A Complete Beginner's Guide to Buying Bitcoins
The BTC rally is still ongoing and shows no signs of slowing down, having already broken the $67,000 barrier for one bitcoin. Over the past decade, bitcoin has grown in value and quickly became legitimate. However, if you want to get your share and start capitalizing on the vast revenue potential of this highly liquid and volatile market, you need to prepare well, as it is also hazardous.
In this guide, we will look at some of the fundamental questions that you can ask if you are new to the cryptocurrency space, such as: "What are some of the unique characteristics of bitcoin, and how will they affect my investments?", "How to buy cryptocurrency?", "How much money do I need to buy bitcoin?", "If I buy bitcoin, where will the money go and how to manage it?" or "How to buy Bitcoin and earn money safely?".
Cryptocurrency is entirely unlike any other asset class, so even if you have already invested in financial markets, make sure that you are armed with all the knowledge necessary to successfully and safely dive into the world of cryptocurrencies 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 its decentralization. As a decentralized cryptocurrency, no single financial institution, government, corporation, or other structure controls the market. On the one hand, it reduces costs and bureaucracy and eliminates government interference. However, this also means that there is no central authority to whom you can apply for compensation if you have lost your bitcoins due to fraud or hacking.
When it comes to Bitcoin anonymity, how private are purchases?
One of the most defining characteristics of Bitcoin is its anonymity. Your data is not disclosed when buying and selling cryptocurrencies, although the transaction is publicly recorded in the blockchain. This means that the transaction history for a specific Bitcoin address is available to everyone, but not the identification data of the person who owns it. If you want to leave no traces of buying or selling cryptocurrencies, buy Bitcoin each time to a different address. This way, you will remain anonymous since your transaction history will not be saved.
How do Bitcoin wallets work?
You store cryptocurrency in a bitcoin wallet, which in many cases works like a bank account, keeping your funds for you and sometimes even providing interest. When you decide where to store your cryptocurrency, the security of a bitcoin wallet is of great importance. Check the credentials of any wallet you choose and choose only the licensed and regulated one. It should also be encrypted and have frequent backups. Hot wallets provide online storage, which means that wallet security is never absolute, as you are always vulnerable to hacking. For this reason, you may want to store your funds in a cold or hardware wallet offline, for example, on a flash drive, where it cannot be hacked.
Where is Bitcoin bought and sold?
Bitcoin is bought and sold on cryptocurrency exchanges, which are platforms to trade hundreds of digital currencies. The process of trading bitcoin on cryptocurrency exchanges is straightforward, and you can buy or sell bitcoin for fiat currencies using a credit card, bank transfer, or even a Paypal account.
In addition, there are many trading platforms through which you can trade on exchanges or which will buy and sell on your behalf.
How does the offer affect Bitcoin's volatility?
If you want to enter the world of cryptocurrencies to buy bitcoin or sell it on exchanges, now is the time because the digital currency market is more popular than ever. The supply of bitcoin is limited, and, as the recent surge of interest has shown, the demand for it is snowballing.
Halving bitcoin - a 50% reduction in the reward for each bitcoin block that occurs every time 210,000 blocks are mined - is an anti-inflationary step that further affects the price. After each case of halving, the value of bitcoin increased dramatically. It should be noted that since fewer people than other traditional currencies use bitcoin, changes in demand lead to greater volatility, which makes it a risky investment offer known for sharp price fluctuations.
Since Bitcoin is just beginning to be legislated, what to do with insurance and taxes?
Governments worldwide are not keeping up with the development of this rapidly growing asset class, which is reflected in issues such as insurance and taxation.
When it comes to the taxation of cryptocurrencies, each jurisdiction has its approach, so you need to know your local obligations and monitor developments. For example, although bitcoin is not considered legal tender in the US, it is treated as taxable personal property.
As for insurance, since bitcoin is not covered by the Investor Protection Act (SIPA), investment insurance can be a difficult task since you will have to rely on private companies that may not be too reliable.
How can I reduce the risk when investing in Bitcoin?
The main lesson to learn when you first start investing in cryptocurrency and buying bitcoin is that the landscape changes rapidly. This is a relatively new asset class, and development is taking place at a tremendous speed. Over time, the legislation will become more apparent, and more reliable consumer protection will be created. In the meantime, bitcoin offers, admittedly, risky, but at the same time, exciting and very profitable opportunities for far-sighted investors.
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