How to Buy Bitcoin and What Next?
Where can I buy my first Bitcoin? What can I do with my Bitcoin? What are Altcoins? How do I trade using Bitcoin?
I can't Afford One Bitcoin Because it is Too Expensive
Good news! You do not have to buy a full Bitcoin, and you can simply buy a fraction of a Bitcoin.
One of the characteristics of money is that money has to be a medium of exchange that is highly divisible - imagine trying to pay for a cup of coffee with a bar of gold and expecting change.
Bitcoin, just like regular fiat money (everyday paper money), is highly divisible. In fact, 1 Bitcoin is divisble to 0.00000001 sats (the Bitcoin equivalent of cents). If the price of 1 Bitcoin is 10,000, then the smallest Bitcoin amount is one hundredth of a cent.
In the case of buying Bitcoin, if the price of Bitcoin was $10,000 and you only had a $100 dollars to invest, you can simply buy 0.01 of a Bitcoin.
There are numerous ways of buying Bitcoin, here are my recommendations
How to buy Bitcoin?
For most of us, the easiest and most convenient way to acquire Bitcoin would be to buy some off a coin exchange. Coin exchanges are growing in popularity and are a legitimate portal in which you can purchase your very own bitcoins with fiat money (USD, SGD, RMB etc).
There are numerous coin exchanges currently in the market. However for readers based in Singapore, I find that Binance has the cheapest fees amongst all exchanges available to Singaporeans. If Binance is not available to you, Gemini is a very good alternative.
You may read in further detail, the first steps to buying your first Bitcoin here in my recent blog posts.
1. Learn about buying Bitcoin on Binance Singapore (recommended for users based in Singapore)
2. Learn about buying Bitcoin on Gemini (recommended for users based outside of Singapore)
To read up more about buying Bitcoin and other investment tools relating to Bitcoin, visit Our Blog.
Are There Other Ways to Get Bitcoin?
Not-entirely convinced or still reluctant to invest a lump-sum of money into Bitcoin? Not to worry!
There are a number of alternative ways that you can start to slowly gain exposure to Bitcoin or the world of cryptocurrencies.
1. Using the Brave Browser - One of the best ways you can gain immediate and a seamless experience of the blockchain and crypto. Brave is a lightning faster browser which actually rewards you to view ads at your convenience while you are surfing the net. Did I mention that it is also lightning fast? Up to 8x faster than Google Chrome to be precise.
Learn more about Brave and its advantages here.
2. Using RoundlyX (unfortunately only available in the US for now) - RoundlyX is a fantastic way to develop savings into Bitcoin over-time in a convenient and painless manner. Similar to other apps like Acorn, RoundlyX rounds up your transcations to the nearest dollar and converts the excess amount into your Bitcoin purchase. No better way to dollar-cost average into Bitcoin!
Now that you've gotten your first Bitcoin, what next?
In the good old days of Bitcoin, there were pretty much only two things you could do with your Bitcoin, using it for payments (such as buying pizza), or simply hodling it!
Thankfully, today there are all sorts of exchanges and platforms offering a wide variety of crypto financial services that did not exist in the past. Generally, anything you could imagine doing with traditional stocks or derivatives, you can now achieve this with crypto - this includes:
1. Earning interest on your Bitcoin / Crypto through loans or staking (Safest for beginners)
2. Buying and Trading Altcoins
3. Trading Bitcoin / Crypto futures with margin
4. Trading Bitcoin Options
A word of caution - unless you have previous experience trading derivatives and volatile assets, I would not recommend trading with your Bitcoin. There are many ways in which your positions can be affected. To learn more about some of the risks associated with trading bitcoin, click this link.
Earning Interest on your Bitcoin / Crypto through loans or staking
This is the lowest risk approach for beginners looking to increase the potential of their Bitcoin holdings. There are numerous centralized platforms offering high-interest returns on your Crypto deposits. However, please do your own due diligence on your investments. I personally recommend BlockFi and Celsius as my platforms of choice for interest on Bitcoin and other cryptos. You may find out more about BlockFi and Celsius in my article here.
Buying and Trading Altcoins
There are more than 5,000 other cryptocurrencies other than Bitcoin (known as altcoins). Some of them maybe have the potential to make a similar impact and investment return like Bitcoin and there is an opportunity to invest in them. However, investing in these altcoins are very risky due to their high volatility and co-relation to Bitcoin's price (any major movement in Bitcoin's price tends to leave alts lagging). Read more about what altcoins are and how to invest in them below.
*not recommended for new investors or passive investors*
Trading Bitcoin / Crypto Futures
Bitcoin Futures have become a popular way for many Bitcoin traders to speculate on future Bitcoin price movements. Exchanges like Bitmex, Phemex or Binance enable traders to long/short Bitcoin (or other cryptocurrencies) with high amounts of leverage - potentially enabling traders to achieve high rewards trades. For example, with 0.1btc you may be able to trade up to 10btc (100x) positions - enabling a trader to make huge gains with only a small starting capital. However, this also means that any potential wins or loses are greatly amplified.
*not recommended for new investors or passive investors*
Trading Bitcoin Options
Depending on your strategy, trading options can be a fantastic way of hedging your Bitcoin investments (by buying put options) or earning a semi-passive income source (selling put options). Options also enable you to make leveraged Bitcoin trades through buying of call options. Bitcoin Options exchanges like Deribit or Sparrow enable options buying/selling in the secondary market.
*Options trading may be a safe investment method, but proper understanding of Options trading, its risks and rewards must first be understood*
Sparrow (a Bitcoin Options platform), provides some fantastic introductory materials for options trading here.
How Can I Store my Bitcoin?
Equally as important to your Bitcoin investment gains are the security of your coins - this is important and should never be neglected at all cost.
After buying your Bitcoin, there are several options available for storing your Bitcoin safely. Here, I will go through the pros and cons of various methods of storage.
1. Cold Wallet Storage - Arguably the most secure way of storing Bitcoin. As the definition of a "Cold" wallet means that it is stored offline, there can be no danger of your cold wallet ever being hacked as it is separate from the network. The most common method of cold wallet storage is through a hardware wallet - a USB like device which you can send your Bitcoin to and safe keep in your home. It is portable and secure, with the drawback being a sacrifice in convenience if the user is intending to transaction and use Bitcoins.
Bitcoin.Org has a extremely useful tool in narrowing down your wallet options based on your desired criteria, such as your level of experience and features desired. Check out their "Choose Your Wallet" function here.
2. On a Centralized Finance (Cef-FI) Platform - A vast amount of Bitcoins are currently being stored on centralized exchanges as they offer the most convenient access to funds as well as a wide range of utilities. Centralized exchanges are any company or business that you can deposit your Bitcoin to, for example, a Bitcoin Exchange like Binance, or Crypto Asset servicers like BlockFi or Crypto.com. While your Bitcoins are stored at these centralized exchanges, you can perform a various of actions such as trading Bitcoins, or earning interest from your Bitcoins. However, there is a famous crypto saying that goes - "Not your keys, not your coins". Because your Bitcoin are stored with the Centralized Exchange, you technically do not hold the Bitcoins and there is a risk that the centralized exchange may be hacked, putting your Bitcoins at risk. However, security in centralized platforms have vastly improved in recent years and are a safe and viable options today (at least for the larger and more reputable ones around)
I personally hold my Bitcoin in several Ce-Fi platforms, spreading them out rather than keeping them all in a single platform as I believe that this reduces the risk of a single hack compromising all my Bitcoins. Additionally, I use a variety of Ce-Fi platforms for a few purposes, like buying and selling altcoins, and Bitcoin options. Check out the various things you can do with your Bitcoin here.
What are Altcoins?
While Bitcoin is the most famous and prominent cryptocurrency, there currently exists more than 5,000 other cryptocurrencies in the market as at early 2020, known as "altcoins" or simply "alts" (alternative to Bitcoin), and the number continues to grow.
Altcoins primarily aim to address any perceived limitations of the current Bitcoin protocol. For example, a creator may view that Bitcoin transactions lack privacy (as all Bitcoin transactions are stored forever on the blockchain publicly) , and wishes to create a cryptocurrency that offers advantages in privacy.
That new alternative would be an altcoin. While some alts have a clear and established use-cases, other alts may not, and may even be scams cleverly disguised as a legitimate project - which is why you must be extremely cautious in investing in alts . Historically, although certain alts have outperformed Bitcoin, they are considerably more volatile and risky to trade, as compared to simply holding your Bitcoin. With that being said, I view certain alts like Ethereum having tremendous potential with the various eco-systems being build upon its blockchain.
One useful place where you can find out more about the various altcoins in existence is CoinMarketCap. For followers of the altcoin space, CoinMarketCap is consistently the go-to place to find the best performing alts and the prices.
There are numerous crypto exchanges that offer altcoin trading, such as Binance, KuCoin or Huobi. Altcoin prices are commonly denomiated in two ways - relative to USD or to BTC.
To learn more about trading alts, read my article on trading alts on Binance, however do consider carefully the risks involved - you may end up losing some or all of your Bitcoin.
Can my Bitcoin get Hacked?
What are the chances that I will lose all of my Bitcoin to a Hack?
As long as you store your Bitcoin (or any other cryptocurrency) by yourself in an offline wallet, you can never be hacked. Bitcoin is a 100% decentralized, meaning that there is no central point of authority that can be hacked.
With that said, we have often still heard of cases involving Bitcoin hacks or scams. These happen when user's place their Bitcoin with a centralized authority, like a Bitcoin exchange. These entities are not immune to hacks, as hackers can infiltrate their security systems and have access to your funds in storage. It is for this reason that storing Bitcoin on exchanges is ideal as recommended approach; however it is convenient to do so.
Bitcoin exchanges can be hacked, Bitcoin companies can be hacked, but the Bitcoin network itself cannot be hacked. As long as you store your funds safely, you should not need to worry about being hacked.