Throughout 2020, Bitcoin’s value increased by 288 percent, reaching an all-time high of $40,000 in early 2021. Those are significant figures, and you’re not alone if they’ve piqued your interest in Bitcoin.
In a survey conducted by Bitwise Asset Management in 2020, 81 percent of financial advisors said their clients had inquired about cryptocurrencies (Bitcoin). However, many experts believe that their clients would be prudent to ignore this tendency.
“I think a lot of the time when people bring up Bitcoin to me, what they really want to do is get started in investing and they’re not sure what to invest in,” financial planner Sophia Bera said. She shares her motto with curious clients: “Simple first, sexy later.”
If you’re considering purchasing bitcoin through your stock-trading app or brokerage, there are a few things to think about before parting with your hard-earned cash on what could be a fad.
1 Start from somewhere
People who want to buy some bitcoin should start with a very small amount, according to my own experience. No more than a few hundred dollars worth. (You can also use less money and buy a small amount of it if you want to).
Online banking and investing are not the same as buying and moving bitcoin. If you send bitcoin to the wrong place, for example, you can’t just call your bank and cancel your transaction. You can’t do this with bitcoin. So it’s important to learn how to buy and move bitcoin around with a small amount of money first, before moving on to bigger amounts.
2 Everything should be written down
It’s ironic that even though bitcoin is a very modern technology, you still need to keep a record of all your bitcoin information “on the ground.” That means a pen and paper, or at least a Microsoft word document that you print out and keep as a back-up.
When you want to store and send or get it, you need to set up a digital wallet. These are the places where you “store” your bitcoins.
This is what public key wallet look like: (1GwV7fPX97hmavc6iNrUZUogmjpLPrPFoE). This is where the bitcoin goes when it is sent from your wallet to another. An account name is something like this.
Also, your wallet has a unique key that only you know. In either case, this will be an alpha-numeric sequence that looks like the public key above, or a long sequence of random words that the wallet will make up as it goes. This is the “password” that you use to get into your wallet.
In either case, safe wallets don’t have a “I forgot my password” button.
If you lose or forget your private key, you won’t be able to get into your money. You also lose your money. Period.
3 Don’t leave money at the exchange
To turn your money into bitcoin, you need to open an account with a company called an exchange.
For this to happen, the exchange will need to do some KYC (know your customer) checks on you. This means they’ll do a standard check of your identity to make sure you are who you say you are and that you aren’t a bad person.
Open the account. You can then fund it with money from your checking account (or with money from your credit card, in some cases) before you buy bitcoin.
If the exchange where you bought bitcoin and left it is hacked, you could lose your money. Some high-profile cases have had this happen before.
Among other things, Mt. Gox, a bitcoin exchange, filed for bankruptcy in 2014 and said that 750,000 customer bitcoin was missing. As of today, that’s worth about US$1.5 billion.
