcoin investment to be for the long term or short term gain, depending on the market’s situation.

If you see a Bitcoin investment as long term, you expect the price to rise over time. You don’t need to monitor the price every hour or day as you hope to keep it on hold for over a year. It’s good to consider that the longer you hold onto that cryptocurrency, the lower the tax will be.

If you’re going for a short term investment, you keep it for under a year. You will want to buy Bitcoin when the price is low and wait for it to increase, and sell it when it is right for you. Because of Bitcoin’s high liquidity, it can be seen as an excellent option for the short term too. We looked through predictions and articles and found that either option is reasonable when investing in Bitcoin.

Mining Bitcoin

You may have come across the term Bitcoin or crypto mining and wanted to know how it’s relevant to your Bitcoin investment. At the early stages of Bitcoin, crypto mining was done by individuals as a lucrative way to earn Bitcoin at a considerably lower amount. Users would use their computers and laptops to execute this, but now mining Bitcoin has evolved into a significant industry where companies and large mining pools dominate the market.

As a miner, rewards are paid in Bitcoin when you find the solution to a complex hashing puzzle first. Known as ‘blocks’ when completed, the probability that the individual will find the solution is related to that network’s total mining power. They are done using ASIC miners, a device with the sole purpose of mining digital currencies.

If you wanted to do this now, it would cost you quite an amount to cover the costs of hardware, electricity and operating time. But some services will give you access to mining rigs within mining warehouses and offer regular returns based on what you invest.

It is the alternative way if you want to earn Bitcoins through mining instead of traditional investing and trading routes. It allows you to enjoy the benefits of mining without the hassle and financial strain of setting up your rig. If you are thinking about starting to mine crypto yourself, check out our best cryptocurrency mining software article on all the key components to look out for.

Investing in Bitcoin or Stocks?

Whether you are a beginner and want to know how to invest in Bitcoin or someone who has experience in investments and trading, you will understand that all investments carry risks.

We at TradersBest.com thought we would make your decision easier by weighing both potential investments options.

You may decide you want to invest in a little bit of everything and ask if that is right for your situation. When it comes to stocks, there is a risk that a particular asset may not grow. You would be looking for a long term investment but don’t anticipate how long that will be. On the other hand, investing in Bitcoin will produce a quicker change in your funds due to its constant movement and aggression in the market.

Cryptocurrencies, however, are based on supply and demand. They are speculative, as are other assets to some extent, but on a different scale. The market for Bitcoin investments is considerably smaller than Gold or Oil, so its highs and lows are a lot more dramatic when it swings in the market.

Yes, Bitcoin has fluctuated in price in the past, whereas stock is historically known to do well over time. Both assets carry the weight of loss, but that is a significant part of investing and shouldn’t hold you back from pursuing either.

Conclusion  – Is a Bitcoin Investment a Good Idea?

We believe investing in Bitcoin is a sensible idea for beginners and those more experienced in trading. The long term benefits are set to be rewarding as Bitcoin continues to increase in value.

There are several exchange platforms online that not only allow you to invest in Bitcoin but provide tools and support on your trading journey. A Bitcoin investment is highly volatile in the market, so it shows how valuable the asset is and why it is set apart from other cryptocurrencies that came after it.

Bitcoin is known for its quick transfer service as the middle-person is cut out, compared to fiat currency. And with the rise of digital currency taking over traditional payment methods, we recommend giving a Bitcoin investment a go.

Bitcoin Investment – FAQ