Cryptocurrencies

Everything You Need to Know Before Buying Bitcoin

Everything You Need to Know Before Buying Bitcoin
Written by Mary Ann Callahan

(Images: Pixabay)

Bitcoin shot to fame last year. It shocked many by flying from around $1,000 per BTC at the start of the year to an all-time high of nearly $20,000. This grabbed media attention around the world, and as the BTC to USD price continued to increase, so did the number of people hoping to increase their own wealth. For many of these latecomers, this super-volatile, emerging asset class represents nothing more than a get-rich-quick scheme. They saw the price rising and thought, “hey, I’d like to get some of those gains too!”

These are exactly the type of people who are most likely to get burned by making a hasty investment in something they know little about, apart from a rising price. Of course, one of many “Bitcoin bubbles” burst when the asset was considerably overbought at the end of the year.

Without the solid understanding of some fundamental concepts of Bitcoin, these people are the easiest to “jump ship” on their investment. These “weak hands,” as they’re known in the investment world, are a part of the reason there is such volatility in Bitcoin. It’s people’s greed that directly causes it. Such swings are caused by their own rash investments and are based on “FOMO” (fear of missing out) or because they’re constantly buying and selling assets trying to time the market to make a profit. Unfortunately, the latter group will be a feature of just about every asset class as long as there are markets to make such trades. However, good education can stop it, as many folks are becoming the weak hands in cryptocurrency that are so ridiculed in the space.

The Philosophy – the Actual Point of Bitcoin

Everything You Need to Know Before Buying Bitcoin Point

The most important thing to understand about Bitcoin is a bit philosophical. This ties in with the reason that it should become immensely valuable in the future. Of course, the fact that it goes up in price is nice, but that isn’t the be-all and end-all of Bitcoin. The reason it will continue to increase in price is down to its unique qualities.

   

Scarcity

The first of these is that it’s a scarce asset class that cannot be manipulated by outside forces. Thanks to the way Bitcoin has been designed, no single entity can increase or decrease the number of units of Bitcoin. This makes it deflationary rather than inflationary (as is the case with government-issued or fiat money). No one can truly influence the price other than the entire market.

Uniqueness

The next quality of Bitcoin that makes it special and must be understood before you buy Bitcoin is that it is not confiscatable. This is entirely unique on the planet. If you store your Bitcoin correctly, there is absolutely no way it can be taken from you. This, combined with the first point we made, makes Bitcoin very special indeed.

Value

In a world where governments consistently overstep their marks and their abuses of power become more rampant each year, an asset class like Bitcoin is becoming more valuable by the day. The ability to hold onto your wealth, no matter what a person or government does to you, makes Bitcoin immensely valuable. This is something that few people have truly cottoned onto as well.

How to Store Bitcoin Securely

Everything You Need to Know Before Buying Bitcoin Vault

Now that we’ve got the important philosophical necessity of an asset class like Bitcoin out of the way, we can get to a point that ties in with it – securing your Bitcoin. We raise this point deliberately before broaching the subject of actually buying Bitcoin too.

Knowing that you can immediately transfer your non-confiscatable asset directly into the most secure storage method possible is vital for using Bitcoin to its full potential.

There are two generally agreed-on methods of storing Bitcoin for the long term and one way that is not advisable.

The two ways of storing your Bitcoin for any length of time are either using a hardware wallet or a paper wallet. In all honesty, a paper wallet is the most secure, if set up correctly. However, they are notoriously difficult to create properly. This means, for non-technical users, it’s best to use a purpose-built hardware wallet.

It is not advisable to store Bitcoin on an online wallet. The golden rule of cryptocurrency is that if you don’t possess your own private keys, you don’t possess your own cryptocurrency.

If you successfully learn how to store your Bitcoin – whether that be on a paper wallet or hardware wallet, you’re the master of those Bitcoin. No one can take them from you and they can’t manipulate them to make themselves richer and you poorer. Again, to labor a point, this is a very special quality indeed.

How to Buy Bitcoin

Finally, we move onto a more practical piece of knowledge needed before buying Bitcoin – the actual process of buying them. For this, there are many different options. You can look at exchanges such as CEX.IO, Coinbase, or Kraken or use a peer-to-peer marketplace, such as Paxful or Local Bitcoins. All these options have their own advantages and disadvantages that are too numerous to explain here. At some you can use credit cards and bank transfers, others will accept physical cash in exchange for Bitcoin.

Once you are a happy owner of some, you can transfer Bitcoin from the exchange to your personal wallet smoothly and save it for a rainy day, or you can trade it… But it’s quite a different story!

About the author

Mary Ann Callahan

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