From banking to advertising to retail shopping, our society carries out a growing array of economic activities online. It only seems natural that currency would join the mix. Digital money has arisen as an alternative to the volatile official currencies of many modern countries. Bitcoin is by far the most popular of these alternatives, rapidly becoming a major source of money across the globe.
Considering how rapidly Bitcoin has grown, it may make a promising investment. But before you begin buying, it is essential to understand how this currency works. Only once you know how to buy Bitcoin, keep it secure, and anticipate changes in its value can you hope to invest profitably.
The first step to investing in Bitcoin is to learn how to buy it. This typically involves joining an online currency exchange, where you can trade dollars, rupees, Yuan, and other forms of money for their equivalent value in bitcoins. The most popular online exchange is known as Coinbase, but you can also use Changelly, Coinmana, LiteBit, and a myriad of other fora. Once you sign up for an exchange, you can pay for bitcoins using your bank account, your debit or credit card, or any other online purchase method. Exchange accounts typically come with a wallet, which keeps track of the amount of bitcoins you own; that wallet will be updated automatically each time you make a new currency purchase.
Shoring Up Security
While your exchange wallet will keep track of your bitcoins in the short term, it is not safe to keep them there indefinitely. Exchanges like Coinbase do not specialize in security, and will not be able to reliably prevent other users from stealing your bitcoins. For this reason, you should sign up for a secure digital wallet as soon as you begin buying.
You can create a Bitcoin wallet on your desktop computer by going to the website Blockchain.info. If you have an Android mobile device, you can create a wallet on that by downloading the app Bitcoin Wallet for Android; for Apple devices, the equivalent app is Blockchain Bitcoin Wallet for iOS. There are a number of different types of wallets you can create, but the most secure ones are multi-signature wallets. This kind of wallet requires multiple users to agree in order to create an account in the first place; at least two users must sign on before anyone can withdraw money. This arrangement makes it harder for unauthorized users to steal your bitcoins, shoring up security for the long haul.
Once you know how to buy and secure bitcoins, you can start making money off them. Bitcoin prices have fluctuated wildly since the currency was first developed. The key to profiting from it is to figure out when prices are about to rise or fall; you can then buy before they rise, wait for your bitcoins to increase in value, and then sell just before they fall. Such changes in price happen for a number of reasons, but the most common ones include:
- Currency Changes– Since Bitcoin was developed as an alternative to official government currencies, its price changes in accordance with those currencies. It tends to do best when national currencies decline in value or are expected to decline; when experts were predicting that the Chinese government would devalue the Yuan, for example, Bitcoin prices climbed. On the other hand, if countries with previously volatile currencies become more stable, Bitcoin prices will fall.
- Bitcoin Acceptance– As more countries and businesses allow bitcoins to be used for payment, the currency as a whole becomes more valuable. For example, Japan’s recent decision to allow Bitcoin was a boon for investors. But if any companies or nations stop accepting bitcoins, the currency’s value will likely decline.
- Competing Currencies– While Bitcoin is the most common digital currency, it is by no means the only one. If currencies like Ethereum and Factom increase in popularity, Bitcoin will likely suffer.
By paying attention to these and other trends, you can anticipate the changing value of Bitcoin. This puts you in the perfect position to invest in and profit off this cutting-edge digital currency.