Investing in Bitcoin can be complicated if you are unaware of its technical aspects. But it can be much easier if you know the dos and don’ts of Bitcoin investments. It can help you avoid loss and earn maximum investment.
As a Bitcoin investor, you need personal identification documents, a cryptocurrency exchange account, and a secure internet connection. It would be best if you also had your digital wallet for payment transactions.
Some valid payment methods include debit cards, bank accounts, and credit cards. You can also get Bitcoin at specialized ATMs through P2P exchanges.
Privacy and security are the important things that Bitcoin investors need to consider before putting their money. Anyone with access to the private key to a public address on blockchain and Bitcoin can authorize transactions.
You must keep your private keys secret to protect them from criminals or online thieves.
Without further ado, let’s find out what things you need to know before buying Bitcoin.
1. Volatile
You may already know that Bitcoin is volatile, and its price can change unpredictably. So, it is of utmost importance that you do not invest all your money or savings in Bitcoin; use the extra cash you have.
Within a few hours, the price of Bitcoin can jump high or go down dramatically.
Before moving forward, it is important to note that you can exchange your Bitcoin with the currency of your choice and vice versa. However, suppose you don’t know the real-time selling/buying price of Bitcoin, Google Bitcoin converter to US dollars, or any other currency of your choice and hit the search button. In that case, you will get several online platforms in search results from here; you can calculate the real-time selling or buying price of Bitcoin. Simple, isn’t it?
Market news has an impact on cryptocurrency adoption. Any positive news on cryptocurrency adoption can drive the price of Bitcoin higher. On the other hand, bans or events which can be a concern for cryptocurrency can have the opposite effect on the valuation of Bitcoin.
The volatility of Bitcoin is one of the major aspects you must understand before buying it. You need to keep an eye on the latest market valuation of Bitcoin and wait for the right time to sell or buy it to earn maximum profit.
2. Transparent
Bitcoin offers one of the most transparent payment options worldwide due to distributed ledger technology, blockchain. All transactions on the network are public and traceable. The information will be updated every time you buy or sell Bitcoins, and everyone can see it on the broadcast.
You do not need to provide personal information like your name or address to receive Bitcoins; you just need to provide your wallet address to the sending party.
In addition, Bitcoin does not depend on third parties for transactions like traditional fiat currencies. You need to pay the blockchain fee, which is the cost of setting your transaction on the blockchain.
3. Anyone Can Make Bitcoin Investment
One of the best things about Bitcoin is that it is for everyone. If you are thinking about investing your money in Bitcoin, then you do not necessarily have to be an accredited investor.
Bitcoin’s decentralized nature makes it accessible to everyone, which is not the case in the traditional market. You can not only buy Bitcoin but also participate in its creation through a procedure which is known as mining.
Also, you can get outstanding returns by joining the Bitcoin mining pools.
4. Bitcoin is Taxable
You need to be aware of the Bitcoin tax laws of the place you are residing in.
Some countries consider Bitcoin profits as capital gains you make from buying or selling. You may have to declare your gains for tax purposes.
You may consider consulting an accountant before buying Bitcoin. Dodging taxes is a big crime, so to avoid legal trouble, it is better to take precautions beforehand.
5. Bitcoin is Accepted as a form of Payment
Most people consider Bitcoin as an investment, but you need to know that this digital currency can also work as a payment method. Just like fiat currencies, you can use Bitcoin also to buy products or services.
With mobile cryptocurrency wallets, you can easily pay with Bitcoin or any other cryptocurrency using QR codes. You can also send it through phone features.
Additionally, cryptocurrency debit cards have enabled people to buy things without a problem.
6. Password Protection is Crucial
Cryptocurrency exchanges are usually considered secure when it comes to avoiding large-scale theft. However, if your account gets hacked, there is nothing you can do to protect your assets.
If someone steals your password or gets access to your phone and transfers your Bitcoins from your account, they are forever gone; you cannot retrieve them. Therefore, using a strong password is a must to strengthen the security of your account.
7. No Need to Buy an Entire Bitcoin
The important thing the new investors need to know is that they do not have to buy an entire Bitcoin. You can buy a fractional amount of Bitcoin, and many exchanges offer minimum trade amounts, which are usually $5 to $10.
It can be helpful for new investors who cannot afford to buy a complete Bitcoin which is around $20,000.
Conclusion
As a new Bitcoin investor, you need to consider different factors to ensure that you get the maximum return for your investment.
Firstly, you need to consider the volatile nature of Bitcoin, as its value can go up and down in a fraction of a second. Furthermore, security is one of the most vital aspects of Bitcoin investment, so you need to protect your password or private keys. It will help you protect your assets from scammers and online thieves.
Similarly, as mentioned above, you need to focus on other factors to keep everything on track and get the most out of Bitcoin investment.
To make things easier to understand the blockchain and digital assets please go through the below infographic.
Provided By Tax Software Company, Sovos