3 Ways to Invest in Bitcoin

Table of contents:

3 Ways to Invest in Bitcoin
3 Ways to Invest in Bitcoin
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Bitcoin (or BTC) is a virtual currency and payment system created by a software developer under the pseudonym Satoshi Nakamoto. Although initially not very well known, Bitcoin has attracted a lot of attention in the financial world in recent years. With this new number of stakeholders, investing in Bitcoins today is easier than ever. However, it is worth noting that this is not a traditional type of investment, like the financial market. In fact, Bitcoin is an extremely unstable currency and it's critical that you understand all the risks involved before you spend any cents.

Steps

Method 1 of 3: Buying and Selling Bitcoin

Invest in Bitcoin Step 1

Step 1. Create a Bitcoin wallet

Nowadays, buying and selling BTC is very easy, even for those who have never heard of the currency. The first step is to create a virtual Bitcoin wallet. As the name suggests, your wallet is a digital account that facilitates all types of transactions, such as buying, storing and selling BTC; think of it as your bank account. However, unlike all the bureaucracy required to open an account at a physical bank, opening a BTC wallet takes less than a minute and the entire procedure can be done online.

The websites Coinbase.com, Coinmkt.com, Blockchain.info and Hivewallet.com are just a few examples of reputable wallets that are reliable and easy for beginners to use

Invest in Bitcoin Step 2

Step 2. Link your bank account to your wallet

After opening your virtual wallet, it's time to buy your first BTC. Typically, to do this, you will need to provide the details of a real bank account, just as if you were making a deposit to your Paypal account or any other virtual payment service. In general, you will be asked for at least the following data: your account number, agency number and your full name. These numbers can be found easily by going to your bank's website.

  • A contact option such as a phone number may also be requested.
  • Linking your bank account to a BTC wallet is no more or less secure than shopping online. Any serious and reputable website that works with Bitcoins makes its high security and data encryption standards clear. While these services have been targets of hacker attacks in the past, so have any major online resellers.
Invest in Bitcoin Step 3

Step 3. Buy BTC with money from your account

Once you have provided your bank details and they have been verified, you should have no difficulty purchasing BTC. Usually, on your e-wallet page, there is a button called "Buy Bitcoin" or something similar; just click on it and follow the steps to transfer money from your account to your Bitcoin wallet.

Importantly, the price of BTC can and does vary from day to day; to values ​​in significant values. As Bitcoin is a relatively new currency, the market is still very unstable. The current BTC quote must appear before you complete the transaction; in October 2014, for example, 1 BTC was worth $350

Invest in Bitcoin Step 4

Step 4. Use your BTC's to buy from resellers that accept you

Recently, several large companies have started to accept BTC as a form of payment. Although they are still in the minority, some of the biggest online retailers have already joined this new trend. Check out the following list of websites that accept this currency:

  • Amazon.
  • Wordpress.
  • Overstock.com.
  • Bitcoin.travel.
  • Victoria's Secret.
  • Metro.
  • Zappos.
  • Whole Foods.
  • If you have experience in markets, you can make your BTCs pay more by buying them when the price is low and spending them when it is high. After that, you can sell the purchased items to make a profit or simply keep them.
Invest in Bitcoin Step 5

Step 5. Sell your BTC to another user

Unfortunately, selling BTC is not as simple as buying them. There is no method to "draw" them back to your bank; instead, you'll need to find a buyer willing to pay for them with cash, goods, or services. In general, the easiest way to do this is to register with a Bitcoin marketplace, where, after finding a buyer, the website will broker the deal. To use this method, you will need to create a seller account and verify your identity, which is a separate process from creating the account.

  • In the US, CoinBase and LocalBitcoins are two markets that offer this type of service. In the UK, BitBargain and Bittylicious are two reliable options.
  • In addition, some sites, such as Purse.io, allow sellers to transfer BTCs to the buyer, who then buys some product online and ships it directly to the seller's home. In the end, this is nothing more than a way to use your BTC to shop on sites that do not accept virtual currency.
Invest in Bitcoin Step 6

Step 6. Alternatively, sell BTCs on a trading site

Another good option for sellers is to use an exchange site. They work by pairing two parties: one interested in selling and the other interested in buying. Once this is done, the site acts as an intermediary, holding the money until both users are verified and the transaction is completed. There is usually a small fee associated with using these services. It is important to emphasize that this process is not usually very fast. In fact, there are several case reports where these sites took a long time to complete the transaction, especially compared to other alternatives.

  • Among the exchange sites, some famous options are Circle, Kraken and Virtex.
  • Still, there are some sites, like Bitcoinshop, that allow the exchange of BTC for other digital currencies, like Dogecoin and Litecoin.

Method 2 of 3: Using Alternative Options

Invest in Bitcoin Step 7

Step 1. Consider setting up a regular purchasing system

If you are really interested in this type of investment, you can set aside a portion of your salary to buy virtual currencies, which is a great way to accumulate BTC without having to make a single expensive transaction. Many wallets, such as Coinbase, offer the option to set up automatic BC purchases. Typically, this method works like this: you select a value and a time frame, and the wallet makes the purchase automatically.

Invest in Bitcoin Step 8

Step 2. Consider buying BTC locally

If you want to keep your money in your community, you can use a service that allows you to sell it to people close to you. Instead of pairing users from anywhere in the world, some sites have the option to search for sellers in your region. If you choose to meet with these users in person, take all the usual precautions to meet someone you've met online. Make an appointment in a public place during the day and, if possible, do not go alone. This article is worth checking out:

The website localbitcoins.com is one of the most prominent in the industry and allows the user to search for buyers in more than 6,000 cities in 200 countries

Invest in Bitcoin Step 9

Step 3. Consider putting your money into a company that invests with BTC

An option that is often considered "less risky" than trading BTC directly is to leave your capital in investment companies. The Bitcoin Investment Trust, for example, allows users to buy and sell company stock, just as it can be done on the stock market. It uses this raised capital to sell and buy BTC with the goal of generating dividends for investors. As they only trade BTC, the company value is directly associated with the virtual currency value. However, some users find this option more interesting because Trust's professional investors are (presumably) specialists and there is no need to deal with buying and selling virtual currency.

Invest in Bitcoin Step 10

Step 4. Consider mining BTC

Have you ever stopped to wonder where BTCs come from? In fact, each new fraction of the coin is created through a computational process called mining. In extremely simplified terms, a mining computer competes with other machines in solving extremely complex algorithms. Whoever solves the problem first gets paid. The benefits of mining yourself include the fact that you are generating BTC without spending any real money (not counting energy costs). However, in practice, to generate any considerable value a high investment in high-performance hardware is often required.

  • The mining process is extremely complicated and is beyond the scope of this article. For more information, check out our article on Mining Bitcoins.
  • Furthermore, it is important to emphasize that the BTCs are distributed in blocks. Therefore, it is interesting to join a group of miners, who work together and share the rewards. Trying to solve the algorithms yourself is extremely difficult, and you can go over a year without getting a single cent.

Method 3 of 3: Profiting From Your Investment

Invest in Bitcoin Step 11

Step 1. Buy low, sell high

Fundamentally, the strategy to profit from trading BTC is not much different from that of the financial market. However, buying when the currency is undervalued and selling when it is up is a high risk strategy. Unfortunately, because the market is so volatile, it is extremely difficult to predict BTC price fluctuations and any investment in the currency has an inevitably high associated risk.

See an example of the volatility of this market. In October 2013, the price of BTC ranged between $120 and $125 dollars. Within a month and a half, the price skyrocketed to almost $1000 dollars. A year later, it had already suffered a devaluation of almost 65%. That said, it's very difficult to predict when the next peak will be (if it happens)

Invest in Bitcoin Step 12

Step 2. Stay up to date with market trends

As stated above, it is impossible to predict variations in this currency. However, the best option to profit from these operations is to follow the market closely. As it can fluctuate quickly, some good profit opportunities, such as sudden bursts, can come and go in a matter of days. So always be on the lookout for variations to find good investment opportunities.

You can also visit some online discussion forums, such as Bitcointalk.org, to talk to other investors about market fluctuations. However, keep in mind that no investor, no matter how expert, can predict currency fluctuations with certainty

Invest in Bitcoin Step 13

Step 3. Invest part of your capital in safer options

One of the ways to have a little more stability in your BTC portfolio is to leave part of your capital in more stable investments, such as a portfolio of stocks or "commodities". There are sites that allow you to do this, like coinabul.com, for example, whose users can buy gold directly from BTC. You can also sell part of your funds and invest in the financial market or in bonds. While a conservative portfolio is generally the best option for a stable investment with moderate dividends, most industry experts agree that even the riskiest stocks have a lower associated risk than the BTC market.

Invest in Bitcoin Step 14

Step 4. Never invest money that you cannot afford to lose

As with all types of risky investments, capital spent on BTC should be thought of as "lost" money: if you make a profit, excellent; if you don't profit, it cannot affect your financial health. Don't invest money without which you cannot survive. BTCs can evaporate in the blink of an eye (this has happened in the past), so the consequences of investing large amounts of money can be devastating.

Don't fall into the sunk costs fallacy, that is, the idea that you've already lost a lot of money to cash out your investment. Losing a great selling opportunity and walking away with a small loss is still better than losing most of your capital

Tips

  • If you're lucky, you can live near a BTC ATM. Check Bitcoinatmmap.com to see if there is one near you.
  • Note that Bitcoin price may vary from country to country. If you're willing to take the risk, you can profit by buying cheap BTC in one country and selling it at a higher price in another. Still, it is possible to lose money on these transactions if the market suddenly changes.
  • If you are interested in maintaining your anonymity, you can purchase Bitcoins via email using a service such as BitBrother LLC. For a fee, they buy virtual currency without you having to be online.

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