Introduction
Many people think that investing in bitcoin is very complicated. This thought scares off many people, and that is why traders and investors should read this article. This article has been written very carefully so that people who are interested in bitcoin but do not know how they should begin or get intimidated have a source for help. The sole purpose of this is to guide you through the process of investing in bitcoin. Buying bitcoin is not difficult, and as the crypto world has developed, exchanges have also improved.
A few years ago, when these cryptocurrencies had not become so popular, security used to be a major issue. This was a major concern for traders because there was no guarantee if the investment into the bitcoin would be profitable or not. But now, most of the exchanges in the market are regulated and legitimate. This is a good thing as it makes investing in bitcoin much easier and simple. With the provision of exchanges, the process of buying bitcoin is simplified greatly for customers as well.
Before you start to invest in bitcoin, you should know some things. Bitcoin is one of the most popular cryptocurrencies in the market. One of the reasons why it is so popular is due to the market value being so high, and that is why people want to invest in it even more. You should already know that no matter how safe a platform seems, you should still take as many precautionary measures as possible. This includes researching a platform such as the exchange or wallet you choose to work with, making sure that they have security policies that would provide protection, as well as other safety measures.
And as an investor, you will need some things so that your experience is even more smooth. This includes creating a cryptocurrency account with an exchange. A lot of platforms have certain policies that have been implemented to maintain safety. A common one is the KYC policy which is the Know Your Customer policy, and this helps to verify users so that no fake identity is being used. In order to pass this, you need to have documents that would verify your identity and these need to be of 2 types. One that is issued by the government, and the other has to be a utility bill or anything that would confirm your address. It is also best if you have an internet connection that is really strong and steady, as online investing works best when you have a good connection. Other than this, you also have to choose a payment method that works best for you and is the most convenient because you need to be able to access your funds easily and quickly. This is an important feature as it is the only way you will be able to deposit the amount and withdraw too.
Another thing that you should get is an online wallet, as this plays the most vital role in online transactions. You need this to make deposits or for when you want to withdraw an amount, but most importantly, it is like a safe haven for your digital assets. That is why a wallet has to be secure and legitimate. Safety is a very important feature for many people, and that is why people prefer to choose well-known platforms. Other things such as private keys to certain addresses should also be kept private as it can give access or a chance to criminals to steal them.
First Step: Finding A Cryptocurrency Exchange
The first thing an investor has to do before being able to start investing is to make an account with a cryptocurrency exchange platform. In order to participate in the market, this is a must because without an exchange. Such procedures become very difficult. But you should also know that there are many types of exchanges present in the market. Some allow their users to withdraw their assets and funds to a separate wallet. But then there are others that do not allow this, and they only let their customers hold their funds on the account provided. It really just comes down to what a customer is looking for. Most people prefer an exchange that allows them to transfer their funds to a separate wallet because it provides additional security.
But when you start looking for a cryptocurrency exchange in the market, then be prepared to come across many different types. This is the time when knowing what you are looking for and what you want exactly comes in very handy. Now an important thing to remember is that Bitcoin is a decentralized digital asset, and that means that it is not controlled by any company or person. Rather, it can be owned individually. So in favour of this, there are a couple of exchanges that let their customers keep their identities private. This means that customers do not have to provide any information that is personal. But exchanges that allow this are also decentralized, and they are not controlled by any individual or company. This raises alarms because if things were to go wrong, then there is nobody that would be able to control or stop any illegal thing from occurring.
So yes, at times, such platforms play a role in illegal activities happening in the market, but these platforms have also proven to be useful for the unbanked world. Examples of these could be refugees or people that belong to underdeveloped countries. Due to such factors, many people continue to support exchanges that are anonymous and decentralized because they believe that they do more good than bad.
But exchanges for Bitcoin and other cryptocurrencies which are on the rise and becoming popular day by day are those which are not decentralized. This means they are monitored and studied by some source, and such platforms also have the KYC policy. KYC stands for Know Your Customer, and it is a very important policy as it maintains the security of the exchange by only letting authentic and verified customers enter. There are many platforms like these in the US, and they include Gemini, Coinbase, Kraken, Binance and many more. As time is going on, the number of exchanges that implement the KYC policy is increasing, as well as their features that are offered to customers. These exchanges are very good as they offer their customers Bitcoin, but there are many other options too, such as various altcoins.
If a user is looking to really enjoy their experience of investing and trading, then you should choose one from Coinbase, Gemini or Kraken. The exchange as a whole provides you with advanced trading tools and altcoins, too, which prove successful to them. But one thing you must focus on throughout your trading experience is to look out for your security, so when you make an account for cryptocurrency exchange, you should use two-factor authentication and create a strong password. This ensures that your account is secure.
Second Step: Choose A Payment Method
The second step that you have to follow is to pick a payment method that you want to use for your deposits and withdrawals. Once you have confirmed the exchange you want to work with is to collect all your documents that contain personal information. The sort of personal documents needed by the exchange varies from one to another. It also depends on their policies as they define the requirements that customers have to adhere to. Some examples of documents are a copy of your driving license, your social security number, if you have an employer, then their details, and the source from where you get your income. This whole procedure is nearly the same as the one users go through when they want to create a brokerage account.
The purpose of submitting documents is that the exchange can verify your identity, and once that has happened, then you can choose the payment method you feel is most convenient. The four exchanges, which have been mentioned above, also have a couple of payment options for users, and these include bank wire transfer and use of credit or debit card. However, a lot of times, credit cards are not advised because cryptocurrency is already of such a volatile nature, and that is why many people prefer something else.
Bitcoin is still not accepted by a lot of banks because of the nature of the cryptocurrency. That is why if a user of such banks accesses exchanges, then you should be prepared to be questioned or advised to not use such platforms. But there are many other banks that are fine with users depositing funds to exchanges or similar platforms. If you want that the process is smooth and is not delayed, then it is best to check whether your bank is happy to cooperate with the exchange or not.
Many features vary from one exchange to another, and similar features of banks differ too. Whichever exchange you choose, it will charge you a fee for your transactions, but these also fluctuate depending on the method of payment that you have decided. So if you choose any bank wire transfer, credit card, or debit card, then do keep in mind that these have different fees applied to them. Let’s take Coinbase as an example of an exchange platform. This is one of those platforms that are really suitable for beginners. And it is also very accommodating. If you want a wire bank transfer, the fee will be1.49% and a fee of 3.99% for credit or debit card.
Third Step: Start Sending Orders
After you have completed the first two steps, all there is left to do is buying bitcoin or other cryptocurrencies. And as the rest of the trading world has developed, so have these exchanges and people have become more aware of investing in Bitcoin. Many people used to think that exchanges were a scam and it was just a way to get some money. But now many have realized that it is a very profitable choice and it is reliable too.
And now, most of these exchanges are so well advanced that they have reached a level that allows them to provide features and services which are also offered by stock brokerages. So all you have to do is find an exchange that is suited to your preferences, choose a payment method that is suitable for both the exchange and your bank and then start investing. The next part includes starting to place orders. Any cryptocurrency exchange that you will come across will provide you with many different types of orders. They will also allow you to explore various ways that a user can invest. Many of these exchanges also allow their customers to access market orders and limit orders. There are also others that provide users with access to stop-loss orders. Out of all the exchanges that were mentioned before, Kraken is the one with the highest order types. It provides its users with various options for orders so that they have more freedom and expertise.
But that is not all, exchanges also provide users with ways to make repeated investments, and this allows them to invest in cryptocurrencies of their choice without any difficulty. Let’s take Coinbase as an example, it allows the customers to set a number of orders beforehand, and these can be on a daily basis, weekly basis or monthly basis. This way, everything is set in motion. So this is most of it, but you should always be conscious of security for you, your information and your funds.
Fourth Step: Storing Your Bitcoin
Security is a very important thing, especially when it comes down to keeping your funds secure. This is why using cryptocurrency wallets or Bitcoin wallets is the best way to go, as they are much more secure. When you store your digital assets in a personal wallet, it gives you the right to access them. No one else can. However, if your funds are stored with the exchange, then there are many risks involved, such as the exchange getting hacked and your funds being lost.
You will find many types of wallets online that are also secure. There are some that can only be used to store Bitcoin, whilst others allow you to store any sort of funds. You will also come across wallets that let users swap tokens. But to understand wallets better, let’s start with the two types that are present currently, which are hot wallets and cold wallets.
· Hot Wallets
Hot wallets are another name for wallets that are online. This means that they operate on devices that connect to the internet, such as mobiles and laptops. But these increase the risks as they use private keys which allow one to access coins or funds. These are very beneficial when it comes to having quick and easy access to funds, but once again, choosing this can result in making your funds more accessible to hackers.
These sorts of wallets are suitable for those people who just want to store tiny amounts of cryptocurrency. This amount is usually kept so it can be used in active trading while the rest of the funds are stored in either investment accounts or saving accounts.
· Cold Wallets
The easiest way to describe the way that cold wallets work is that they have no link to the internet, and this reason makes it much better in terms of safety. You can also call them offline wallets as they remain not connected to the internet. Also, the private key of the user is stored in cold wallets, as it works on keeping them hidden. This way, the private key remains hidden. Many people suggest paper wallets as it is considered to be one of the safest ways to store funds. This wallet is generated through specific websites, and it provides the users with private and public keys.
If you are looking for ways to store your funds somewhere, then a paper wallet is the best option because it will provide you with top security as well as the chance to invest things for a longer term. Paper wallets are really secure as all your sensitive information is printed on paper. Therefore you can store this according to your preference, and no one else would be able to access your private keys.
So if you truly want a secure option for storing your cryptocurrencies, then cold wallets are the best option. These will not let any hackers or scammers access any information as everything is stored offline. And it is best if you have a hot wallet and a cold wallet because the hot wallet will let you store tiny amounts of crypto that you can use in trading whilst the rest would be stored offline in a cold wallet.
Conclusion
This article provided users with the simplest way to start investing in bitcoin. I have tried to tell you all of the necessary steps that you need to follow if you want to purchase an amount of Bitcoin.