How to Invest in Bitcoins Safely

Guide to get started investing with Bitcoins

Cryptocurrencies are here to stay, especially Bitcoin. In this guide, you'll learn how to invest in Bitcoin safely and profitably, exploring its origins, characteristics, and how to maximize your investments.

What is money?

To understand Bitcoin, we must first understand what money is. Throughout history, money has evolved from barter to fiat currencies. Money must have certain characteristics:

Universal Value: It must be accepted everywhere.
Divisible: Can be divided for small transactions.
Durable: Its value must be maintained over time.

First standard of money: Gold

Gold was the first monetary standard to meet these characteristics. Its scarcity and durability made it ideal for trade. However, over time, governments began issuing fiat money, initially backed by gold.

The problem with fiat money

After World War II, fiat money was decoupled from gold, leading to increased inflation. This means that the value of money decreases over time, affecting people's purchasing power.

Today, gold acts as a safe haven asset against inflation. It's important to know that if you wish to invest in gold, you can do so through ETFs.

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The beginnings of Bitcoin

Bitcoin was created in response to the 2008 financial crisis. Its goal is to offer a decentralized payment system, where transactions are not controlled by a government or central entity. This allows users to have complete control over their money.

In other words, Bitcoin is not tied to the whims of governments, and therefore cannot be devalued through monetary issuance.

Features of Bitcoin

Bitcoin meets the characteristics of money:

Scarcity: There will only be 21 million Bitcoins.
Divisibility: It can be divided into smaller units (satoshis). This is why you usually don't buy a whole Bitcoin, but a fraction of it (unless you have a lot of money).
Decentralization: It is not controlled by any entity.

The halving phenomenon

The halving is an event that occurs every four years, where the reward for mining Bitcoin is cut in half. This increases scarcity and, potentially, the long-term value of Bitcoin.

How much will a Bitcoin be worth?

While it's difficult to predict Bitcoin's exact price, many experts believe its value will increase as the supply decreases. Compared to gold, Bitcoin's potential for appreciation is significantly high.

How to invest in Bitcoin

To invest in Bitcoin, it's advisable to do so gradually. An effective strategy is periodic purchases, known as dollar-cost averaging (DCA), which helps to average out the acquisition cost. Essentially, you make regular contributions, a strategy also widely used when investing in ETFs.

Best exchanges to buy Bitcoins

One of my favorite exchanges, thanks to its security, fees, and usability, is Bit2Me. Unfortunately, this exchange is currently only offering its services in Spain, although it will soon be expanding into Latin America.

Other popular exchanges you can use include Coinbase, Binance, and Kraken. Kraken is one of the most highly recommended exchanges for buying Bitcoin. It's secure, regulated, and has proven to be reliable. When opening an account, be sure to enable two-factor authentication for added security.

I hold many of my cryptocurrencies on Coinbase because when I started investing, I wasn't aware of the differences between exchanges. While Coinbase is a very secure exchange, it's also one of the exchanges that charges the highest fees. Sometimes the difference can be significant.

Binance, on the other hand, offers good fees, but I find it a bit complicated for beginners. You can check out my exchange guide if you need more information.

How to buy Bitcoins through the exchange

Verify your identity on the cryptocurrency buying platform

The first thing you'll need to do is verify your account. This process is very simple; you just need to provide some form of identification, proof of residence, and complete a webcam verification.

After doing so, don't forget to activate two-factor authentication to add an extra layer of security to your account.

Now is the time to buy your Bitcoins

Choose your cryptocurrency: Decide which one you want to buy, such as Bitcoin or Ethereum.
Enter the amount: You can specify how much you want to spend in your local currency or how many cryptocurrencies you want to buy.
Confirm the purchase: Review the details and confirm. Done. You now know how to buy cryptocurrencies.

Satoshis and recurring purchases

It is clear that you do not need to buy a whole Bitcoin, you can buy just a fraction of Bitcoin (satoshis).

In fact, a good strategy would be to set the platform to make recurring purchases, for example, $50/€50 (or whatever currency you use), per week or per month. This strategy is very effective and usually yields the best results in the long run.

Advantages and disadvantages of cryptocurrencies

Advantages:

Transparency: All transactions are visible on the blockchain.
Decentralization: They are not controlled by any central entity.
Immediacy: Transfers are fast and can be completed in seconds.
Accessibility: Anyone with internet access can use cryptocurrencies.

Disadvantages:

Volatility: Prices can fluctuate drastically.
Lack of regulation: This can lead to scams and fraud.
Limited acceptance: Not all businesses accept cryptocurrencies as a form of payment.

Strategies for making money with cryptocurrencies

Trading: Buy cryptocurrencies at a low price and sell them at a higher price.
Staking: Lock up your cryptocurrencies to support a project and receive rewards.
Futures: Betting on the rise or fall of an asset's price (not recommended for beginners).
Airdrops: Participate in free token distributions.
Launch Pools: Invest in new projects before they are listed.
ETFs: Today there are ETFs for Bitcoin and Ethereum (and other cryptocurrencies will be added soon). This is a good option for those who don't want to buy cryptocurrencies through an exchange and prefer to go directly to a regulated broker to invest.

The best courses for trading cryptocurrencies

Risks and scams

The cryptocurrency market is highly volatile. It's crucial to be alert to potential scams, such as:

Investment bots: Deceptive offers that promise high returns.
Arbitrage: Promises of quick profits by moving cryptocurrencies between exchanges.
Social media clowns: Don't trust internet gurus; many scams have been discovered associated with these characters.

Tax aspects

It's important to understand how cryptocurrencies are taxed in your country. Generally, profits from buying and selling cryptocurrencies are considered capital gains and must be declared. Make sure you are aware of the tax regulations that apply to your situation.

Resources for learning more

Books: 'Cryptocurrencies for Dummies' and 'Mastering Bitcoin' are excellent starting points.
Documentaries: 'Cryptopia' on Netflix offers an overview of the cryptocurrency ecosystem.

Norberto Viale( Trader and founder of Topstep Experience )

My name is Norberto. I've been investing and trading for over a decade. I'm also the author of the Topstep Experience trading course. If you want to learn how to invest and have any questions, feel free to contact me.