Cryptocurrency does not work like traditional cash, so if you want to invest, there are a few things to keep in mind. In this article, we will talk about the things you should know before buying Bitcoin.
We will briefly explain how to buy, sell, and store BTC, and how to protect your funds. Let’s start with the differences from fiat currencies and the top reasons to consider investing.
TABLE OF CONTENTS
1. Bitcoin is Different From Regular Money
Bitcoin makes a great investment because it is different from traditional currencies. It does not follow the same price fluctuations and has the potential to grow while traditional currencies tank. But the detachment from regular finance also makes Bitcoin’s price harder to predict.
Here are a few things that make BTC stand apart:
- BTC is digital: you may argue that regular money may be digital, too. Okay, you have a point, but euros and dollars can still take the form of crisp banknotes and shiny coins. Crypto doesn’t have this option, it’s just a record in a digital ledger.
- Bitcoin is peer-to-peer: when you send 1 BTC to your friend Bob (a generous gesture, indeed), no bank or payment system takes part in the process. It’s like handing Bob some cash when you meet up. Only in this case, the cash is purely digital and Bob can be anywhere in the world.
- Bitcoin is decentralized: You and your friend Bob don’t rely on a centralized organization for moving your 1 BTC. Therefore, no bank corrects your account balances and stores records of your transaction. Instead, this record enters a digital ledger. Every network participant stores an updated copy of the ledger but no one controls it.
If you want to know more about this process, read our Complete Bitcoin Guide that breaks the topic down for beginners.
2. Bitcoin is Likely to Grow
There are several reasons why you should invest in BTC in 2020.
- Bitcoins are limited in supply: there will never be more than 21,000,000 coins). This feature helps to resist inflation. While a government can start a printing press to make more banknotes, BTC has no such option. On the contrary, its value grows over time due to halvings, as it becomes increasingly harder to issue new coins.
- Bitcoin is global and it does not depend on any government’s monetary policy. Meaning if this government fails (like in Venezuela) or adopts restrictive laws, your investment will be safe.
- Bitcoin may grow more popular due to the “corona crisis”. By now, its price has reached $9,400. Some prominent experts, including Mike Novogratz, predict it will keep growing. It’s not surprising, considering that BTC was a crisis solution by design.
And if you want to know more about halving, read our beginner’s guide to learn more about the ways in which it shapes Bitcoin’s price.
3. You Need Special Software to Buy Bitcoin
Buying BTC is rather easy. Below is the list of available methods.
- Crypto wallet
For a user, such a wallet is similar to a banking app. To buy BTC, deposit a fiat currency using one of the available methods, and buy bitcoins with it. When choosing a wallet, make sure it’s beginner-friendly and secure.
Our own mobile wallet Channels lets you easily manage and trade over 30 crypto and fiat currencies from your mobile. Channels is fast, easy to use, and overprotective of your funds. Also, you get a built-in encrypted chat as a bonus. Give it a try!
- Crypto exchange
The most popular crypto-fiat platforms include Coinbase, Bitstamp, Coinmama, Gemini, GDAX, and some others. Register on an exchange, pass all the necessary verification procedures, deposit some fiat currency, and place a buy order. Depending on how fast you need BTC, you can opt for a market or limit order.
- BTC ATM
Find a suitable machine using this BTC ATM map. Then, scan the QR code of your BTC address, put some cash into the machine and press Send. Be ready for rather high buy and sell fees.
4. Cashing out Bitcoin is Harder than Traditional Investments
At some point, you may want to convert your bitcoins into fiat currencies. For instance, because you need cash urgently. Or because you think the price has reached its peak.
Whatever the reason, you can sell your BTC using mobile wallets like Channels, fiat-crypto exchanges, and P2P exchanges. Another option would be to convert your crypto into stablecoins (USDT, Tether, etc). In this case, the value of your holdings will reflect the value of USD, EURO, or another fiat currency.
5. Bitcoin Requires Specific Storage Solutions
Okay, you have bought some BTC and now wonder where to store them.
You can do it using a hot or cold wallet.
- Hot wallet (connected to the internet)
This umbrella term covers mobile, desktop, and web wallets. These pieces of software have one thing in common. It’s an internet connection.
If you want to know how these types are different, here is our Wallet Guide.
- Hardware wallet (disconnected from the Internet)
It’s a sturdy device that looks like a flash drive or a mini calculator. A hardware wallet ensures top security as it doesn’t expose itself it to the dangers of the Internet. Your funds are 99,99% safe with it.
By design, hot wallets are less secure than cold wallets. Experts often compare hardware wallets to bank vaults — cumbersome, hard to reach, but impossible to crack. So, they would be perfect for storing the bulk of your funds.
It doesn’t mean that you cannot trust hot wallets, though. New-gen payment apps ensure a high level of security, too. At the same time, they are more convenient to use and easy to reach at any time.
So, how it all translates into real life?
If you plan to buy many bitcoins and let them “sleep” until the right moment comes, invest in a hardware wallet by Tresor or Ledger.
If you prefer to manage your bitcoins with the same ease you manage your bank accounts, opt for a reliable mobile wallet. It’s safe when you take all the necessary measures.
Finally, you can always keep most of your crypto in a Ledger-like wallet while using a mobile wallet for your daily payments.
6. You Can Lose Bitcoin Without Following these Best Practices
The BTC benefits come with greater user’s responsibility. To protect your funds, you should:
- Have a clear understanding of how crypto works
Decentralization means that no bank stores and restores your financial info. If you lose your private keys, your crypto is gone. If you share them with someone, this person becomes a co-owner of your crypto.
- Take some security measures
Create a strong password, implement 2AF, install reliable anti-virus software, set up a VPN. Before depositing your money anywhere, make research to see who runs the platform and what other users think of it.
- Remember about volatility
Any crypto is a high-risk asset due to its volatility. So, the golden rule is not to buy BTC with money you cannot afford to lose. Don’t sell your family house. Don’t use your emergency fund, don’t pawn your family jewels, and don’t persuade your grandma to invest her lifelong savings in crypto.
- Beware of scams and frauds
Hackers and scammers are smart guys who come up with new tricks all the time. So, keep updated about trendy types of attacks and stay alert. Also, don’t forget to update your OS and antivirus software regularly.
- Never talk to strangers
Avoid exposing your BTC activities both on and offline. For some people, crypto owners are money bags worth millions. By talking about your bitcoins, you may attract hackers or other bad guys.