Blockchain Bitcoin Investment: A Beginner's Guide To Getting Started

Bitcoin is a type of cryptocurrency that utilizes blockchain technology to store and protect your digital assets. Blockchain is a digital technology that disperses a single code over thousands of different computers, making it nearly impossible for hackers to access the entire code.

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

- Purchasing standalone Bitcoin through an app or exchange such as Coinbase, Binance, or Kraken.

- Investing in a company that utilizes Bitcoin technology, such as exchange-traded funds (ETFs) that include shares from blockchain-related companies.

- Participating in Bitcoin mining by allowing your computer to be used as a node for the public ledger and earning Bitcoin as a reward.

- Investing in a Bitcoin-focused fund such as an exchange-traded fund (ETF) or a Bitcoin investment trust.

- Buying shares in a company with significant Bitcoin exposure, such as a Bitcoin mining company.

It is important to note that investing in Bitcoin carries a high level of risk due to its volatility. Before investing, individuals should carefully consider their risk tolerance, investment strategy, and financial goals.

Choose a crypto exchange

Choosing a crypto exchange is an important step in investing in Bitcoin with blockchain. There are many exchanges to choose from, each with its own unique features, fees, and security protocols. Here are some key considerations to help you select the right crypto exchange:

Reputation and Security:

Look for an exchange with a good reputation and a strong track record of security. Check for features like two-factor authentication, cold wallet storage, and compliance with regulatory practices. Avoid exchanges that have been hacked or had major security breaches in the past.

Cryptocurrency Selection:

Consider the range of cryptocurrencies offered by the exchange. If you plan to invest in Bitcoin only, most exchanges will suffice. However, if you're interested in altcoins or lesser-known tokens, look for an exchange with a wide selection, such as BitMart or Crypto.com.

Fees and Payment Methods:

Compare the fees charged by different exchanges, including trading fees, withdrawal fees, and transaction fees. Some exchanges offer lower fees for high-volume traders or those who hold certain balances. Also, check the payment methods accepted by the exchange, such as bank transfers, credit cards, or debit cards.

User Interface and Features:

Choose an exchange with a user-friendly interface, especially if you're a beginner. Some exchanges, like Coinbase, are known for their intuitive platforms that make it easy for new investors to navigate the crypto market. Additionally, consider the advanced trading features offered, such as margin trading, futures trading, or staking rewards.

Customer Service and Reviews:

Research the exchange's customer service options and user reviews. Look for exchanges that provide multiple support channels, such as live chat, email, and phone support. Read reviews from other users to gain insights into their experiences with the exchange's customer support, ease of use, and overall reliability.

Regulatory Compliance:

Ensure that the exchange complies with the regulatory requirements of your country or region. For example, in the U.S., some exchanges like Coinbase, Kraken, and Gemini follow laws that require users to submit identifying documentation.

Location and Availability:

Check if the exchange is available in your country or state. Some exchanges may have geographic restrictions, so it's important to verify that you can access all the desired features in your location.

Remember, it's crucial to do your research and carefully evaluate multiple exchanges before making a decision. Compare their features, fees, security measures, and user reviews to make an informed choice.

Get a Bitcoin wallet

Getting a Bitcoin wallet is a crucial step in investing in Bitcoin and other cryptocurrencies. A Bitcoin wallet is a place to store your crypto securely. There are several different types of Bitcoin wallets, each with its own advantages and disadvantages. Here are some detailed instructions on how to get a Bitcoin wallet:

Hosted Wallets

Hosted wallets are the most popular and easy-to-set-up type of crypto wallet. When you buy crypto through an app or platform, your cryptocurrency is automatically stored in a hosted wallet. This is because a third party, such as Coinbase, holds your crypto for you, similar to how a bank keeps your money in an account. The main benefit of a hosted wallet is that if you forget your password, you won't lose your crypto. However, a drawback is that hosted wallets don't provide access to all the features of crypto.

To set up a hosted wallet, choose a platform that you trust, taking into account security, ease of use, and compliance with regulations. Create an account with your personal information and a secure password, and consider using two-factor authentication for added security. You can then buy or transfer crypto to your wallet.

Self-Custody Wallets

A self-custody wallet, like the Coinbase Wallet, gives you complete control over your crypto. With this type of wallet, you don't rely on a third party to keep your crypto safe. While the wallet provider supplies the software to store your crypto, you are solely responsible for remembering and safeguarding your password or private key. If you lose or forget your password, there is no way to access your crypto, and if someone else discovers it, they can access your assets.

To set up a self-custody wallet, download a wallet app such as Coinbase Wallet. You don't need to share any personal information to create this type of wallet, not even an email address. Write down your private key, which is usually a random 12-word phrase, and keep it in a secure location. Transfer crypto to your wallet, although it may not be possible to buy crypto using traditional currencies with this type of wallet.

Hardware Wallets

A hardware wallet is a physical device, similar in size to a thumb drive, that stores your private keys offline. They are more complex and costly than software wallets, but they have the advantage of keeping your crypto secure even if your computer is hacked. To set up a hardware wallet, purchase a device from a well-known brand such as Ledger or Trezor, install the necessary software from the official website, and transfer crypto to your wallet.

Hot Wallets and Cold Wallets

Online wallets, or hot wallets, are apps on internet-connected devices such as computers or phones. They generate the private keys to your coins on these devices. Hot wallets are best for small amounts of crypto or crypto that is actively trading on an exchange, and they may be used like a checking account. However, they are more vulnerable to theft, so it's important to use strong passwords, two-factor authentication, and safe internet browsing practices.

Cold wallets, on the other hand, are offline wallets that are not connected to the internet. These include paper wallets, which are generated at certain websites and printed on paper, and hardware wallets, which store your private keys securely offline. Cold wallets are considered much more secure than hot wallets, but they require technical knowledge to set up.

Connect your wallet to a bank account

Connecting your crypto wallet to your bank account is a straightforward process. Firstly, you will need to select a crypto wallet that is compatible with your operating system. Once you have chosen a wallet, you can begin the process of connecting it to your bank account.

To connect your crypto wallet to your bank account, you will need to follow a few simple steps. Firstly, find a reliable crypto exchange platform that supports the specific cryptocurrency you are dealing with and the fiat currency you want to exchange it for. Check reviews to ensure the platform is legitimate and secure, and also check that it supports your country. For example, Blockchain.com Wallet users in the US can buy with instant USD ACH transfers, while Coinbase allows US customers to connect their bank accounts via ACH bank transfer and European customers to buy Bitcoin with a SEPA transfer, Faster Payments, or Easy Bank Transfer.

Once you have selected a platform, register and verify your account, following any required procedures such as KYC and AML. You will then need to find the deposit or transfer option, which will allow you to send virtual coins from your wallet to your account on the exchange. You will need to find the exchange's wallet address and send your Bitcoin to this address. Alternatively, if you don't have any crypto funds in your wallet, you can buy them directly from the exchange platform.

Connecting your crypto wallet to your bank account will allow you to seamlessly transfer funds between the two and enable you to withdraw your Bitcoin to a bank account.

Place your Bitcoin order

Now that you have chosen a Bitcoin exchange, set up your Bitcoin wallet, and connected your wallet to your bank account, you are ready to place your Bitcoin order.

Your cryptocurrency exchange will have everything you need to buy Bitcoin. The big question is, how much Bitcoin should you purchase?

Some coins cost thousands of dollars, but exchanges often allow you to buy fractions of a single coin—your initial investment could be as low as $25.

Investing in Bitcoin is very risky, and it is important that you carefully determine your risk tolerance and review your investment strategy before you purchase any Bitcoin.

Manage Your Bitcoin Investments

After you have purchased Bitcoin, you can:

• Use your coins to make online transactions
• Hold your coins for a long period in the hopes that they will appreciate in value
• Perform day trading with your coins—that is, buying and selling coins with other Bitcoin owners, which can be facilitated on the cryptocurrency exchange

Your cryptocurrency exchange will provide you with everything you need to buy and sell coins.

Manage your Bitcoin investments

Once you've purchased your Bitcoin, you'll need to store it in a wallet. There are two types of wallets: hot wallets and cold wallets. A hot wallet is connected to the internet and is generally more convenient, but it is less secure. A cold wallet, on the other hand, is a physical storage device that keeps your cryptocurrency keys completely offline and is therefore more secure.

If you're only going to be purchasing small amounts of Bitcoin, a hot wallet with an insured crypto exchange may be sufficient. However, if you're going to be trading large amounts, a cold wallet is a better option as it provides an extra layer of protection.

When choosing a hot wallet, look for software that enables you to store your coins on your computer or a mobile app that you can use on your phone. For a cold wallet, consider a hardware wallet that is similar to a USB drive and typically costs between $60 and $100.

It's important to keep your Bitcoin investments secure. Deal only with reputable exchanges and digital wallet providers, protect your accounts with strong passwords and two-factor authentication, and be vigilant about phishing scams.

Additionally, it's crucial to periodically review your entire investment portfolio to assess whether you need to rebalance your holdings. This may involve increasing or decreasing your crypto exposure depending on your investment goals and financial needs.

Frequently asked questions