If you’ve missed the first 10 times people told you to buy Bitcoin, you’re not alone. Even the most ardent Bitcoin supporters may not have the guts to hold an asset that seems to be increasing tenfold in value every year – and it’s unsurprising to find many people still thinking about whether to get hold of cryptocurrency before it’s “too late”. If you’re thinking about investing in the original cryptocurrency, here are 6 tips you should know before buying Bitcoin.
1. Decide Why You Are Buying Bitcoin
Before you buy any cryptocurrencies it is important that you understand what cryptocurrencies are, why they were created, and establish what you intend on doing with them.
Cryptocurrencies were created to provide the world with a decentralized financial system that does not rely on any governments or financial institutions. The peer to peer payment network instead operates on a global level, allowing anyone, including the unbanked populations of the world, to get involved - in turn celebrating financial inclusion.
Cryptocurrency is about shifting financial control from the organisations back to the hands of the people. Purchasing crypto allows you to be a part of this global movement.
Some people choose to buy Bitcoin or other cryptocurrencies to invest in a new asset class, while others might choose to buy it to use as an alternative payment system. Crypto offers a faster and cheaper means of sending funds across borders, and is becoming a viable player in the remittance markets too.
While the world of cryptocurrencies and fiat are merging quickly, with the advent of crypto cards people are able to use Bitcoin and other cryptocurrencies seamlessly through card transactions. Understanding what you wish to do with them (store long term or use day to day) will also help you determine what kind of wallet you might need.
2. You Will Need A Crypto Wallet
Once you purchase your first Bitcoin, you’ll most likely see that the platform that you purchased it on has created an account for you. Although it is not so risky these days to store Bitcoin and cryptocurrencies on an exchange (as it was 5 years ago), these tokens and coins are actually being stored on your behalf by the exchange. Once registered on Oobit, each user receives access to their personal crypto wallet. Each wallet represents a different cryptocurrency, however, they can all be accessed on the dashboard.
Alternatively, you might like to withdraw the crypto and keep it in a paper or hardware wallet (find the best suited crypto wallet for you here). Regardless of which wallet you use, it is worth researching which method is the most suitable for your amount of Bitcoin and type of investor you want to be/trading you do.
Additionally, different cryptocurrencies use different wallets. This means that you cannot store Bitcoin in an Ethereum wallet, or Ethereum in an XRP wallet. Don’t try to send your coins to wallets from a different blockchain or you may find your coins lost forever!
3. You Will Need To Complete An Identity Verification Process
Identity verification processes are a necessary hurdle to cross for anybody to get their hands on Bitcoin in the safest way. All reputable online cryptocurrency exchanges are required by law to verify your identity before allowing you to buy, sell or trade Bitcoin (BTC) and other cryptocurrencies.
The process is fairly straightforward – in order to identify and stop fraud, terrorists and criminals looking to use cryptocurrency for malicious activities, the exchange will collect your personal data and check it against well-known databases of potential criminals. If they find a suspected match, they will require you to provide additional documentation to further identify yourself.
Typically, this process involves documentation that proves: who you are, where you live, and whether you are who you say you are. This could include your government ID, passport or residence permit, bank statements with your address, and usually a need for a picture of yourself that is taken recently and in accordance with the platform's instructions. Stay away from platforms that don’t require this step.
4. Educate Yourself And Do Your Own Research (“DYOR”)
The cryptocurrency community can be helpful, but more often than not, individuals are looking to increase the value of their portfolio by sharing their own “recommendations” to you in the hopes of getting you to buy alongside them. These groups and hive mentalities are common in cryptocurrencies and are not necessarily a bad thing; cryptocurrency investors may have done proper research. Nonetheless, you should always look to do your own research.
There are plenty of resources on the internet which are non-biased and try to convey information fairly and objectively, like our Oobit blog for example. Get started with our guide to researching cryptocurrency.
5. Cryptocurrency Isn’t Just Bitcoin; There Are Plenty Of Fish In The Sea
Most people who are aware of cryptocurrency know it from the media. In truth, over 9,000 cryptocurrencies exist, and Bitcoin is just the first, the most popular and the most successful. However, plenty of coins have sprung up since then that serve similar yet different roles to Bitcoin. Each cryptocurrency is designed to solve a problem, each coming with its own use case.
So while Bitcoin provides a store of value and medium of exchange, Ethereum (ETH), the second most popular cryptocurrency, enables the execution of “smart contracts”. These are digital agreements that automatically execute when predetermined conditions are met (think of vending machines that dispense sodas when you put your coins into them).
Chainlink (LINK), another popular cryptocurrency, enables data to be communicated off and on-chain in a secure manner through smart contracts, connecting the blockchain world to the real world.
Ultimately, although these tokens may not be as big as Bitcoin, they are well-poised as trading or investment opportunities due to their potential growth and their increased utility as compared to Bitcoin which is mainly known and held as a store of value. Always do your research and enjoy learning about the intricacies and innovation that have materialized from the invention of cryptocurrencies.
6. Buying Bitcoin Doesn’t Mean You Will Get Rich
A lot of people liken Bitcoin to the Gold Rush, where individuals could get rich overnight just by finding gold. While there are similarities, it’s worth noting that Bitcoin is just like every other investment instrument: it’s high risk, it’s based on human perception and could go both ways.
If you are planning to invest in Bitcoin, there are a few phrases newbies often hear: do your own research (DYOR), invest what you can afford to lose, and manage your risk. There are safer and more established ways to profit from Bitcoin than simply putting all your eggs in one basket.
Consider things like timing, reading the markets, learning to set a stop-loss, these could be the difference between losing it all and making a good return on investment. But these are things to consider in the long term, for now, here are just 6 tips you should know before buying Bitcoin.
As a final, bonus tip: always ensure that you store your cryptocurrencies behind a safe and strong password (a unique one) and when possible enable 2FA. This provides an extra layer of security.
It’s important to remember that cryptocurrencies are more than just about Bitcoin and being rich, and similar to how technology is the centrepiece of our lives today, Bitcoin and blockchain technology may need to dip from time to time in order for a more consistent, reasonable and steady growth.
Follow the progress and updates on blockchain technology, cryptocurrencies and Bitcoin with Oobit, where we build tools that make buying and selling digital currencies easy.
We help connect and introduce what would be an endless maze of information surrounding blockchains – our mission is to make digital currency user-friendly, simple to operate and instant for anyone. Find out more at Oobit.com and purchase your first Bitcoin today.
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