For a number of reasons, your friends and mainstream media keep trying to push you away from Bitcoin investing. Most of this comes from not understanding the changes this new technology is causing, which drives fear of change.
For example, there are claims about Bitcoin taking more power than the country of Argentina — a true statement. Generally, this comes with a misleading assumption that it’s worse than the power consumption of traditional money systems.
The truth is, as usual, somewhere in the middle. Don’t let the fears of others keep you from trying out investment in Bitcoin.
Want to get started and need to know how to invest in Bitcoin? Keep reading to find the top five Bitcoin investing tips as you start your journey in cryptocurrencies.
1. No Transaction Fee Doesn’t Mean Free
Don’t get fooled when you see “no transaction fee.” The design of the Bitcoin system is such that miners, those processing transactions, always get a reward for it. Right now, miners will receive transaction fees as well as bitcoin rewards.
Those rewards will continue to get halved approximately every four years until they go away completely. The hope is that by that point the fees will still be enough to cover power and rent bills for miners, in addition to profit incentive.
Time will tell if this scenario will pan out. However, in the meantime, many platforms have between a 1% to 2% spread. Spread is the difference between what you will pay for Bitcoin and what you can sell it back for.
The exchange itself almost always will have a transaction fee for setting up the transaction, separate from the miners. It isn’t a deal-breaker, but it’s something you should be aware of before jumping in. It plays a critical role in our later points.
2. Keep Your Wallet Secure
Keeping your wallet secure is harder done than said. You may even need a series of wallets if you’re planning on serious investment in the asset.
Using a series of air-gapped, cold storage, and hot wallet protections could be the best way to make sure you have the proper protection and ability to trade or invest as you wish.
There is a public key you can give out to anyone to start a transaction. If you’re sending Bitcoin you have to authorize it with your private key. This should be in a wallet that never lets the private key out of the wallet.
Many people also have backup “paper wallets” laser engraved or marked into metal, written or printed on paper, and dozens of other methods. Whatever you choose, make sure that no one else sees it or has access to it, ever.
Also, never lose it. Hundreds of millions of dollars worth of bitcoins are lost forever (or until a quantum computer comes along to break its private key) because people lost their passwords.
3. You Don’t Need to Buy a Whole Bitcoin
Something many people starting out on Bitcoin don’t understand is that you don’t need to buy a whole bitcoin. It’s not like a share, bond, or another traditional asset.
Similar to forex trading, you can buy whatever your money will fetch for it all the way to the smallest denomination, a satoshi.
There are currently 10 denominations of Bitcoin, each being a simple movement of a decimal, similar to the metric system. A single bitcoin lies close to the middle of the list. The denominations above a single bitcoin (BTC) from highest to lowest are the:
- Megabitcoin (MBTC) — 1,000,000 bitcoins
- Kilobitcoin (kBTC) — 1,000 bitcoins
- Hectobitcoin (hBTC) — 100 bitcoins
- Decabitcoin (daBTC) — 10 bitcoins
The denominations below a bitcoin from highest to lowest are:
- Decibitcoin (dBTC) — 0.1 bitcoin
- Centibitcoin (cBTC) — 0.01 bitcoin
- Millibitcoin (mBTC) — 0.001 bitcoin
- Microbitcoin or Bit (µBTC or uBTC) — 0.000001 bitcoin
- Satoshi (SAT) — 0.00000001 bitcoin
The abbreviations or symbols can get confusing. In comparison to other currencies, people and institutions use the symbol BTC or XBT interchangeably for the currency. It’s recommended to only use the symbols for the denomination within the context of the Bitcoin protocol itself.
4. Bitcoin Isn’t Intended for Quick Trades
You need to decide whether or not you are wanting to invest or trade your Bitcoin holdings.
Similar to staking on another platform, Bitcoin is geared toward investment rather than trades. If you already know how to stake pancake swap, for example, you have already learned this difference. Moving around your stake or investment in crypto can make it tough to make a profit.
Transaction fees spike, as does the price of Bitcoin. This volatility makes it nearly impossible to time correctly and should therefore be treated as a long-term investment. Let’s also not forget that it purposely takes an average of 10 minutes for a new block to be solved.
If your transaction doesn’t fetch a good enough fee for a miner, you could be waiting quite a long time for your transaction to go through. Timing quick buys and sells isn’t a winning strategy with Bitcoin, in general.
5. Coin Price and Market Cap Are Different
Be prepared to deal with the fear of missing out (FOMO) now. You’ll see the prices soar and drop by 30% or more in a single day fairly often. Even if the general trend is up or holding steady.
A lot of people sell with a FOMO that they can’t get their money at the highest point that day. Related to what we talked about in our last point, what often happens instead is a sell or buy after the price change or on a price change they didn’t expect.
This short-sightedness is often due to too much focus on price, rather than the market cap. It’s a common mistake to trade on coin price, instead of current circulating supplies.
Look for the percentage of total market cap for your time to buy, rather than the current value of the bitcoin you’re holding.
Your Top Bitcoin Investing Tips for Success
Bitcoin investing is complicated because of real-world effects, politics, and meta-playing investors. Don’t lose your cool and don’t lose your investment. Follow these tips and keep growing your knowledge to find the real times to buy and sell your Bitcoin holdings.
Did this help you clear the air of all those confusing and conflicting reports on Bitcoin and cryptocurrencies in general?
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