To purchase cryptocurrencies like Bitcoin & Ethereum, one needs to know how to invest in cryptocurrency. The most popular place to buy cryptocurrency is via a cryptocurrency exchange such as Coinbase.
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How to Buy Bitcoin
In this article, I will run you through everything you need to know on how to invest in cryptocurrency such as Bitcoin & Ethereum.
You have most likely heard of gold and how you can own it. Some people buy it as jewelry and others buy gold to hold it as a store of value. Some people actually want the gold, and others just want exposure to the price of gold. Rather than buy physical gold, they buy ETF’s (exchange-traded funds), futures, or spread bets to get exposure to the gold price.
Bitcoin works in a similar manner. You can buy Bitcoins, or you can buy some kind of derivative that gives you exposure to the price of Bitcoin. These derivatives are called Altcoins in the crypto world. Altcoins are just alternative cryptocurrencies to Bitcoin. A good example of an altcoin that you may have heard of is Ethereum.
Years ago, the only individuals who could regularly trade in the financial markets worked for huge financial institutions, brokers, and trading firms. Nevertheless, changes such as the expansion of retail brokerages and online/internet trading, along with rapid global distribution of news and extremely low commissions, have levelled the playing field during the last 25 years. In recent years, the rise of over the counter trading platforms with zero commissions has made it simpler than ever for individual investors to try their luck in financial markets.
Before we move towards our main topic, let’s see what cryptocurrencies actually are and how you can day trade in cryptocurrencies.
What is a Cryptocurrency?
I think that it’s important for one to know what they are investing in before taking any action. Therefore, I will explain cryptocurrencies very briefly before I run you through how to invest in cryptocurrency. So, what is a Cryptocurrency? Well, a Cryptocurrency is just a digital medium of exchange. It uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.
Cryptocurrencies emerged after 2009 with the creation of Bitcoin, a peer-peer electronic cash system. After Bitcoin was invented, many other new cryptocurrencies were created. These are called Cryptocurrency Tokens or Altcoins. Trading cryptocurrencies became popular because of the extremely high levels of volatility and ease of entry into the crypto markets.
Many cryptocurrencies are available to trade against Bitcoin or Ethereum (another cryptocurrency) on online exchanges called ‘Cryptocurrency Exchanges’. A list of the most reputable cryptocurrency exchanges is provided further down this page.
The best place to start your research on what cryptocurrency to invest in is a website called Coinmarketcap. Coinmarketcap is a tool that provides a good overview of the cryptocurrency market. You will be able to explore and start performing due diligence on thousands of cryptocurrencies on this website.
How to buy Cryptocurrency: Learn How To Invest in Bitcoin
The first stage on how to invest in cryptocurrency involves getting a cryptocurrency wallet. This is equivalent to your email address (many people have more than one). You can get a cryptocurrency wallet for free online. You have to decide where to keep that wallet. You can either store your wallet with a provider such as an exchange like Coinbase or Binance (this is the simplest method). This is equivalent to using webmail providers for your emails i.e Hotmail or Gmail. Other methods involve storing your wallet on your own computer or, safest of all, storing your wallet on an external hard drive that is not connected to the internet. A good external wallet for storing cryptocurrency is a Trezor.
If you’re a novice, it’s probably best, while you educate yourself, to use a cryptocurrency exchange wallet. The simplest most reputable place to start is Coinbase or Binance. Once you get the hang of things you can look towards storing your Bitcoin or Cryptocurrency elsewhere.
Next, is the process of buying Bitcoin. There are many ways to do this. You could go to an exchange or you could go down the peer-to-peer route. I’d recommend using the exchange route. Coinbase would be the easiest exchange to use for a novice. However, Binance is not far off, either one of these two is a good starting point. I recommend that you use small amounts only while you’re familiarising yourself with how things work. That basically sums up how to invest in cryptocurrency. A step-by-step list is available below for you to follow.
Other methods used to buy Bitcoin/Cryptocurrency
Final Thoughts on How to Invest in Crypto
1. Open an account on Coinbase or Binance & create a wallet address for Bitcoin.
2. Transfer fiat (money) to your Coinbase or Binance account. (Skip this step if you are purchasing using a credit/debit card).
3. Buy Bitcoin using a fiat-crypto pair such as GBP/BTC.
4. Transfer your Bitcoin to your external storage wallet if you have one. (If you don’t have an external wallet, you have successfully purchased Bitcoin & it will be stored in the exchange wallet of your choice.
5. You have successfully invested in Bitcoin! Keep it safe. Never share your private key or account seed phase.
Here Are Some Important Definitions
Fiat – Traditional money issued by banks, for example, USD, GBP, EUR.
Exchange – A place where you can trade cryptocurrencies online.
Wallet – Where you store cryptocurrencies.
Address – Your wallet address, used for receiving/withdrawing cryptocurrencies.
Market cap – The market capitalization of a cryptocurrency (circulating coins * current price).
Volume – The amount of a certain cryptocurrency traded in a specified period.
Stablecoin – A coin that is usually pegged to a fiat value, people use them to protect themselves from sell-offs. An example of a stable coin is Tether (USDT). Tether is pegged to USD value.
Technical analysis – A form of analysis that looks at price action on a chart.
Fundamental analysis – A form of analysis that looks at the fundamentals of a particular asset.
Pump – A word used for when the price of an asset increases rapidly.
Dump – A word used for when the price of an asset decreases rapidly.
Breakout – When a cryptocurrency breaks out of a structure on the chart.
Cryptocurrency Trading Facts
1. The majority of traders don’t make money.
2. On average, most traders quit within 1 year.
3. Some cryptocurrencies have given returns of over 10,000% in the past.
4. Many millionaires have been made from trading cryptocurrency.
5. Traders that use good charting platforms like TradingView tend to become better traders in the long run.
Top Cryptocurrency Tips
1. Learn Fundamental Analysis.
2. Learn Technical Analysis.
3. Manage risk.
4. Preserve capital.
5. Don’t go all-in on a trade or investment.
6. Don’t chase a trade.
7. Exclude noise.
8. Watch out for scams.
9. Get a hardware wallet for long term holds.
10. Don’t show profits online.
Our Top Recommended Cryptocurrency Exchanges
My advice is that you should always do your own due diligence before using a crypto exchange and never leave coins on them for long periods of time. Here is a list of the top crypto exchanges in our opinion.
1. Coinbase
2. Binance Exchange
3. Huobi Global
4. KuCoin
5. Bitfinex
The ball is now in your court, whether you use the exchange or peer-to-peer method to invest in Bitcoin. You now have the knowledge of where and how to buy bitcoin and other cryptocurrencies in the UK. These methods also apply to anyone living in a country that is supported by Coinbase & Binance such as the US & most countries in the EU.
If you are interested in learning how to trade cryptocurrencies, have a look at this article “Technical Analysis & How It Can Help You Make Money“.
Now that you know how to invest in cryptocurrency, which of the methods outlined in this article are you going to use?
