Bitcoin is a digital payment currency that uses cryptocurrency (a digital medium of exchange) and peer-to-peer technology to create and manage monetary transactions.
You are probably familiar with Bitcoin’s popularity. You have heard of people investing in it, trading it, mining it, and ultimately making small fortunes.
But is it that simple? And how profitable is Bitcoin today?
If you would like to learn more about what you need to do to get a nice slice of this crypto-cake, take a look below. In this article, you can find Bitcoin investing fundamentals that will help you get into this game and start playing it.
How did it all begin?
Bitcoin is a currency that was created in 2009 after the housing market crash. It revolves around the ideas laid down in a whitepaper by the mysterious Satoshi Nakamoto. The real identity of this person is still unknown.
The technology behind Bitcoin had the aim of lowering transaction fees and beating traditional banks and online payment mechanisms. There is no centralized authority operating this currency.
Consequently, there are no physical bitcoins, only balances kept on a public ledger that everyone can access because bitcoins are not issued or backed by any banks or governments.
Additionally, Bitcoins are scarce, and they become more difficult to obtain over time. The rate that bitcoins are produced at cuts in half about every four years.
This exact rate is set to halve again sometimes this year. The total number of bitcoins in circulation is reaching the limit of $21 million that was established in 2009 by its creator Mr. Nakamoto.
Logically, if the demand for bitcoins exceeds the rate at which it can be produced, the price will increase. And this is exactly where you have a chance to profit.
Step 1: Before you can invest
Before you discover how to start investing in Bitcoin, it is essential to learn a few essentials that allow people to invest.
A person is first required to sign up to an exchange platform that allows buying cryptocurrency with cash. An exchange platform is a medium that will allow you to buy and sell Bitcoin as well as any other cryptocurrency that is offered.
Most of these platforms require users to verify their accounts. To do so, one has to buy or withdraw more substantial amounts of Bitcoin or any other cryptocurrency.
When looking for a good platform, make sure that you pick one that has access to Bitcoin and other high-profile cryptocurrencies. These are called ‘blue-chip’ cryptocurrencies and some of them are Ethereum (ETH), Ripple (XRP), or Stellar Lumens (XLM).
Once you make a transaction and get your Bitcoin, you can either keep it on the exchange platform or have it transferred to your own personal wallet.
Bear in mind that you can keep your coins on an exchange platform for the time you spend looking for a wallet.
To store your cryptocurrencies, you need a wallet. Having a wallet means that you are the owner of all the virtual currency you send to your wallet which has a public address and a private key.
The public address is used to receive funds, while the private key is used to spend the funds you have in your wallet.
Proven cryptocurrency wallets include:
- Blockchain.com (Bitcoin, Ethereum, Bitcoin Cash, and Stellar Lumens)
- MyEtherWallet (Ethereum and ERC-20 Tokens)
- Rippex (XRP/Ripple)
Now that you know the essentials necessary to master investing in Bitcoin, let’s move on to a more complicated issue — researching cryptocurrencies.
Step 2: Researching cryptocurrencies
So, you may have bought your first Bitcoin and or seen other blue-chip cryptocurrencies. Now is the time to start researching the cryptocurrencies that seem most attractive to you.
To do so, you should look up forums that focus on crypto news, rumors, and discussions. Great forums of this kind include Bitcoin Insider and Bitcointalk.
These forums gather investors, developers, and other enthusiasts to discuss various topics. A forum like this one usually has a lot to offer when it comes to valuable information regarding cryptocurrencies.
For instance, Ethereum was announced on Bitcointalk by the man himself — Vitalik Buterin, the founder of Ethereum. This is how the first few investors learned about the Ethereum ICO (Initial Coin Offering) and the crowdfunding efforts.
Also, the founder left links to white papers and yellow papers which provided details regarding the philosophy behind Ethereum and other technical information.
Step 3: Placing your first order
Once you have linked a bank account, set up your wallet, and done thorough research, it is time to place orders!
Placing orders means buying bitcoin (or other currencies). However, keep in mind that even though one bitcoin costs several thousand dollars, bitcoin can be divided into up to eight decimal points.
The smallest unit of bitcoin can have is known as a satoshi. Yes, it was named after the man that invented this technology.
Hence, even if the bitcoin price skyrockets, you will be able to buy a satoshi for a small amount of money.
How to identify the next profitable cryptocurrency?
When looking for a new investment opportunity, be extremely cautious, as the world of crypto is continuously growing.
But just because you see tons of news where more and more founders are claiming how their new cryptocurrency will be the next Bitcoin, that doesn’t mean that you should go and support them.
Instead, before you spend your funds, consider the following factors.
The technology behind the cryptocurrencies
A cryptocurrency does not have value by itself, as it basically represents technology. So, if you want to invest in great potential, find a currency that offers revolutionary technology.
What does it represent?
If you recognize that a cryptocurrency is backed by technology with incredible potential, think about the change it could make in society. Think about its size and whether it will become big among ordinary people. However, also consider what would happen if something went wrong.
Some currencies are more ready for massive adoption than others. Some factors accelerate or cause a slowdown on its approval. Just consider Ripple and how banks and financial institutions are adopting it, as this is a great way to make transfers with optimization of time and fees.
This is a fundamental factor for an average investor. The price determines whether you will be able to buy or not. Hence, consider how much you can invest but also how many pieces you can buy with your funds.
Check if the currency has a supply limit. See if there is a maximum number of coins allowed to be created. Once the roof has been reached, prices will go up.
The number of transactions shows how liquid the market is and how much interest it is raising among investors. Cryptocurrencies with high volume are better than others with little to no people trading it.
The world of cryptocurrencies is the new gold rush, with a lot of people trying to get their share of it. However, you need to be smart and informed if you want to compete with big players.
Hopefully, the tips listed in this article will get you one step closer to getting your first Bitcoin.
Images from Pixabay.