How to Invest In Bitcoin and Is Bitcoin a Good Investment?

Bitcoin — the subject of the past few years in the crypto world. By the end of 2017, everyone seemed to know what Bitcoin was. And every one that didn’t know what it was, seemed to be asking about it, as well as wondering how to invest in Bitcoin. But, why?

Well, it’s simple.

The price of Bitcoin has grown at a huge rate over the past few years. In fact, it has grown so much that it makes other normal investments (stocks, bonds, etc.) look pointless.

That being said, investing in Bitcoin is becoming increasingly more popular. Before deciding on an investment, though, make sure that you chose the right exchange platform to purchase your coins from!

Let’s Talk Bitcoin

Let’s compare Bitcoin’s growth to the growth of Amazon (yes, the company). Amazon has seen huge growth over the past 5 years and has been one of the top-performing companies in the world! If you bought a share of Amazon 5 years ago, it would have cost you $274. That same share would now be worth around $3100 today.

Let’s compare that to Bitcoin. If you knew about Bitcoin and bought one 5 years ago, it would have cost you $45. Now that same Bitcoin would be worth $11,194. You can see what I mean about it making other investments look pointless now, right?

How to invest in Bitcoin: a woman entering her credit information on Amazon.

Anyway, that’s enough about Amazon. What you really want to know is whether now is a good time to invest in Bitcoinhow to invest in Bitcoin and if so, what the best way to invest in Bitcoin is.

So, let's get to that, shall we?

What Is Bitcoin and is Bitcoin a Good Investment?

To know whether Bitcoin is a good investment or not, you need to understand a little about what Bitcoin is. Investing in something you know nothing about is always a bad idea.

So, always do plenty of research and talk to a financial advisor before investing.

Put simply, Bitcoin is a digital currencyit is money that is online.  Just like the money we use every day, you can use Bitcoin to buy, sell and trade with other people. When you buy Bitcoin (which I will show you how to do the “How to invest in Bitcoin?” section below), you store it in a digital wallet.

How to invest in Bitcoin: an ATM machine and a credit card being inserted into it.

You can then send Bitcoin from your digital wallet to other people’s digital wallets, just like a bank transfer. This is called a Bitcoin transaction. All transactions are stored on the Bitcoin blockchain, which is a type of technology that keeps your Bitcoins safe from hackers.

The purpose of Bitcoin is to remove the need for a single company (banks, PayPal, etc.) having control over your money. Instead, with Bitcoin, you have full control. All Bitcoin transactions are confirmed on a trustless shared network that isn’t owned by anyone.

The Bitcoin Investment

As I mentioned above, Bitcoin has proved to be one of the best investments in the past 10 years. Although many people have doubted Bitcoin, it has continued to rise year after year.

Let’s look at how Bitcoin has grown since its creation in 2009:

The Birth of Bitcoin: Bitcoin was first bought in 2010 at a price of around $0.06. Yes, that’s right! $0.06 — cheaper than a chocolate bar. So, if you had $20 to invest in Bitcoin in 2010, you could have bought 333 Bitcoins. Those 333 Bitcoins would now be worth over $3.7 Million! I bet you wish you knew how to invest in Bitcoin then, right?

2011: Bitcoin grew steadily in 2010 and started 2011 at a price of around $0.30. Towards the end of 2011, it was worth around $6.10. That’s a total increase of over 2000%! At this time, Bitcoin was being used to buy illegal things online through the “Dark Web”.

Note: Bitcoin transactions are anonymous. This allows people to be unknown when paying in Bitcoin. The most common website that was known for selling illegal things online for Bitcoin was “Silk Road”. As you can imagine, “Silk Road” ended badly for its creator.

How to invest in Bitcoin: a trade - a Bitcoin for a bag of white powder.

2013: This was the year of “Bitcoin accepted here”. Businesses started to accept Bitcoin as a payment option and Bitcoin reached a total market cap of $1 billion. By the end of 2013, one Bitcoin was worth around $817!

Market Cap: Bitcoin’s market cap is the total price of all Bitcoins added together.

2014: As for the price, 2014 wasn’t a great year to know how to invest in Bitcoin. The price of Bitcoin had dropped to $300 by the end of the year. However, this was the year that Microsoft started to accept Bitcoin payments. You could now use Bitcoin to buy Xbox games, apps, and videos from Microsoft. This was a huge step for the cryptocurrency in question.

2017: Without a doubt, 2017 was the year that Bitcoin exploded. Wall Street and large investment banks started to invest in Bitcoin. Lots and lots of people began following Bitcoin — it started to be on the news every day. The price of Bitcoin went really high, starting at around $985 and rising to heights of nearly $20,000!

So, as you can see, investing in Bitcoin has made a lot of people rich. That being said, though, it is important that you understand the pros and cons of a Bitcoin investment.  So, before we explain how to invest in Bitcoin, let’s look at the advantages and disadvantages.

Pros of Investing In Bitcoin

There Will Only Ever Be 21 Million Bitcoins Created. What does this mean to you? Well, think about it. The more popular Bitcoin becomes, the more people will want to buy it. If there can be no more Bitcoins created, then the demand will continue to rise for each Bitcoin, which increases the price.

Huge Returns on Investment. As you can see from the timeline above, Bitcoin can offer a return on your investment that you won’t find anywhere else.

Easy to Invest. Bitcoin is easy to invest in. You can buy it and sell it whenever you want to. You do not have to sign an agreement, and you can do it all by yourself!

Bitcoin’s Uses. There are lots of great uses for Bitcoin. Here is a list of reasons why some people would prefer to use Bitcoin over the traditional banking system:

  • It allows people to easily send money to each other
  • It is much quicker and cheaper to send international payments
  • People have control over their money, instead of the banks having control
  • Its anonymous transactions mean that people have privacy

Cons of Investing In Bitcoin

Volatile (The Price Is Always Changing In Huge Ways). When thinking about how to invest in Bitcoin, you must always consider the cons of investing. The price of Bitcoin changes all the time. However, these aren’t just small changes. For example, after Bitcoin hit its highest price of $19,839 on the 17th of December 2017, it dropped to $12,015 on the 22nd of December. That’s a total loss of $7,824 in just 5 days!

Government Regulations. You might be wondering “but why?”. Well, Bitcoin’s anonymous transactions could cause a huge amount of problems for local governments. Bitcoin allows illegal activities to be paid for online without ID. Also, Bitcoin could be used as a way for people and businesses to avoid taxes.

How to invest in Bitcoin: the government of the United State of America.

Limited Scaling. Currently, Bitcoin can only handle 3 to 7 transactions per second. So, as it becomes more popular, the time it takes for the Bitcoin network to verify a transaction becomes longer. If this problem isn’t fixed soon then the fees to send Bitcoins will increase, and so will the time it takes to send Bitcoins. This may have you wondering not about how to invest in Bitcoin, but should I invest in Bitcoin?

Unfortunately, it seems that the inventor of Bitcoin (Satoshi Nakamoto) didn’t think about this becoming a problem in the future.

Lack of Security

Because Bitcoin isn’t controlled by a single company, there is no help if you make an error. For example, if you forget the “password” to your Bitcoin wallet, there is no company to contact to reset your password. You might be asking “but what happens if I accidentally send my Bitcoins to the wrong place?” well, the simple answer is that your Bitcoins will be gone forever.

Short-Term Investment or Long-Term Investment?

So, should you invest in Bitcoin for the long term or the short term? Well, if you look at the growth of Bitcoin over the past 5 years, it’s clear that holding Bitcoin for the long term seems like the best option.

How to invest in Bitcoin: return of investment.

However, before you learn how to invest in Bitcoin, it's important that you have a clear strategy in mind when it comes to your investment. Let’s help you get a better understanding of what will work best for you, shall we?

Short-term Investing — Minutes, Days, Weeks

Short-term investing can require a lot of your time and can be very stressful when the prices don’t go your way (you lose money). However, when things do go your way, you can make quick money, and have fun doing it.

I would only recommend short-term investing for those who are prepared to spend a lot of time analyzing charts and doing market research. The price of Bitcoin moves up and down very quickly, so you must always be watching the charts carefully and have a solid plan!

I highly recommend that you do not start short-term investing without any training. Again, always talk to a financial advisor before investing.

Long-term Investing (or HODLing) — 1 year+

HODL” — Hold On for Dear Life. This is a term that is used in the crypto world all the time. Put simply, it means to hold on to your investments. Not only has a long-term holding of Bitcoin been the best way to make a profit over the last 5 years, but it’s also the easiest!

So, instead of sitting at your computer all day analyzing charts — you can sit back, relax and wait for the price of Bitcoin to rise. But remember: never invest an amount that you cannot afford to lose. No investment is guaranteed!

By now, you should have a good idea of whether or not you want to invest. If your answer is “YES!”, then please read on.

How to Invest in Bitcoin?

How do I invest in Bitcoin?” – a newbie’s favorite question. I understand how difficult it can be to find the best option that works for you. But don’t panic! That’s why I'm here to help.

Let’s Talk Security

First things first, you need to set up a Bitcoin wallet. A Bitcoin wallet is like the wallet you store your local currency in, the only difference is that this wallet stores digital currency.

How to invest in Bitcoin: people talking about investing.

There are different types of digital wallets, though. Here are some of the wallets that I recommend:

Online Wallets (Least Safe Option)

Online wallets should only be a temporary storage option for your Bitcoin. You should only leave your Bitcoin in these wallets if you must. Even though they are easy to use, they are the least secure. Leaving your Bitcoin in an online wallet means that you are putting your trust in the security of the website you are using.

Online wallets include: Coinbase and Xapo 

Software Wallets (Safer Option) 

Software wallets are like apps that you install on your computer or phone. They offer you a good amount of security and give you full access to your public and private keys. Also, they are free to use and simple to set up!

Software wallets include: Exodus and Jaxx

Hardware Wallets (The Safest Option!):

Hardware wallets are the option I recommend for storing your Bitcoin. They allow you to store your Bitcoins offline on a small piece of hardware. You plug the hardware wallet into your computer (with a USB) and transfer your Bitcoins on to it.

This allows you to store your Bitcoin offline so that they can’t be hacked. When wondering how to invest in Bitcoin, I would definitely go for the most secure wallet.

However, they do come at a cost. Most hardware wallets are priced at around $100, so I only recommend buying one if you are investing a lot of money.

Hardware wallets I recommend: Trezor and Ledger Nano S

Bitcoin Mining

What is Bitcoin mining? It sounds confusing, doesn’t it?

I’ll do our best to explain it in simple terms for you.

Bitcoin mining is a process that is performed using special computers. These are computers that are designed to verify transactions on the Bitcoin blockchain. To verify transactions, computers must solve a mathematical problem.

The first computer to solve the problem is rewarded with Bitcoin. It’s just like gold miners being rewarded with gold! The computers are miners! So, here's another solution to how to invest in the Bitcoin question.

Sounds easy, right? Well, it isn’t. There are thousands of computers trying to verify transactions. Which means one thing — there is lots of competition. So, if you want to mine Bitcoin by yourself, then you’re going to have to invest a lot of money into computers to beat your competition!

However, there are other options for mining Bitcoin. The most common option for small-time miners is to join a Bitcoin mining pool.

How to invest in Bitcoin: mining rigs.

As the name suggests, a Bitcoin mining pool is a pool/group of computers that work together to verify Bitcoin transactions. All the computers in a mining pool combine their computing power to help verify transactions.

Let’s imagine that you have joined a Bitcoin mining pool and you provide 5% of that mining pool’s computing power. When your mining pool verifies a transaction, you will be rewarded with 5% of the Bitcoin.

I recommend that if you would like to start mining, you start by joining a Bitcoin mining pool.

Bitcoin mining isn’t always profitable though and requires around $2000 - $3000 to set up.

To learn more about how to invest in Bitcoin, its mining, mining pools, and the computers you need, read our guide "What Is Bitcoin Mining and How to Does It Work".

The Coinbase Method

This is the best way to invest in Bitcoin for beginners.

Coinbase is one of the world's largest exchanges when it comes to cryptocurrencies. It allows you to purchase Bitcoin by using your credit/debit card. The website is user-friendly, and they make it very easy for you to set up an account.

How to invest in Bitcoin: Coinbase and Bitcoin.

Coinbase doesn’t just allow you to buy Bitcoin though, you can also buy Ethereum, Litecoin and Bitcoin Cash.

I have a full guide on how to set up a Coinbase account — be sure to check it out: The Complete Guide on How to Buy Bitcoin and Where to Do It.

How to Invest in Bitcoin Anonymously?

One of the things people like most about Bitcoin is that it allows you to keep your information private! So, for those of you who want to stay extra private, buying your Bitcoin on a peer-to-peer trading platform might be the best option for you.

If you're wondering how to do it anonymously, another good thing about peer-to-peer platforms is that you don’t have a middleman to pay a fee to! That’s right — 0% fees!

However, you must be careful when using these websites. Some Bitcoin sellers might try to steal your money, so always check that the seller you use has 100% positive feedback on their account.

The peer-to-peer trading platform that I recommend is LocalBitcoins. By using LocalBitcoins, you can set up the terms and conditions of your Bitcoin purchase. Some sellers ask for ID, but others do not.

LocalBitcoins gives you the option to:

  • Find people who live local to you - then you can meet up with them and pay in cash;
  • Deposit your cash into a seller’s bank account — go to your local bank and send it to the bank account number that the seller gives to you;
  • Pay using bank transfer – send your money to the seller’s bank account using the bank account information they give to you.
Pros
  • Super secure
  • Protection against physical damage
  • Supports more than 1500 coins and tokens
Pros
  • Can be managed from mobile device
  • Very secure
  • Supports more than 1,100 cryptocurrencies
Pros
  • Easy to use
  • Free to register and keep crypto coins in
  • Decent fees

ATMs

Just like you use an ATM for your local money (USD, EUR, etc.), you can now use an ATM for Bitcoin! The only difference is, you cannot use Bitcoin ATMs to withdraw money. You can only use it to buy Bitcoin. The best thing about Bitcoin ATMs is that they are simple, easy to use, and you can use cash/paper money. That's one of the easiest answers on how to invest in Bitcoin.

How to invest in Bitcoin: an ATM.

Bitcoin ATMs are rare though, so you’ll need to check to see if one is near you first. You can find that out here: Bitcoin ATM Near Me. Some of the Bitcoin ATMs ask for ID, but most of them don’t need it.

I recommend that you take your Bitcoin wallet details with you, so you can send your Bitcoins straight to your Bitcoin wallet from the ATM machine. If you don’t, then the Bitcoin ATM has to make a new wallet for you — it prints out the public and private key on your receipt.

Conclusions

And there we have it!

You should now have a good idea of whether Bitcoin is the right investment option for you. And if so, then you know how to invest in Bitcoin.

Bitcoin has proven to be a great investment over the years, but who’s to say that the growth will continue? I guess the answer to that question depends on who you’re asking. There are so many different options about the future of Bitcoin.

If you are going to invest, I welcome you to the crypto world (lots of exciting stuff happens here). Just remember, it is important that you only invest what you can afford to lose.

So, let us know: are you going to invest? if so, which exchange platform (or other methods) will you use?

*Note: this article is a personal opinion. Before making any investment decisions you should consult with a professional.

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FAQ

Is Bitcoin worth investing in?

If you believe in Bitcoin - not just the coin, but the technology behind it, too -, then investing in it might be a good idea. That being said, though, you should always consult a financial advisor, and make sure that you're investing just the money that you wouldn't be afraid to lose. Oh, and naturally, that you're also using a reliable crypto exchange, too!

What is the best way of investing in Bitcoin?

As you can probably tell, there are many different ways of how to invest in Bitcoin. Some of them are quite popular, while others might be... a bit more niche. Still, one of the most reliable methods of investing in Bitcoin remains using an exchange, such as Coinbase. This way, you can be sure that everything's legit, and you won't get scammed!

How to pick the best crypto exchange for yourself?

Picking out the best crypto exchange for yourself, you should always focus on maintaining a balance between the essential features that all top crypto exchanges should have, and those that are important to you, personally. For example, all of the best exchanges should possess top-tier security features, but if you’re looking to trade only the main cryptocurrencies, you probably don’t really care too much about the variety of coins available on the exchange. It’s all a case-by-case scenario!

Which cryptocurrency exchange is best for beginners?

Reading through various best crypto exchange reviews online, you’re bound to notice that one of the things that most of these exchanges have in common is that they are very simple to use. While some are more straightforward and beginner-friendly than others, you shouldn’t encounter any difficulties with either of the top-rated exchanges. That said, many users believe that Coinbase is one of the simpler exchanges on the current market.

What is the difference between a crypto exchange and a brokerage?

In layman’s terms, a cryptocurrency exchange is a place where you meet and exchange cryptocurrencies with another person. The exchange platform (i.e. Binance) acts as a middleman - it connects you (your offer or request) with that other person (the seller or the buyer). With a brokerage, however, there is no “other person” - you come and exchange your crypto coins or fiat money with the platform in question, without the interference of any third party. When considering cryptocurrency exchange rankings, though, both of these types of businesses (exchanges and brokerages) are usually just thrown under the umbrella term - exchange. This is done for the sake of simplicity.

Are all the top cryptocurrency exchanges based in the United States?

No, definitely not! While some of the top cryptocurrency exchanges are, indeed, based in the United States (i.e. Coinbase or Kraken), there are other very well-known industry leaders that are located all over the world. For example, Binance is based in Tokyo, Japan, while Bittrex is located in Liechtenstein. While there are many reasons for why an exchange would prefer to be based in one location over another, most of them boil down to business intricacies, and usually have no effect on the user of the platform.