The Ultimate Beginner’s Guide to Buying Bitcoin
The BTC rally is still going strong and shows no signs of slowing, having already punched through the $50,000 barrier for a single Bitcoin. Over the last decade, Bitcoin has grown in value and rapidly gained in legitimacy. However, if you want to get a piece of the action and start benefiting from the huge revenue potential of this highly liquid and volatile market you need to be well prepared as it is also incredibly risky.
In this guide we will look at some of the basic questions you may be asking if you are new to the crypto space, such as: “What are some of the unique characteristics of Bitcoin and how will they affect my investment?” “How do I buy cryptocurrency?”, “How much money do you need to buy Bitcoin?”, “If I buy Bitcoin where does the money go and how can I manage it?” or “How do I buy Bitcoin and make money safely?”
Cryptocurrency is totally unlike any other asset class, so even if you have invested in the financial markets before, make sure you are armed with all the knowledge you need to successfully, and safely, dive into the world of cryptocurrency and buy bitcoin for the first time.
Bitcoin is a decentralized cryptocurrency. Is this an advantage?
One of the most important factors to consider when buying Bitcoin is that it is decentralized. As a decentralized cryptocurrency, there is no single financial institution, government, corporation or other entity in charge and no authority controlling the market. On the one hand this reduces costs and bureaucracy, as well as eliminating government interference. Yet, it also means that there is no central body that you can turn to for compensation if you have lost your Bitcoin to a scam or hack.
When it comes to Bitcoin anonymity, how private are purchases?
One of the most defining characteristics of Bitcoin is its anonymity. When you buy and sell cryptocurrency your personal details will not be revealed, although the transaction is publicly recorded on the blockchain. This means that the transaction history of a specific Bitcoin address is accessible to everyone, just not the identifying data of the person who owns it. If you really want to leave no trace of your purchase or sale of a cryptocurrency, buy Bitcoin with a different address each time. In this way you can remain anonymous as there will be no history of your transactions.
How do Bitcoin wallets work?
You hold cryptocurrency in a bitcoin wallet, which in many cases works a little like a bank account, holding your funds for you, and sometimes even providing interest. When you are deciding where to store your cryptocurrency, bitcoin wallet security is essential. Check the credentials of any wallet you choose, and only go with one that is licensed and regulated. It should also be encrypted and backed up frequently. Hot wallets provide online storage meaning that wallet security is never absolute as you are always vulnerable to a breach. For this reason, you may wish to keep your funds in a cold, or hardware wallet offline, on a flash drive for example, where it can’t be hacked.
Where is Bitcoin bought and sold?
Bitcoin is bought and sold on cryptocurrency exchanges, which are marketplaces where you can trade hundreds of digital currencies. When trading Bitcoin on cryptocurrency exchanges, the process is incredibly simple, and you can purchase or sell Bitcoin for fiat currencies using a credit card, wire transfer or even a Paypal account.
In addition, there are a variety of trading platforms through which you can trade the exchanges, or which will buy and sell on your behalf. Not all are trustworthy however, so once again, it is important to only entrust your funds to a licensed and regulated financial services provider.
How does supply impact Bitcoin volatility?
If you want to enter the world of cryptocurrency to buy bitcoin or sell it on the exchanges, now is the time, as the digital currencymarket is enjoying greater popularity than ever. Bitcoin has a limited supply and as the recent surge in interest has shown, it has rapidly growing demand.
Bitcoin halving, a 50% cut in the reward for each Bitcoin block that occurs whenever 210,000 blocks have been mined, is an anti-inflation move that further impacts price. After each halving event, Bitcoin’s value has seen a sharp rise.
It should be noted that since less people use Bitcoin than other, traditional currencies, shifts in demand lead to greater volatility, making it a highly risky investment proposition, known for dramatic price swings.
Since Bitcoin is only starting to be legislated what about insurance and taxes?
Governments around the world have been slow to catch up with developments in this rapidly growingasset class and this is reflected in issues like insurance and taxation.
When it comes to the taxation of cryptocurrency, every jurisdiction has a different approach. so you need to be aware of your local obligations and keep up to date with developments. For example, in the US, while Bitcoin is not seen as legal tender, it is deemed to be taxable personal property.
With regard to insurance, since Bitcoin isn’t covered under the Security Investor Protection Act (SIPA), insuring investments can be challenging, since you have to rely on private companies, which may be less than trustworthy.
How can risk be reduced when investing in Bitcoin?
Buying and selling BTC on the crypto exchanges is not the only strategy for profit from the Bitcoin boom and it is certainly not the most secure or reliable. If you want to benefit from Bitcoin with almost none of the risks, and a guaranteed, steady, and generous return, your best option is crypto arbitrage.
Crypto arbitrage, which we offer here, at ArbiSmart, involves exploiting price inefficiencies across exchanges, completely side-stepping the dangers of crypto market volatility. The way it works is that temporarily, sometimes for just a few minutes, a cryptocurrency can be available on different exchanges, at different prices at the same time. This price inefficiency will resolve itself pretty quickly, but an automated platform can take advantage of this window of opportunity. The ArbiSmart platform is connected to 35 exchanges, which it scans 24/7, tracking hundreds of currencies to identify a price inefficiency. It will then automatically buy the coin on the exchange where the price is lowest and then sell it, instantly, on the exchange where the price is highest, to make a profit, before the market can adjust and the price difference is resolved. ArbiSmart guarantees, a steady, reliable, passive return of up to 45% a year, and you can know, in advance, exactly how much you can expect to make each month, depending on your investment amount by reviewing the company Accounts page. Risk is further mitigated by the fact that as a fully licensed crypto arbitrage platform that is regulated across the EU, ArbiSmart offers a secure investment opportunity, which is critical for anyone looking to enter the crypto space.
The main lesson you need to learn, when you start to invest in cryptocurrency and buy bitcoin for the first time, is that the landscape is changing rapidly. This is a relatively new asset class and developments are occurring at warp-speed. In time legislation will become clearer and greater consumer protections will be established. For now, Bitcoin offers admittedly risky, but also exciting and highly lucrative opportunities to forward thinking investors.
To discover more about crypto investing, check out the ArbiSmart blog and to learn more about crypto arbitrage in particular, click here.