The Future Of Money: Why You Should Invest In Bitcoin

Bitcoin is a cryptocurrency asset that has grown in adoption and value over time. It was the first-ever cryptocurrency, and its performance often reflects the crypto market at large. For instance, an investment of ₹2000 in Bitcoin on January 1st, 2023, would have amounted to ₹4120 by the end of October 2023. As Bitcoin approaches its next halving in 2024, its prices are steadily increasing, making now an opportune time to invest.

There are several ways to invest in Bitcoin. Here are some of the most common methods:

- Cryptocurrency exchanges: You can purchase Bitcoin from various cryptocurrency exchanges, such as Gemini, Kraken, Coinbase, Crypto.com, and Mudrex. These exchanges offer different cryptocurrencies, fees, and consumer protections, so conducting thorough research beforehand is essential.

- Traditional stockbrokers: A few traditional investment brokers, like Robinhood Crypto, Webull, TradeStation, and Fidelity, offer their customers the ability to buy and sell Bitcoin.

- Bitcoin ATMs: These function like regular ATMs but allow you to buy and sell Bitcoin. They are often placed in locations where regular ATMs are found, such as convenience stores.

- Bitcoin exchange-traded funds (ETFs): The Securities and Exchange Commission (SEC) recently approved spot Bitcoin ETFs, which track Bitcoin's price and trade on major exchanges. This approval makes it easier for traditional investors to access Bitcoin.

- Peer-to-peer money transfer apps: Cash transfer services like PayPal, Venmo, or Cash App enable users to purchase, store, send, and sell Bitcoin directly through their apps.

Before investing in Bitcoin, it is crucial to understand the risks and conduct thorough research. Bitcoin's value is highly volatile, and regulatory changes or other factors can significantly impact its price. Additionally, ensure you have the necessary information, such as your Social Security number and bank account details, to set up a cryptocurrency account.

Choose a crypto investment app/exchange

There are several crypto investment apps and exchanges available, each with its own unique features and offerings. Here are some of the top options to consider:

Coinbase:

Coinbase is often recommended for beginners as it offers a user-friendly platform and an easy-to-use interface for buying and selling cryptocurrencies. It provides a large number of supported cryptocurrencies, strong security measures, and advanced trading options. However, it has relatively high fees and has received poor user feedback regarding customer support.

Robinhood Crypto:

Robinhood is a traditional broker that offers crypto trading alongside stocks. It provides an easy-to-use platform and the convenience of having stocks and crypto in one app. However, it has limitations, such as the inability to trade crypto-to-crypto directly.

Gemini:

Gemini is known for its strong security measures and is available in all 50 U.S. states. It offers a range of features, including a crypto reward card and the ability to pay for goods and services with crypto. However, it has a convoluted fee structure and limited customer service options.

Kraken:

Kraken is one of the oldest crypto exchanges and is suitable for both beginners and advanced traders. It offers competitive fees, a wide range of cryptocurrencies, and advanced trading tools like margin trading and futures trading. However, it is not available in all U.S. states and has limited fiat currency support.

Crypto.com:

Crypto.com provides a vast ecosystem with over 350 cryptocurrencies, a native token (CRO), and a crypto visa card. It offers low fees, customizable alerts, and watchlists for advanced traders. However, higher trading fees are incurred for low-volume crypto investors.

EToro:

EToro is a newcomer to the U.S. market, offering a crypto exchange and an online brokerage platform. It provides an engaging communal experience and allows users to copy the trading strategies of advanced users.

When choosing a crypto investment app or exchange, it is essential to consider factors such as fees, cryptocurrency selection, security, customer service, and regulatory compliance. Additionally, it is important to remember that crypto trading is not subject to the same investor protections as traditional investments, so there are risks involved.

Sign up on the platform and complete KYC

To get started with investing in Bitcoin, you will need to sign up for an account on a cryptocurrency exchange platform. One of the most popular platforms is Coinbase, which offers users the ability to buy and sell Bitcoin and a growing number of altcoins.

To sign up for Coinbase, you will need to provide your name, email address, and create a password. You will also need to verify your email address by clicking on a link sent to your inbox.

Once you have signed up, you will need to complete the Know Your Client (KYC) process by verifying your identity. This is a legal requirement to prevent fraud and ensure compliance. The process typically involves uploading photos or scans of government-issued identification documents, such as a driver's license, passport, or national identity card. Some platforms may also require additional information, such as your employer and source of funds.

It is important to note that you will have limited functionality on your account until the KYC process is completed. The verification process typically takes between 10 minutes to 48 hours. After successful verification, you will receive a confirmation email.

Make sure to keep your login credentials secure and consider enabling two-factor authentication for added security.

Add funds and place an order to buy Bitcoin

To add funds and place an order to buy Bitcoin, you'll need to follow a few steps. Here's a detailed guide to help you through the process:

Step 1: Choose a Crypto Exchange

First, you'll need to select a cryptocurrency exchange that suits your needs. Popular exchanges like Coinbase, Kraken, Gemini, and Binance offer a range of features, including buying, selling, and holding cryptocurrencies. These exchanges also allow users to transfer crypto to their online wallets for safekeeping. When choosing an exchange, consider factors such as security, fees, and the number of cryptocurrencies available for trading.

Step 2: Fund Your Account

Once you've chosen an exchange, you'll need to fund your account. You can typically use various payment methods, such as bank transfers, credit cards, or debit cards. Each payment method may have different processing times and fees associated with it, so be sure to review the options before proceeding. It's important to note that some exchanges may require you to verify your identity before allowing you to deposit funds.

Step 3: Place a Buy Order

After your account is funded, you can place your first order to buy Bitcoin. On the exchange's platform, look for the option to buy Bitcoin, either by selecting it from a list of cryptocurrencies or entering Bitcoin's ticker symbol, BTC. Next, input the amount you want to invest. You can choose to buy a whole Bitcoin or a fraction of a Bitcoin, depending on your budget. Review the total cost, including any applicable fees, before placing your buy order.

Step 4: Withdraw to Your Wallet (Optional)

Once you've purchased Bitcoin, consider withdrawing it to a secure wallet, especially if you don't plan to trade it immediately. You can choose between a hot wallet, which is an online wallet, or a cold wallet, which is an offline storage option. Hot wallets are convenient for active trading but carry higher security risks. Cold wallets, such as hardware wallets or paper wallets, are considered more secure but may be less user-friendly. Always ensure that you carefully input the correct wallet address when withdrawing your Bitcoin to avoid losing your funds.

Important Considerations:

• Security: Privacy and security are critical when dealing with cryptocurrencies. Always enable two-factor authentication and use strong, unique passwords for your accounts.
• Volatility: Bitcoin is known for its high volatility, so be prepared for potential gains and losses.
• Regulations: Before buying Bitcoin, ensure you understand the legal, regulatory, and tax implications in your region.
• Fees: Different payment methods and exchanges may have varying fees. Compare the fees to find the most cost-effective option for your needs.
• Investor Protections: Keep in mind that Bitcoin investments are not insured by the Securities Investor Protection Corporation like traditional investments.

Select a safe storage option

When it comes to storing your Bitcoin, there are several options to choose from, each with its own advantages and disadvantages. Here are some of the most common and safe storage options:

• Hot Wallets: Hot wallets are connected to the internet and are typically used for small amounts of cryptocurrency or for active trading. They can be accessed through computers or mobile phones and are usually free or low cost. However, they are more susceptible to hacking and phishing attempts. Examples of hot wallets include online wallets, mobile wallets, and desktop wallets.
• Cold Wallets: Cold wallets are offline storage solutions that are not connected to the internet. They are considered one of the safest options for storing large amounts of Bitcoin over the long term. Cold wallets include hardware wallets and paper wallets. Hardware wallets are physical devices similar to USB drives, while paper wallets involve printing your public and private keys on paper. While cold wallets offer superior security, they may be less convenient for quick transactions and are susceptible to physical damage or loss.
• Crypto Exchanges: Crypto exchanges provide integrated platforms that offer various services, including wallet services for storing cryptocurrencies. They support a wide range of cryptocurrencies and offer the convenience of quick transactions. However, they are vulnerable to hacking and security breaches and may have higher fees. Examples of crypto exchanges include Coinbase, Binance, and Kraken.
• Desktop Wallets: Desktop wallets are programs that reside on your computer. They are not considered the safest storage method as they are connected to the internet and are vulnerable to hacking.
• Mobile Wallets: Mobile wallets are programs hosted on mobile devices. Similar to desktop wallets, they are not very secure as they are connected to the internet.
• Web-based Wallets: Web-based wallets are hosted by a web service and are not secure as you are allowing a third party to store your keys.

When selecting a storage option, it is important to consider factors such as security, convenience, accessibility, and the amount of cryptocurrency you plan to store. For larger amounts or long-term storage, cold wallets are generally recommended. For smaller amounts or active trading, hot wallets may be more suitable. Additionally, it is crucial to prioritize security measures such as two-factor authentication, regular software updates, and backup solutions to protect your Bitcoin from potential threats.

Store Bitcoin in a hot or cold wallet

When it comes to storing Bitcoin, there are two main types of wallets: hot wallets and cold wallets. Both types of wallets protect your public and private keys—the cryptographically generated strings of letters and numbers that allow you to authorise your crypto transactions. The right type of wallet for you depends on how much crypto you hold, your security preferences, and how easily accessible you need your funds to be.

Hot Wallets

Hot wallets are connected to the internet through your computer or phone, making them more convenient for regular transactions. They are usually free, and some even pay interest on stored crypto. Examples of hot wallets include MetaMask, Exodus, and Mycelium. Some crypto exchanges, such as Coinbase, Gemini, and Binance, also offer hot wallets.

Pros of Hot Wallets:

• User-friendly: Always being connected to the internet allows for easy storage and access to your cryptocurrency from anywhere.
• Cost: Most hot wallets are free to use.
• Convenience: Hot wallets linked to a particular exchange are convenient for interacting within that ecosystem.
• Accessibility: Most have recovery and backup options and can be accessed from multiple devices.

Cons of Hot Wallets:

• Security: Being connected to the internet makes hot wallets more vulnerable to hacking.
• Ease of transfer to exchanges: As cold wallets require an extra step to connect online, hot wallets are more easily accessible for transfers to exchanges.

Cold Wallets

Cold wallets, on the other hand, keep your crypto keys offline, adding an extra layer of security from potential hacks. Cold wallets are hardware storage devices that are not connected to the internet, making them less vulnerable to online theft. Examples of cold wallets include Ledger, Trezor, and KeepKey.

Pros of Cold Wallets:

• Security: As your private keys never leave the device and transactions are signed locally, cold wallets are significantly less vulnerable to cyberattacks.
• Autonomy: Cold wallets allow you to be the sole custodian of your crypto assets, eliminating third-party applications from your storage experience.
• Portability: Cold storage solutions are often small, plug-in devices that can be easily carried around and used to log into decentralised apps.

Cons of Cold Wallets:

• Price: Hardware wallets can range in price, making them more expensive than online options.
• Transfers: Transfers between cold storage devices are slightly more cumbersome than with hot wallets.
• Layout: Some people may experience a learning curve when it comes to navigating the smaller screens on hardware devices.
• Accessibility: Most have recovery and backup options for a lost password, but not for a lost device.

Both hot and cold wallets have their advantages and disadvantages. The best option for you will depend on your specific needs and priorities. If you prioritise security and are looking for a long-term storage solution, a cold wallet may be the better choice. On the other hand, if convenience and ease of access are more important to you, a hot wallet might be the way to go. Ultimately, many people utilise a combination of both hot and cold storage options to create a secure and seamless transaction experience.

Frequently asked questions