Strategies To Fund Your Bitcoin Investment Journey

Bitcoin is a decentralised digital currency that operates without the oversight of banks and governments. It is one of the most widely used types of cryptocurrency, with virtual coins or tokens used in place of physical cash.

There are several ways to invest in Bitcoin, both directly and indirectly. Here are some of the most common methods:

- Bitcoin wallets and cryptocurrency exchanges: You can purchase Bitcoin from cryptocurrency exchanges such as Coinbase, Kraken, Gemini, and Crypto.com. These platforms typically offer a range of cryptocurrencies and carry different fees and consumer protections.

- Traditional stockbrokers: Robinhood was one of the first mainstream investment brokers to offer Bitcoin trading. Other options include Webull, TradeStation, and Fidelity.

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

- Bitcoin ATMs: These machines function like regular ATMs but allow you to buy and sell Bitcoin. They are often found in convenience stores and charge a purchase fee and a conversion fee for exchanging fiat currency to Bitcoin.

- Bitcoin exchange-traded funds (ETFs): The SEC recently approved spot Bitcoin ETFs, which track the price of Bitcoin and can be traded over major exchanges.

Before investing in Bitcoin, it is important to understand the risks and volatility associated with cryptocurrencies. Conduct thorough research, evaluate your risk tolerance and investment strategy, and only invest what you can afford to lose.

Choose a crypto exchange

Choosing a crypto exchange is an important step in investing in Bitcoin. There are several factors to consider when making this decision. Here are some detailed instructions to help you choose a crypto exchange:

• Research and compare different exchanges: Look for well-known and reputable exchanges such as Coinbase, Kraken, Gemini, and Binance. Compare their features, fees, security measures, and user reviews. Consider the range of cryptocurrencies they offer and whether they meet your specific needs.
• Security and Safety: Prioritise exchanges that prioritise security and safety. Look for exchanges that offer two-factor authentication, strong password requirements, and secure storage options for your digital assets. Avoid exchanges with a history of security breaches or hacks.
• Fees and Charges: Understand the fee structure of each exchange. Consider the impact of transaction fees, trading fees, and withdrawal fees on your overall investment. Some exchanges offer volume discounts or lower fees for high-volume traders.
• Regulatory Compliance: Choose an exchange that follows regulatory requirements, especially if you are in a highly regulated region. Ensure the exchange complies with Know Your Customer (KYC) rules and has measures in place to prevent money laundering and fraud.
• User Experience and Functionality: Consider the user interface and functionality of the exchange. Look for an exchange with a user-friendly interface that makes it easy to navigate and execute trades. Check for additional features like educational resources, customer support, and advanced trading tools.
• Geographic Availability: Ensure that the exchange is available in your country and complies with local regulations. Some exchanges may not be accessible in certain states or countries, so verify their availability in your region.
• Payment Options: Review the payment options supported by the exchange. Check if they accept credit cards, debit cards, bank transfers, or other payment methods that are convenient for you.
• Customer Support: Opt for an exchange that provides reliable customer support. Look for multiple channels of communication, such as live chat, email, and phone support. Prompt and responsive customer service can make a significant difference in your trading experience.
• Advanced Features: If you are an experienced trader, consider exchanges that offer advanced features like margin trading, futures trading, and limit orders. These features can provide more sophisticated trading opportunities.
• Staking and Rewards: Some exchanges offer staking rewards or interest on your crypto holdings. If you plan to hold your Bitcoin for the long term, choosing an exchange with staking options can be beneficial.

Remember to do your due diligence and carefully review the terms and conditions of each exchange before making a decision. Always consider your investment goals, risk tolerance, and financial situation when choosing a crypto exchange.

Set up an account

Setting up an account to invest in Bitcoin is a straightforward process. You can follow these steps:

• Select a cryptocurrency exchange: Choose a reputable exchange that suits your needs, considering factors such as security, fees, trading volume, minimum investment requirements, and the types of cryptocurrency available. Examples include Coinbase, Gemini, Kraken, Binance, and Crypto.com.
• Create an account: Sign up and provide personal information to verify your identity, such as your name, email address, and date of birth. Some exchanges may also require additional documentation, such as a driver's license, passport, or a selfie for facial recognition.
• Add funds to your account: Fund your account by connecting it to your bank, initiating a wire transfer, or using a debit or credit card for payment. Different deposit methods may have varying processing times, and it's important to be aware of any associated fees.
• Enable two-factor authentication: To enhance the security of your account, enable two-factor authentication. This adds an extra layer of protection and makes it more difficult for unauthorized users to access your account.
• Explore wallet options: Decide whether you want to use the built-in wallet provided by the exchange or opt for a third-party hot or cold wallet. Hot wallets are connected to the internet and offer convenience, while cold wallets are offline storage devices that provide enhanced security but come with their own risks, such as device failure or loss of access codes.

Remember to research the specific requirements and features of the exchange you choose, as the process may vary slightly between different platforms.

Add funds to invest

Once you've chosen a broker or cryptocurrency exchange, you'll need to add funds to your account before you can start investing in crypto. You can add money to your account in a variety of ways, including:

• Connecting it to your bank account
• Initiating a wire transfer
• Using a debit or credit card for payment

The time it takes for funds to become available in your account will depend on the deposit method and the broker or exchange you've chosen. While some platforms allow credit card deposits, these can come with additional costs and risks. Credit card companies often treat crypto purchases as cash advances, leading to higher interest rates and extra fees. When you factor in the fees charged by the broker or exchange, you could lose up to 10% of your crypto purchase. Therefore, it's generally advisable to pay for crypto purchases with cash or with another crypto you own.

Place your order

Once you've decided to invest in Bitcoin, you'll need to place your order. Here's a step-by-step guide:

Step 1: Choose a Crypto-Trading Service or Venue

You can purchase Bitcoin from cryptocurrency exchanges, such as Gemini, Kraken, Coinbase, Crypto.com, Binance, and Bitfinex. These exchanges offer a variety of features, cryptocurrencies, and fees, so be sure to research which one best suits your needs.

Step 2: Connect Your Exchange to a Payment Option

Most exchanges allow you to connect your bank account directly or link a debit or credit card. Keep in mind that using a credit card to purchase Bitcoin can result in higher interest rates and additional fees.

Step 3: Place Your Order

When placing your order, you'll need to decide how much Bitcoin you want to buy. Bitcoin's price is often quoted in U.S. dollars, and you can buy a fraction of a Bitcoin, as your initial investment could be as low as $25.

Step 4: Safe Storage

After purchasing Bitcoin, you'll need to store it securely. You can use a hot wallet, which is connected to the internet and provided by your exchange or a third-party provider. Alternatively, you can use a cold wallet, which is an offline storage device similar to a USB drive. Cold wallets are considered more secure but require technical knowledge to set up.

Step 5: Manage Your Investments

Once you've purchased Bitcoin, you can use it for online transactions, hold it for potential long-term appreciation, or trade it with other Bitcoin owners. Remember that investing in Bitcoin is risky due to its volatile nature, so carefully consider your risk tolerance and investment strategy before making any decisions.

Store your Bitcoin

Once you've bought your Bitcoin, you'll need to store it in a wallet. There are two main types of wallets: hot wallets and cold wallets.

Hot Wallets

Hot wallets are connected to the internet and are generally more convenient for accessing and making transactions with your Bitcoin. Examples of hot wallets include:

• Electrum: Software that enables you to store your coins on your computer
• Mycelium: A mobile-only app for Android and iPhone users

However, hot wallets are vulnerable to hacking. If the hot wallet provider is hacked, your Bitcoin may be at risk.

Cold Wallets

Cold wallets are not connected to the internet and are considered the safest storage method for your Bitcoin. They are usually portable devices similar to flash drives that cost between $60 and $100. Examples of cold wallets include:

• Ledger Nano X
• Trezor Model T

Cold wallets are less convenient as they are not easily accessible for transactions. They also require more technical knowledge to set up.

Custodial vs Non-Custodial Wallets

Another way to categorize Bitcoin wallets is whether they are custodial or non-custodial.

Custodial wallets are managed by a third party, such as an exchange like Coinbase, who stores your private keys for you. While this can provide some peace of mind, custodial wallets have been the target of many attacks.

Non-custodial wallets, on the other hand, are those you use to store your keys without any third-party involvement.

Additional Security Measures

• Use a strong password and two-factor authentication for your wallet and exchange accounts.
• Regularly back up your wallet to prevent data loss.
• Keep your software and operating systems up to date to patch security vulnerabilities.
• Use a seed phrase: a series of randomly generated words that act as a master password for your wallet.
• Only keep a small amount of Bitcoin in your hot wallet for day-to-day transactions and store the majority of your Bitcoin in a cold wallet.

Frequently asked questions