How to Invest in Bitcoin (For Beginners)

By now, you’ve undoubtedly heard about Bitcoin and how it’s the next revolution in the world of money. Over the years, Bitcoin has been tried and tested, making it one of the blue chip cryptos that’s here to stay.

Recently, there's been increased interest in Bitcoin, including on the part of institutional investors such as mutual fund issuers, major tech companies and financial firms incorporating this groundbreaking digital currency as part of their portfolios.

However, despite Bitcoin’s popularity, navigating the world of Bitcoin and other cryptocurrencies can be tricky and hectic, especially for a beginner. In this article, we bring you helpful tips on how to invest in Bitcoin, and where you can find the best Bitcoin investing strategies.

Key Takeaways:

• Having been in the crypto space since 2009, Bitcoin’s gradual growth makes it one of the most valuable and stable blue chip digital currencies to buy and hold.

• You can invest in Bitcoin through Bitcoin mining, buying on crypto exchanges, Bitcoin ETFs, Bitcoin trusts or using money transfer apps, such as PayPal.

• Some ways you can invest in Bitcoin with Bybit: Buy Bitcoin, trade it as a spot or derivatives pair, or stake or lend Bitcoin.

What Is Bitcoin?

Bitcoin (BTC) is the world’s most popular virtual currency. As the first cryptocurrency to successfully enter the market (in 2009), Bitcoin immediately stood apart, since it doesn’t operate under mainstream finance controls. 

Instead, it uses a distributed and immutable public ledger powered by blockchain technology to manage and track all transactions. Bitcoin is used to facilitate fast and cheap peer-to-peer (P2P) payments across the globe. It has also risen as a store of value, with investors buying the asset to trade or hold for the future. 

Bitcoin’s price is determined by supply and demand. With an internet connection, you can securely buy and sell Bitcoin from anywhere in the world.

What You Need for Investing in Bitcoin

Bitcoin, like all cryptocurrencies, is a highly volatile asset — a high-risk, high-reward investment. Its price can fluctuate in minutes, leading to either big profits or huge losses. 

So, how much Bitcoin should a beginner invest?

We recommend starting small to keep your investment from turning into a minefield. Start by investing between 5% and 30% of your investment capital, with 5% as the safest and 30% on the riskier end. As you increase your risk tolerance, you may increase the investment range. However, a cardinal rule, as with any asset, is to invest only what you can afford to lose.

Tips for Investing in Bitcoin

As we mentioned above, navigating the world of Bitcoin investing can be tricky and risky. Following are some tips you can apply to invest in Bitcoin strategically.

1. Educate Yourself About Bitcoin — Before investing in Bitcoin, it's vital to understand the crypto's fundamentals. For instance, learn the difference between a bullish and bearish market, and what that means for your portfolio. The crypto market is fast-paced, and shifting your tactics appropriately is critical in order to grow your assets.
2. Diversify Your Portfolio — The cryptocurrency arena can be disheartening for beginners, especially when they keep experiencing unforeseen losses. That’s why it’s best not to put all your capital in Bitcoin. Diversifying your portfolio helps mitigate the volatility of your crypto investments and stabilizes your returns. Investing in other blue chip crypto coins like Ethereum (ETH) and Ripple (XRP), or projects in different industries or asset classes, is a good way to start. 

3. Dollar-Cost Averaging (DCA) — As a beginner, you may also want to consider the dollar-cost averaging strategy. With this approach, you invest fixed amounts of capital at regular intervals instead of a lump sum. DCA helps you to reduce the impact of price fluctuations, and allows you to buy more when prices are lower and less when the prices are high.

4. Always Keep Part of Your Investment in Bitcoin — We all know that Bitcoin is the king of the crypto economy. As you master the crypto investment game, you may be tempted to jump ship when it stagnates. While selling BTC and shifting to a more profitable coin may at times seem like a better move, trading history has shown that Bitcoin ultimately picks up again. When that happens, you want to be a Bitcoin holder, not a frantic buyer.

Seven Ways to Invest in Bitcoin

Following are seven of the best ways to invest in Bitcoin.

Bitcoin Mining

Bitcoin mining is the process of creating new Bitcoins as a reward for completing the complex computational problems that validate Bitcoin transactions on its network. Put simply, individuals called miners compete to solve extremely complicated math problems to get a predetermined amount of Bitcoin, currently at 6.25 BTC per block. 

As a solo miner, you would require expensive computer hardware using copious amounts of electricity. Then you’ll have to contend with the ever-increasing mining difficulty, Bitcoin hash rate and the low odds stacked against you — about 1 in 26 million. 

Even if you were successful at mining Bitcoin, there’s no guarantee it would be profitable in the end when you equate the reward to the costs you’ve incurred. This is especially true since Bitcoin mining rewards are reduced by half after approximately every four years in an event known as Bitcoin halving. The next Bitcoin halving, scheduled for April 2024, will bring the block reward down to 3.125 BTC.

For these reasons, Bitcoin mining has increasingly become less profitable, and may not be the best strategy for investing in Bitcoin. Investing in shares with a Bitcoin mining company, however, is a viable way to reap rewards from Bitcoin without directly owning the asset.

Cryptocurrency Exchanges

Cryptocurrency exchanges provide the most straightforward way to buy Bitcoin. These platforms are popular because they’re cost-effective and easy to register with. They don’t charge hidden fees, and they offer a variety of extra security features, including online wallets to store your crypto.

Cryptocurrency exchanges are categorized into two types — centralized and decentralized. 

A centralized exchange (CEX) is the most common type that investors use to buy crypto. As a third-party platform, it helps you complete safe Bitcoin transactions, with stringent protocols in place to safeguard your holdings. A CEX’s simple and friendly interface allows you to use fiat currency to buy Bitcoin, making it a convenient and safe space for beginners.

Bybit is one of the most popular and trustworthy centralized exchanges for Bitcoin transactions. The platform offers you the best prices in the market with triple-layer asset protection, advanced privacy and data protection. 

Decentralized exchanges (DEXs) cut out intermediaries to allow for peer-to-peer transactions. Users enjoy anonymity and more autonomy over their funds, less red tape and fewer regulations around transactions. These exchanges are less popular mostly because they are more complicated than CEXs. Users need to remember their account credentials and acquaint themselves with their platform’s operating style, or risk losing their holdings forever.

Bitcoin Trusts and Exchange-Traded Funds (ETFs)

Many investment companies are looking to meet their clients’ demands for cryptocurrency. One way they do so is through Bitcoin trusts, an easy way to get exposure to Bitcoin without directly owning it. 

Accredited investors who meet the set income and experience threshold can buy a limited number of private shares through brokerage or retirement accounts, but without the private key or other crypto exchange storage concerns. By buying through a trust, you rely on your brokerage to buy and manage your Bitcoin assets.

Currently, Grayscale Bitcoin Trust is the most popular investment trust, with over $15 billion in assets under management as of September 2023. GBTC stores the actual Bitcoin, tracks the underlying price and trades its retail index on the open or over-the-counter market.

Another option that’s similar to a trust is an exchange-traded fund, or ETF. A Bitcoin ETF is a pool of investment funds that tracks Bitcoin’s price and can be bought or sold throughout the day. It offers beginners an easy, simple and cheaper way to add Bitcoin to their portfolios.

ETFs follow the price of Bitcoin, which means that when BTC fluctuates in value, they follow suit. However, they may deviate from the actual Bitcoin value due to various reasons such as market demand, trading volume and other market dynamics.

Some popular Bitcoin ETFs that invest in futures are ProShares Bitcoin Strategy ETF (BITO), with over $1 billion in assets, and Evolve Bitcoin ETF (EBIT), with $76.17 million under management.

Whichever option you choose, you’ll find a safer and more convenient way to expand your portfolio with little to no effort.

Money Transfer Apps

For beginners who want to buy Bitcoin conveniently, money transfer apps like PayPal, MoneyGram and Cash App are great options. These platforms allow you to buy, sell and store Bitcoin. PayPal, for instance, lets you buy Bitcoin using your bank account, debit card or PayPal account balance.

Peer-to-Peer Exchanges

Peer-to-peer platforms (or P2Ps) provide a venue where buyers and sellers can post their buy and sell orders. Many platforms may require you to create and verify your account before making a transaction.

You can initiate a trade once you choose your preferred offer and payment method. The seller sends the Bitcoin to the escrow account, and after receiving the fiat currency, the escrow account unlocks the Bitcoin and sends it to the buyer. Since P2P platforms connect buyers and sellers directly, you need to take precautionary measures before making a trade, as follows:

1. Ensure that you read through users’ trading histories and choose a reputable seller.

2. Only make a trade on a reputable site with identity checks (to avoid getting scammed).

3. Only release your funds once the Bitcoin is locked in an escrow account. 

For an even smoother Bitcoin trading experience, try out Bybit P2P HotSwap, which offers you more advertisers, third-party liquidity providers, competitive Bitcoin rates, and fast payment and release of your Bitcoin.

Traditional Brokers

Traditional brokers have also ventured into the crypto space to offer their customers a way to buy and sell Bitcoin. They don't charge for Bitcoin trades, and only profit from a payment for order flow. 

Some of the popular choices include:

• Robinhood Crypto

• TradeStation

• SoFi®

• Firstrade Securities

Remember that when you choose a broker, they become the custodian of your assets, limiting your control over your investments.

Bitcoin ATMs

For people living in areas with limited access to more conventional methods of buying Bitcoin, or if you're just looking for a simple way to complete a transaction, Bitcoin ATMs can come in handy. All you need to do is insert cash or a credit or debit card in exchange for Bitcoin, which is then loaded into your crypto wallet. 

Most Bitcoin ATMs allow one-way transactions, either to buy or sell, while others support bidirectional functionality, which allows you to both buy and sell BTC. The charges to expect here are the fiat currency conversion and purchase fees. Make sure to compare the ATM's fee structures, as they tend to be high or low depending upon location. 

It's important to note that Bitcoin is not protected by insurance from the Securities Investor Protection Corporation. Various crypto platforms may safeguard themselves against hacks and other financial losses, but that insurance does not protect you as their client from theft or any other kind of loss. As we’ve mentioned earlier, Bitcoin is a high-risk, high-reward investment.

How to Invest in Bitcoin in Four Steps

As we’ve seen, there are numerous ways to buy Bitcoin. But as a beginner, you may still wonder where to start. Following is a simple four-step guide on how to invest in Bitcoin.

Choose a Secure Wallet

Before you make your purchase, you’ll need a crypto wallet to store your digital assets. You can use two types of wallets to store your Bitcoin — hot and cold. They serve different purposes, and come with specific advantages and disadvantages. 

Hot Wallets

Hot wallets are online wallets that generate the private keys to your assets on interconnected devices, with the most popular being MetaMask. Many exchanges offer a free hot wallet where your Bitcoin will automatically be stored upon purchase. However, some users prefer to transfer their assets to a third-party hot wallet provider. These versions are also largely free, easy-to-use downloadable wallets.

Hot wallets don’t provide the best security. If the exchange or third-party provider is hacked, which is a real risk, your information and assets are at risk. To keep hackers at bay, you need to adopt the bare minimum of two-factor authentication (2FA), strong passwords and enhanced safe browsing.

However, hot wallets are convenient for small transactions and when you need to access your assets on multiple trading platforms. 

Cold Wallets

A cold wallet usually is a small, portable hardware device that allows you to store your Bitcoin offline. It comes with software that lets you view your portfolio once connected to a computer. (Paper wallets also fall under the category.) Cold wallets are considered the safest storage option, since they aren’t vulnerable to malware or hacking attacks.

A hardware wallet is a USB-like device that keeps your keys safe in an offline environment. Some good examples of hardware wallets include Ledger and Trezor. A paper wallet is simply a printout of your keys, considered obsolete since it’s easily damaged.

So, which one to choose — a hot wallet or a cold wallet?

Your choice depends upon your unique circumstances and crypto activity. If you're a beginner who requires a simple and convenient wallet, or if you’re an active trader, the hot wallet may be your best option. However, if you intend to become a long-term Bitcoin investor, you may require the cold wallet's extra security features to protect your assets. 

Select a Cryptocurrency Exchange

A cryptocurrency exchange is an online marketplace where you can buy Bitcoin. Its interface contains different types of trading opportunities and data that may initially be overwhelming. But once you find Bitcoin — and it's typically the first crypto on the list — the purchase process becomes easy to complete.

Bybit is a trustworthy cryptocurrency exchange that offers a smooth trading experience at low fees. As a beginner, you need to find an exchange that allows you to buy Bitcoin with fiat currency. Bybit supports fiat deposits from either bank transfer or bank card, making it the best option to start your Bitcoin investing journey. 

Create an Account

Once you’ve selected your preferred exchange, you need to create an account on the platform. With many exchanges, including Bybit, you’re required to provide your KYC details to verify your identity. This may include providing your email address or mobile phone number to complete the verification process.

The next step is to deposit fiat currency into your account, via either bank card or wire transfer. Once your account is funded, you can use the fiat balance to purchase Bitcoin.

Buy Bitcoin

Once you have a balance in your funding account, you can purchase Bitcoin. The Buy Crypto option on Bybit allows you to buy Bitcoin through the following methods:

One-Click Buy

Hover over Buy Crypto and click on the first option: One-Click Buy. There are two payment methods you can go for. First, you can choose to link your credit or debit card to your account and use it to buy Bitcoin. Bybit currently supports Mastercard and Visa. Alternatively, use a third-party channel to process your Bitcoin purchase and credit your crypto into your Bybit account. Currently, Bybit’s One-Click Buy partners are Banxa, XanPool, MoonPay, Mercuryo and NeoFi.

Fiat Balance

You can also deposit your fiat cash into your Bybit account to fund it before buying crypto. Under the Fiat Deposit option, select your preferred fiat currency to complete the transaction. Bybit currently supports over 172 fiat currencies. 

P2P Trading

With P2P Trading, you can find Bitcoin sale offers and make a trade with your preferred seller. P2P HotSwap is a new feature on P2P Trading that expands your options with more advertisers and third-party liquidity providers to make your desired trade.

Recurring Buy

This function is created specifically for long-term HODLers who wish to grow their investments at a steady pace. It’s fully customizable, with a range of flexible plans to choose from. As a type of DCA strategy, it lowers your risk, since you don't make a lump sum investment.

Once you’ve purchased Bitcoin, we highly recommend that you transfer it to a cold wallet to guarantee safety. A cold wallet also gives you control over your assets, which may boost your sense of security and confidence as a Bitcoin novice.

Managing Your Bitcoin Investments

Now that you own Bitcoin, what can you do with it? 

There are two possibilities:

• HODL your Bitcoin: You can buy Bitcoin over an extended period and hold it, regardless of market volatility. HODLing cautions novices against trying to time the markets, because they’ll more than likely botch the trade. Instead, they need to HODL their Bitcoin as they wait for its value to rise so they can increase their returns. 

• Trade your Bitcoin: You can actively trade your Bitcoin on Bybit to make a profit.

Here are some of the different ways you can earn more with your Bitcoin on Bybit:

1. Spot Pair Spot pairs are assets that can be exchanged for other ones at the current market price. You can choose from a wide selection of Bitcoin trading pairs to profit from different crypto coins. Bybit Spot Margin Trading also helps you boost your earnings up to 10x by using your BTC as collateral.
2. Derivatives — When you trade derivatives, you sign a contract to buy or sell your Bitcoin at a specific price and date, and book the profits based on the difference. You can trade Bitcoin using various types of derivatives on Bybit, such as Options, USDT Perpetual contracts and Inverse Perpetual contracts.
3. Stake with Bybit Savings — By holding your Bitcoin assets in Bybit’s BTC Flexible Savings program, you can earn passive income in the form of guaranteed yield.
4. Dual Asset — Use the Bybit Dual Asset trading tool as a fuss-free way to grow your crypto assets as you capitalize on price movements and make significant gains during market fluctuations.
5. Liquidity Mining — Bybit Liquidity Mining lets you use your Bitcoin to add liquidity to a liquidity pool and earn daily yield derived from the pool’s swap fees.
6. Lending — Bybit Lending enables you to earn hourly interest determined by market conditions, simply by transferring your idle Bitcoin to Bybit’s asset pools. The deposited assets are then loaned out to various Bybit products, such as Leveraged Tokens and Bybit’s Unified Trading Account (UTA).

Is Bitcoin a Good Investment?

Here comes the million-dollar question: Is Bitcoin a good investment?

The answer is yes. Bitcoin is the world’s largest cryptocurrency, and has held its own since its inception 15 years ago. As of Sep 22, 2023, Bitcoin was trading at approximately $26,678 with a market cap of $520.03 billion. Experts are making highly optimistic predictions for the coming years. According to CoinCodex, Bitcoin’s price could hit a high of $177,384 in 2025 and $273,987 by 2030.

There’s always the potential to make big profits with Bitcoin. Remember, however, that it’s a highly volatile investment and could lose its value just as fast. In the end, it all comes down to your risk tolerance and financial goals. 

Are you looking to set up a source of passive income — or a long-term investment plan — and can Bitcoin help you achieve your goals? Once you answer these questions, you’ll know whether Bitcoin is the best option for you.

The Bottom Line

There’s no doubt that Bitcoin is the most popular cryptocurrency in the world. It may have undergone some turbulent times, but if experts’ predictions come true, it will dominate the market as the most valuable crypto for many years to come. 

Getting in on the action at this point may prove to be one of the best investment decisions you can make. And with all the Bitcoin knowledge you’ve acquired, why not start today?

#Bybit #TheCryptoArk