As Bitcoin continues to set records, surpassing $99,000 in November 2024, first-time investors might wonder if it is suitable for their financial goals. Purchasing or trading this digital asset seems complicated; however, it is quite simple and requires an individual to have an account in a cryptocurrency exchange, a secure place to store it, and a method of payment. Let’s find out what is required and how to start.
Preparing to invest in bitcoin
Before diving into Bitcoin, it’s essential to consider privacy, security, and accessibility. Bitcoin investors need:
- Cryptocurrency exchange account: Platforms like Coinbase, Kraken, or Binance are popular centralized options requiring identity verification under Know Your Client (KYC) regulations. Alternatively, decentralized exchanges offer anonymity but with fewer safeguards.
- Personal identification documents: These are often required for regulated exchanges to comply with legal standards aimed at preventing fraud and money laundering.
- Payment method: Options include bank accounts, debit or credit cards, and even cash at Bitcoin ATMs. Keep in mind that credit card purchases may incur additional fees.
- Digital wallet: Secure storage for Bitcoin, either online (hot wallets) or offline (cold wallets), is crucial for protecting your investment.
Privacy and Security considerations
Always protect an investor’s private key cryptographic code enabling transactions. Invest in distributing Bitcoin across multiple public and private addresses, thereby reducing risk. Transactions on blockchains are public, and users may be pseudonymous unless connected to a regulated exchange.
Then, Bitcoin investments are divisible-segmented—you do not have to acquire a whole coin. Smaller purchases would be something like 0.01 bitcoin, which would be just as affected by market activity but open the playing field for more investors.
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Steps to buy bitcoin
Step 1: Choose a cryptocurrency exchange
It’s a great idea to always start by picking a trading platform according to your own needs. Centralized exchanges enable you to easily use many different cryptocurrencies along with various trading tools for your buying and selling convenience. And then secure that account by employing two-factor authentication as well as a strong, easy-to-remember password to guarantee added protection.
Decentralized exchanges are the options for those who want to trade more anonymously since they usually do not provide fiat-to-crypto conversion, which is the ability for someone to convert paper cash to digital assets, and neither do advanced trading options.
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Step 2: Connect a payment method
Link your chosen exchange to a payment option, such as a bank account or debit card. While credit cards can be used, they come with higher transaction costs and potential interest charges. Remember to review the fees associated with your selected payment method.
Step 3: Place an order
All the exchanges offer standard order types, such as market orders to buy at the present cost and limit orders to buy at a predetermined price. They also have advanced order types such as stop-loss and take-profit, which are provided by Kraken.
Keep in mind that managing risks includes creating periodic purchases according to dollar-cost averaging methods. This means that investors will adopt a strategy of gradually investing within a given time frame as a way of reducing exposure to price volatility.
Step 4: Secure your bitcoin
Store your Bitcoin in a digital wallet for enhanced security.
- Hot wallets: These are online and ideal for active traders but are more vulnerable to hacking. Use strong passwords and two-factor authentication to minimize risks.
- Cold wallets: Offline wallets, like hardware or paper wallets, are safer for long-term holdings. They store private keys on non-internet-connected devices, reducing exposure to cyber threats.
Alternative purchase methods
Buying with PayPal or credit cards
Users who have PayPal accounts can use their accounts to buy Bitcoin or use their debit cards that are connected to the PayPal account. However, the platform usually charges a transaction fee for the amount being sent, and revenue is also earned by the platform based on the difference between the two purchase prices, that is, between market and purchase prices. You can buy using your credit card, but that incurs additional costs with processing fees and cash advance interest rates.
Bitcoin ATMs and peer-to-peer exchanges
Bitcoin ATMs allow users to buy Bitcoin using cash, but fees are generally higher. Peer-to-peer (P2P) platforms like LocalBitcoins connect buyers and sellers directly, offering flexibility in payment methods.
Using mainstream brokerages
Platforms like Robinhood and eToro offer Bitcoin trading with no commission fees. Traditional brokers, such as Fidelity, now include Bitcoin in 401(k) options, expanding accessibility for retirement portfolios.
The bottom line
Bitcoin investments are made convenient to some degree, although investors, potential or otherwise, should not lose track of security and consider the risks involved. Certainly, exchanges, ATMs, and platforms like PayPal diversify the ways by which people can enter the market. When investing in cryptocurrency, bear in mind that markets are open to high volatility—invest only that which is disposable.
The content of this article is for informational purposes only and should not be considered financial advice, investment recommendations, or an endorsement of any particular investment strategy, product, or service. Investing involves risks, including the potential loss of principal, and past performance is not indicative of future results. Readers are encouraged to conduct their own research and consult with a qualified financial advisor before making any investment decisions. The publisher and authors of this article are not liable for any financial losses or other consequences resulting from the use of this information.
