Bitcoin Wallets For the past few years, Bitcoin has been a red-hot investment. The foremost cryptocurrency has delivered outrageous returns, but most investors are yet to be exposed to these rewards. Most investors still consider buying Bitcoin and other digital currencies to be an overly complicated endeavor, but that is far from the truth.
How to Buy Bitcoin Summary
Here’s a quick guide for buying your first Crypto:
- Step 1 – Get a Crypto Wallet
- Step 2 – Locate your Bitcoin address
- Step 3 – Choose the amount of Bitcoin to buy From
- Step 4 – You will be navigated to Etoro , where you can enter your Bitcoin address and payment information
Before you buy Bitcoins, it is important to understand how they are stored. Bitcoin is stored in digital wallets.
Bitcoin wallets have public keys and private keys. Public keys can be seen by anyone, and they are your unique identifier on the Bitcoin blockchain. However, you will need your private keys to access or manage your Bitcoins. To understand bitcoin wallets, consider them as an email service.
Your email address is like your public keys, and anyone can have this information or see it. However, you will need your email password (private keys) to view, read or send emails.
Non-custodial wallets are obviously more secure than custodial wallets, and this is why there is this popular quote in the Bitcoin community, ‘Not your Keys, Not your Coins.
Types of Wallets
There are two types of Bitcoin wallets: Cold wallets and Hot wallets. Cold wallets are hardware-based and offline. They are typically USB drive devices or paper wallets that have private keys written on them. All cold wallets are non-custodial, and they are considered the safest way to store your bitcoins. Some of the popular cold wallets include Ledger and Trezor.
To read more about the Ledger wallet and if you would like more information about the Trezor wallet.
On the other hand, hot wallets refer to digital wallets that are in one way or another connected to the internet. This can be a web service, such as crypto exchange wallets, a desktop-installed program such or even an app installed on your mobile devices such as Edge. Hot wallets allow for easy and convenient storing of your coins, but they are considered to be less secure because they are vulnerable to cyber-attacks. Nonetheless, hot wallet services are continually taking measures to improve their safety by adopting the latest security trends such as 2-factor authentication.
Security is not the only factor to consider when choosing which type of Bitcoin wallet, you want. Other factors include frequency of use, fees, user-friendliness, personal preferences, as well as the number of Bitcoins you wish to buy.
Where to Buy Bitcoin
Having understood and decided on which wallet will meet your needs, you are now ready to buy some Bitcoin. Here are some of the places you can buy Bitcoin:
Buying Bitcoin via Peer-to-Peer Trading Platforms
Peer-to-peer (P2P) crypto trading sites, such as Localbitcoins.com and Paxful.com, offer a platform where people can easily trade Bitcoin and other cryptocurrencies. On these sites, Bitcoin traders can post their Bitcoin buy and sell orders. Buyers and sellers can then interact freely and decide to perform a transaction using multiple convenient local payment methods. In addition to the platform, P2P Bitcoin trading sites also offer escrow and dispute resolution services to both parties so as to facilitate a smooth Bitcoin transaction.
Buying Bitcoin on P2P crypto trading sites is fairly straightforward. After the signup process, simply browse through the various Bitcoin selling ads and choose a good seller that matches your needs. Proceed to contact the seller and then initiate the Bitcoin trade. As soon as you initiate a trade, the equivalent amount in Bitcoin will be held in escrow. The seller will then release the Bitcoins to you after payment is confirmed. When buying Bitcoins via a P2P crypto trading site, choosing a good seller is particularly important. Some of the factors to consider when choosing a good seller include reputation stats, vendor availability, verifications, number of trades, pricing, as well as offer terms.
Buying Bitcoins via ATMs
Bitcoin ATMs are emerging as a popular and convenient method to buy Bitcoins. They look like and function like traditional ATMs, but they are linked to crypto exchanges and Bitcoin wallets, rather than to banks. Depending on your area of residence, you can easily locate a Bitcoin ATM that is near you by easily doing an online search. Simply visit the ATM and follow the steps that you are prompted to do. This will typically involve scanning your wallet address using the ATM’s QR reader, then inputting the number of coins you wish to buy. Depending on the ATM, you can complete the buying process by paying with your credit/debit card, or cash. Bitcoin ATMs are very intuitive, which makes them very friendly even to first-time Bitcoin buyers. To confirm your purchase, simply check your wallet address after a few minutes.
Strategies to Buy Bitcoin
While you know WHERE to buy Bitcoin, it is important to have a strategy of WHEN to buy. Bitcoin has a price history that is characterized by sharp and random peaks as well as troughs. This essentially means that a strategy of when to buy the coin can determine your overall risk as well as reward in the market.
Here are some of the popular strategies to implement when buying Bitcoin:
Dollar Cost Averaging
Dollar cost averaging is a strategy that involves buying Bitcoins at a set amount at regular intervals regardless of how the market is doing. For instance, you may decide to buy Bitcoin worth $100 every month, regardless of the prevailing price of the coin. A variation of this strategy is known as value investing, which involves buying more Bitcoin when the price dips, and less when the price appreciates. Overall, dollar cost averaging is a risk-limiting strategy that will make you interact with the markets consistently. The strategy will also ensure that you have an attractive average price for your coins. However, because you will be buying Bitcoin in both its peaks and troughs, your potential rewards will be as limited as your risks. Another downside to dollar cost averaging is that it encourages market timing because you will be making subjective decisions regularly in the market by determining when to buy more Bitcoin or when to buy less.
Lump-sum Investing
Lump-sum investing is a strategy of buying Bitcoin using your entire investment capital. For instance, if you intend to spend $10,000 to buy Bitcoin, you do it all at once, instead of spreading out the purchase over an extended period of time. It is relatively riskier to put all your investment bankroll at once, but this set-and-forget method eliminates the need to constantly time or monitor the markets, and it is way more profitable over the long run. With this strategy, investors can catch a better price early on in the market and ride it out until their investment objectives are met. The only downside to this strategy is that you may not get the chance to add to your portfolio when prices are trading below your entry price.
Bitcoin Buying Tips
Bitcoin has featured erratic price action during its history. But there are technical analysis methods that have continually helped traders to identify optimal price points that offer great value when buying and selling Bitcoin. One of the most common and reliable Bitcoin trading strategies is the golden cross/death cross strategy. This strategy utilizes two moving averages on the daily chart (50 MA and 200 MA). The golden cross occurs when the 50 MA crosses above the 200 MA, and this is an overwhelming buying signal. On the other hand, you can look to exit your buy position when a death cross occurs (the 50 MA crosses below the 200 MA). Technical Analysis
Another popular technical strategy is based on the Bitcoin halving event. This is when the reward of Bitcoin mining is halved, usually after every 4 years. Previous Bitcoin halving events have led to periods of massive price boom, and this may inform your decision of when to buy the digital coin.
Secure your wallet
If you are buying Bitcoins, it is especially important to ensure you keep them safe. There are different wallet types (discussed above) that offer various levels of security as well as convenience. If you intend to keep your coins safely for the long term, securing your private keys must be your top priority.
Do not fall for scams
Bitcoin has emerged as a hugely promising investment opportunity. This has, however, also inspired unethical schemes designed to scam uninformed or vulnerable investors. Several scam schemes have emerged in the Bitcoin space, and they include cloud mining scams, phishing scams, and giveaway scams. These scams generally aim to misdirect you to send your coins to a scammer, or to lose the security (confidential access) of your wallet.
Choose a convenient payment method
If you are buying bitcoins for profit, you need to ensure that you will get the chance to actually enjoy those profits in the future. This means that you should use a safe payment method that will be convenient for you in terms of accessibility and fees charged.
Don’t buy bitcoins without a strategy
You should have a clear plan on how and why you are buying Bitcoin. Bitcoin is very volatile and there is no price that is too high or too low at any given time. Without a plan, you may end up buying Bitcoin when prices are about to collapse, and you could then panic sell during major price dips.
Don’t go ‘all-in’
Despite the potential of abnormal profits, buying Bitcoin is still a highly risky activity. When buying high-risk investment assets, it is important to always use a portion of your investment portfolio that you are comfortable with. For instance, you can decide to use 5% of your available investment capital on buying Bitcoin.
Constant education
Bitcoin is still a nascent investment vehicle, and it is important to continually improve your knowledge of the digital coin and its underlying technology. By being constantly updated, you can gain fundamental and technical insights that can inform your current and future buying decisions.
Final Word
Buying Bitcoin can be a life-changing activity – it is as rewarding as it is risky. Among all cryptocurrencies, Bitcoin has emerged as the safest digital store of value and buying it with the right strategy can help investors boost the overall returns of their portfolios. Nonetheless, the space is still volatile and following the right tips can help you stay on top of risks when buying Bitcoin. Take the first step and buy Bitcoin today!
