Important Things to Consider Before Investing in Bitcoin
With the dawn of decentralization and the incorporation of cryptocurrencies into the financial sector, it has become easier than ever to be able to invest in cryptocurrencies and buy tokens from all over the globe. The crypto market is an extremely volatile space to be, and it surely isn’t without its ramifications and certain tolls onto the traders and investors alike. At one point in time, you would be rocking it hard with Bitcoin or any other cryptocurrency, but after a few hours, the same cryptocurrency would be plummeting into the ground.
With the kind of disclaimer put into action, let’s begin with Bitcoin investing, and what you need to know to be able to buy or invest in Bitcoin other than Bitcoin being a volatile cryptocurrency if you truly know what you are doing, then it would be a walk in the park for you. Investing in Bitcoin is not complicated at all; in fact, it is extremely easier, and with the evolution of technology at present, it has only become convenient and more approachable.
Shortly all that you require is an online wallet account, a crypto exchange, and some money to be able to invest into Bitcoin. Now, if you’re using a know-your-customer platform, then you would require your personal identification documents as well.
When you are beginning to invest in Bitcoin, the one thing that you must be extremely careful about is the privacy and security of your data as well as your finances; anyone who can gain access to the private key used to unlock the crypto wallet would be able to authorize transactions on your behalf. That is why it is extremely important to keep these private keys secret and away from people with bad intent. Cybercriminals could try to steal these keys if they learn about large holdings, and when they have the key, they have your account, which is the crypto wallet containing all those Bitcoin tokens.
Anything present on the Bitcoin Ledger or the blockchain is visible to the public, and there is nothing you can do about it, which means that a cybercriminal can see your account balance, but that is just about it everything else is being redacted, and only you have access to that information. A great strategy to implement here is to develop multiple public addresses and then distribute your stash of Bitcoin over these addresses across the board.
Another great thing that you can do here is to keep your investments at those public addresses that are not clinically connected to the ones which you often use to perform transactions. All the transactions are recorded publicly on the blockchain, which means anyone can view these transactions, but that is about it; the data of the transaction remain confidential to a major part, but alas, it is not completely anonymous.
The decentralization itself allows you to become anonymous in this gruesome herd of people trying to steal each other’s tokens; that is why it is extremely difficult to trace the transacting parties which are the sender and recipient of the Bitcoin token. The players, however, try their best to hide their information as well as they can, and that is why they are not using know-your-customer crypto exchanges out there because they don’t want anyone to trace this transaction that they will be performing with Bitcoin back to them.
Now that you have acclimated yourself to the challenges that you would have to face when investing into know that if you are using a proper strategy and doing everything by the book, then there is potential in this cryptocurrency, and you could end up earning a lot of profit for your initial investment. Following are some of the steps involved when it comes to buying Bitcoin online and being able to trade in this spectacular cryptocurrency;
Choosing a Crypto Trading Platform
The very first step involved in the purchase of Bitcoin or any other crypto out there is to choose a particular trading platform, or in simple words, a crypto exchange, but you don’t have to necessarily sign up with the cryptocurrency exchange to be able to do that as many payment services and private brokerages also provide with the service.
On the other hand, if you want to go with a plethora of options and features provided to you, then it is better to sign up with a cryptocurrency exchange; after doing that, you would be able to buy, hold onto or sell your cryptocurrency in a matter of seconds. The safest practice in all of these is to go for a crypto exchange which would allow you as a user to be able to withdraw all your crypto earnings into a private online wallet for safekeeping purposes.
Now there are two things that you can do when signing up with a dedicated crypto exchange; you can either provide them with your personal information, thus exposing yourself and your wallet account to a plethora of cybercriminals and people with bad intent, or you can keep all of it anonymous.
Sadly this thing or feature is not tied to your liking or desire as many crypto exchanges would keep your identity anonymous in all cases because they don’t require any personal information but those who are abiding by the KYC rules or know your customer policy would have to ask you about your personal identification along with supporting information.
There is a common misconception associated with the use of crypto exchanges as many users believe that these are actually decentralized but in reality, many popular crypto exchanges out there are not yet decentralized. That is why they use the normal policies and regulatory laws put together by the regulators all across the globe, and these are given an intricate framework to work within. An important thing to consider when creating your account with a dedicated crypto exchange is to always use safe Internet practices.
You never know who is on the other side of the screen, trying to maneuver you into putting down your personal information where it isn’t supposed to be and then only using it to do bad by you. Try to create a password that is unique and strong and that you think is going to be safe with you and in your memory at all times.
Connecting the Exchange with a Payment Option
Now that you have developed an account with a dedicated crypto exchange, the next step is to connect that account with a payment option. The process begins by giving away your personal information to the exchange, and that will primarily depend on the type of exchange that you have selected to go in business with. Many exchanges out there keep the whole activity anonymous, and that is why they don’t require any personal information from the user.
But if you are asked to submit your personal information, then know that some things need to be beside you, such as your driver’s license, social security card, and or your birth certificate having certain credentials that apply to you as an individual of the country that you are developing this account from.
After your identity has been verified, you would be then asked to connect a payment option; nowhere, you have certain options, you can either select to go with your bank account, or you can add a debit or credit card option as well. It is never wise to put down your credit card for the sake of making a crypto purchase because the volatility factor of Bitcoin is extremely strong, and that would only end up inflating the overall cost of purchasing a single token now.
Bitcoin is legal within the United States, but in some instances, your bank might stop the payment from going through to certain exchanges and crypto-related sites, that is why it is always a good practice to first consult with your bank if they are compatible with a dedicated crypto exchange or not.
You must also try your best to accumulate information regarding the fees that will be charged by your bank as well as the crypto exchange that you are using as an intermediary to invest in Bitcoin. The fees continue to change across the year, and that is why it is important to know beforehand what kind of cost you are looking over before you begin this endeavor.
Placing an Order
After that, you are done with setting up your account and would now be up and running to invest your money into some Bitcoin tokens. Remember that crypto exchanges were not that mainstream back in the day, and by some people, these were considered a scam purely. It is a business that has slowly gone mainstream and has gotten many big players interested in it from the financial industry.
If you have previously worked with the forex and or stocks market, then you definitely know about different order types that these exchanges allow you to engage with. Cryptocurrency exchanges are also getting better at this, and they are also now offering both market and limit orders, and some of these also offer stop-loss orders; all of these are the type of orders that you can place with a dedicated brokerage working with either stock or forex market.
The best practice when it comes to buying Bitcoin is to take a look at the charts that would be made available to you by the crypto exchange itself now the data in terms of price continues to change in a matter of seconds, and if you have not noticed before it is a second’s game and you need to be purely active and in your element to be able to score something out of it. Try to buy as much Bitcoin as you can when the price is lower, and the market has actually taken a dip because that is when the big players out there invest their money into the crypto market.
Storage of Tokens
When all is said and done, and you have gotten your hands on some of the Bitcoin tokens, now your primary concern should be placing these tokens in a secure environment up to the moment when you have decided to let these go for a profit. The best way to do so is to use cryptocurrency wallets, these or the digital entities which facilitate you with the storage of crypto tokens securely and neatly. Although many crypto exchanges out there allow the users to be able to store their crypto on site, this is not a very popular practice nor a recommended one.
What you should be doing is to sign up with a crypto wallet service outside of the exchange; this way, you would have access to your funds anywhere and at all times using a private key for which only you are responsible. Even if you choose to go with exchange offered wallets, you must know that they don’t cherish the security of the users as strongly as private crypto wallets out there do.
There are some wallets that have more features as compared to the other ones; some are Bitcoin-only wallets, while some offer the user the ability to store all kinds of cryptocurrencies in a consecutive and section-wise manner. When trying to choose a dedicated wallet type to store your Bitcoin tokens, you must confront the two elementary wallets out there that are hot wallets and cold wallets.
Hot wallets are basically those wallets that are interconnected via your devices such as the computer, your phone, or tablet, providing you round-the-clock access to your assets from all over the globe. But at the same time, it also proposes the question of making your private keys as inaccessible to others as you can because no matter how hard you try, the electronic print of your private key would be embedded into the devices that you are using. It is easier to use and more accessible than a cold wallet but knows the fact that it is more susceptible to hacking than the cold wallet.
If you’re not using a strong password or are careless in your pursuit of securing your funds in a hot wallet, then you might end up losing all of it to theft or a possible cyber hack. Many people don’t bring into account the seriousness of the situation, and they are often careless by boasting their private endeavors with Bitcoin or any other cryptocurrency for that matter on public forums, and that is the moment they get hacked.
Some of the things that you can take into account are using two-factor authentication, strong passwords, and using only safe Internet connections that you completely rely on and trust. Hot wallets are a preferred way of carrying a small amount of crypto from one place to another because you don’t have to carry it in person, and it is more convenient to have access to your funds whenever you want and wherever around. You also must be extremely careful when dealing with hot wallets and never slip the private key from your eyes because if you do, then the chances are that it has already been duplicated and is changing hands with the hacker and a potential buyer somewhere out there.
The most authentic description of a cold wallet is that it is not connected to the Internet in any way, and therefore it has a lesser chance of being compromised and hacked, such as hard bullet; other names for these wallets are offline wallets and or hardware wallets. You can think of them as a USB device containing a dedicated number of crypto tokens on board and a private key that is only known to the user or owner of a cold wallet, and this key doesn’t exist on the Internet and therefore can’t be hacked. The private key, on the other hand, works in parallel with the software provided by the cold wallet so that only the owner of the crypto can access their wallet and see the portfolio without ever having to put any data at risk.
Another extremely effective way of storing your crypto in a cold wallet environment is to use a paper wallet. A paper wallet can be generated from certain websites, and it will produce both public and private keys, which can be printed out on a piece of paper. Therefore a user can only access the cryptocurrency present within the cold wallet if they have that piece of the paper with them along with the private key.
It is kind of a foolproof system because you can’t open the wallet unless you have both; simply having one entity won’t make you run into possession of the other, and therefore you can’t access crypto present within the wallet at all. If you are thinking of long-term investment in Bitcoin or any other cryptocurrency and want the maximum security present out there then a cold wallet is the most effective solution that you can opt for.
Final Thoughts
These are some of the elements that you must know before investing in Bitcoin or any other cryptocurrency for that matter because without the proper information, strategy, and the will to remain consistent in this kind of trading, you are only venturing out on a doomed journey.
Therefore take all the information present here into account when you venture off to your journey in Bitcoin trading and investing also make sure that you are content with the overall time period for which you would be putting away your investment because haste is not going to help you at the end and is only going to disrupt your case.
