Ready to invest in the new “gold rush”, but don’t know where to start? Read on to learn how to invest in Bitcoin and other Cryptocurrency.
I’ve done a whole bunch of research and learned the process, so I have the answers you need. We’ll also get into learning what to invest in besides Bitcoin and really important stuff like how to securely store your cryptocurrency.
Before we dive in, I want to say that I personally use the services listed here. That said, in no way do I guarantee these services/products/cryptocurrencies and you should invest only what you can afford to lose. Seriously, cryptocurrency is extremely volatile and there are no guarantees, but that volatility also means we can make some big money!
If you don’t already know what Bitcoin is, it is a virtual currency also called cryptocurrency and is built on a technology called Blockchain. A blockchain is a network of computers that creates, stores, and verifies digital transactions (ie: transferring Bitcoin from one person to another). This technology is very secure and is being utilized for a multitude of uses besides cryptocurrencies and this offers more investment opportunity in ICOs (Initial Coin Offering), but more on that later.
So how do you convert dollars or your local currency to bitcoin and other cryptocurrencies? We are going to do this is three steps…
We start by opening an account with a cryptocurrency exchange called Coinbase and buying Bitcoin. They are considered one of the best exchanges with over 13 million users and a great place to start our journey. Use this link to open your account and you and I will both get $10 of free Bitcoin with your first purchase of $100, a win/win.
Once you have your account started you can purchase Bitcoin via your bank account or using your credit card. I recommend adding your bank account for several reasons. The main reason is you have a way of converting your Bitcoin back to your local currency (US Dollars in my case). Also, you get lower transaction fees, as well as higher trading limits (I started with $1000 worth of Bitcoin). Just to note, with so many people signing up, ID verification and deposits can take a little time. In my case the whole process took about 10 days. In the meantime, we can move onto step two…
Even though Coinbase is pretty awesome, they unfortunately only offer four digital currencies which are Bitcoin, Bitcoin Cash, Ethereum, and Litecoin, so we are going to sign up with another exchange, so we can diversify our portfolio.
After a lot of research and a couple of false starts with two other exchanges that I did not like, I ended up finding Binance and haven’t looked back. Click here to go to Binance and then click Register in the top bar. Fill out your info and do the usual signup stuff.
At the time of this writing you don’t have to verify your ID on Binnace, but I do recommend it as you are limited to how much you can withdraw in a given period without verification.
Once your funds have to posted in your Coinbase account, we’ll transfer 50% of our Bitcoin to Binance (more on why only 50% below).
Transferring is easy and just takes a few steps. Log into both your Binace and Coinbase accounts in separate browser tabs. On Binance you click on Deposit Withdrawals from the Funds menu. Then you click on the Deposit button in the Bitcoin row. This will give you a BTC Deposit Address which you copy.
In your Coinbase account you click Accounts and Send. This will allow you to paste the deposit address we copied from Binance and let you specify the amount. This will usually take a few minutes to complete.
Now we can start trading! My philosophy is to spread things around and play for the long term. I have invested 50% in Bitcoin, Bitcoin Cash, Ethereum, and Litecoin on Coinbase. The other 50% is invested in lower priced altcoins on Binance. Coins where I can buy 100 or even 1000 and hang on to them for the long hall.
Trading is very easy. You can go to the home page, click on the currency you wish to trade and then fill in the amount and click buy.
So this brings up the question of what to invest in?
There are many options and this is where doing your own research is going to come in handy. Not only are virtual currencies great as decentralized money, but they can also be used in specific applications. For instance, one of my investments Tron (TRX) will allow creators of digital content to cut out middlemen such as the Apple Store and Google Play Store. Content producers will thus be able to obtain funds directly from consumers, which seems like a pretty cool concept to me. Not too mention, at the time of writing is was really cheap to buy.
I use a few different sites for news and research. The first one is CoinMarketCap, which lists the most active coins in order. It also provides info about each coin, price history, and links to their web pages, where you can find the specific concept for each one.
What are cryptocurrency wallets?
Now that we have lots of digital currency we need to look at long-term, secure storage for larger amounts and why we don’t necessarily want to keep our money on the exchanges.
For starters, we have split our coins between two exchanges (Coinbase and Binance). Not that we expect something to happen, but just in case one of them disappeared tomorrow, we would still have 50% of our investment, thereby reducing our risk.
The other thing we can do, especially if we are hanging on to our investments for longer or have larger amounts, is transfer our coins to a wallet. Much like the wallet in your pocket or purse, you put your money in there for safe keeping. Wallets work by utilizing a public key or address through which funds can be sent, much like the address we copied and pasted sending between Coinbase and Binance. There is also a private key which allows you to access your funds and most wallets also have a mnemonic recovery phrase which consists of 12 or 24 random words. This is used incase you lose access to your wallet and allow you to recover your funds.
There are four main options to consider and I have listed them from worst to best based security…
Online wallets are cloud based and accessible from any computer or device. They are controlled by a third party are the most vulnerable, therefore not recommended.
Mobile wallets are the most common and are useful as they can be used retail settings. Security is similar to desktop wallets, but functionality is reduced compared to desktop wallets.
Desktop wallets are only accessible from the single computer on which they are downloaded. Desktop wallets have one of the highest levels of security, however if your computer is hacked or gets a virus someone could steal your coins.
Hardware wallets store digital currency on a hardware device like USB. They are the most secure by keeping your money offline. Even if you lose your wallet or it gets destroyed, you can easily recover your funds via the recovery phrase. Hardware Wallets are the best way to go for longterm storage.
I use this hardware wallet from Ledger and recommend it for several reasons. First, it’s hardware based and the most secure. Second, as far as hardware wallets go, it’s pretty inexpensive and third, it supports more cryptocurrencies than any other a hardware wallet to date.
Note: There is another option called a Paper Wallet, which is literally a printed piece of paper with your private and public keys. Though it is simplest option and securely offline where hackers can’t get to it, I don’t recommend it. What if someone broke into your home and stole it or the house burns down or is hit by a natural disaster, there is no way to recover it. Some people have suggested putting it in a safety deposit box, but that is not very practical and often costs more than getting a Hardware Wallet.
More about security!
Always use strong passwords when setting up all your accounts. Do not use the same password for different accounts or even slightly modified passwords like adding an additional character. I use a fantastic app called 1Password that generates random passwords up to 64 characters. It also saves my passwords securely, so I don’t have to remember them all. This is also a great place to store your recovery phrase(s) and private keys. It works on all platforms and I can’t recommend it enough.
Finally, no matter the exchange, wallet, device, etc. you always want to have two-factor authentication. It works by sending you a six digit code sent via text to your phone or using Googles Authenticator app that you enter along with your standard login credentials.