The last few months have been like a rollercoaster for the whole crypto space. It has made a lot of market-savvy individuals question whether they should buy Bitcoin. If you are thinking of buying Bitcoin, but you are not sure, this guide is for you. There is a lot of information on the internet about buying Bitcoins, but remember, not everything applies to everyone. Before you buy Bitcoin, there are a handful of things you need to understand, and this article will help you understand them. Let’s inspect this.
1. Buying a full Bitcoin is unnecessary
Here’s a “Bitcoin 101” notion that many novice investors overlook.
You do not have to buy an entire Bitcoin. You can buy a part of it. Bitcoin is very divisible—we can divide it into eight decimal places. It is possible to buy Bitcoin in increments of 100 millionths of a coin.
Many exchanges offer small trade quantities. But they are often in the $5 to $10 range, rather than the $60,000-ish price tag of a complete Bitcoin.
2. Bitcoin does not guarantee earnings
The internet is rife with bitcoin buying tips, but keep in mind that not everything applies to every situation. As the saying goes, there is no one-size-fits-all approach. Many individuals considering purchasing bitcoin still regard it as a get-rich-quick gimmick. That is not incorrect-bitcoin has made several early adopters wealthy. Look at the extraordinary success of Bitcoin throughout the first ten years of its existence – it’s quite amazing.
Despite a prosperous decade, there are no guarantees with bitcoin. Countless individuals have lost wealth as a result of the volatility of bitcoin.
A solid rule of thumb is to never commit more money than you can afford to give up. Keep in mind that, although you have the safety of a decentralized system, Bitcoin is still a fledgling social experiment. It might succeed or fail, and nobody knows for sure which one.
3. Bitcoin is Not Free
Bitcoin doesn’t come without a cost, even if the website says there is no transaction fee. Most Bitcoin sellers benefit from a “spread”. The spread is the ratio between the rates at which they sell it and the rates at which you buy Bitcoin. This is often between 1% and 2%.
Several providers, including a handful of my favorite bitcoin platforms, charge a transaction fee. These fees should not stop you from purchasing, but you should keep them in mind.
4. Be wary of scams and frauds
You’ve heard of a slew of cryptocurrency-related thefts and frauds. Indeed, hackers stole roughly $1.7 billion in 2018. But does this imply that bitcoin and other coins are risky? No, not exactly.
Security flaws cause most bitcoin breaches in cryptocurrency exchanges. Every Bitcoin exchange has a wallet where you can store and transmit coins. It’s a handy place to hold your coins. You may sell them at any time, and there is no need to set up a crypto wallet because the cash is always accessible to you. They function like banks in the crypto realm.
However, there is a problem.
The funds held at a bitcoin exchange are not entirely yours. Exchanges do not issue any private keys that prove your ownership of the currency. As a result, if an exchange mishandles its operations, it may also lose your assets, as has happened in the past. Many people still put their coins in crypto exchange wallets. It could be out of misinformation or expediency. As a result, exchanges are a perfect target for a hacking attempt. You can treat it like a honey pot, with low risks and high returns.
As a result, hackers devise intricate strategies to steal bitcoin exchanges. Regrettably, several are successful. Furthermore, with a decentralized system such as bitcoin, relying on centralized services makes no sense. It contradicts the idea of cryptocurrencies.
If you intend to buy Bitcoin, do not hold it in an exchange account. Create your Bitcoin wallet or get a hardware wallet. It will assist you in increasing your security and avoiding any uncomfortable circumstances.
5. Trading and investing in Bitcoins are two different things
Cryptocurrency investors should understand the difference between trading and investing. Investing in Bitcoin means holding onto it for the long run. “Trading” shows you’re purchasing it because you believe its value will rise in a short duration and you’ll profit soon.
The former can be a good supplement to a well-diversified investment portfolio. Whereas you should approach the latter with extreme caution. Timing the market is often a losing battle, as trading Bitcoin isn’t free. The spreads and transaction fees can quickly add up if you are making multiple trades in a day.
Bitcoin is an excellent investment option, but it comes with its risks. Although its growth has been impressive, most traders lose money. So, before you buy your first Bitcoin, keep these five things in your mind and never stop learning. Always conduct your research and avoid investing in currencies that do not inspire confidence in you.
Also read: How To Earn Passive Income with Crypto?