How to Invest in Bitcoin for Beginners

How to invest in Bitcoin for beginners

I don’t remember when, but at some point, I started looking into Bitcoin and other cryptocurrencies. For a while, I left all of that in the past- with my interest only returning when 2021’s Hype Wave arrived. This article will provide an overview of how to invest in Bitcoin, which I create during my research on this topic.

Bitcoin is a digital currency that has been in the news for years now. It was developed to be a decentralized cryptocurrency. Decentralized means that there is no central body or single administrator that regulates it. This puts it at odds with central banks’ traditional fiat currencies, which are highly regulated and controlled by governments. When learning how to invest in Bitcoin, we must remember that Governments are still opposing it and pose difficulties along its mainstreaming process.

If you’re touching on this topic for the first time, I warmly recommend this 26 minutes awesome video by 3Blue1Brown. It explains the basics and mechanics thoroughly behind Bitcoin. I found it to be one of the best explanations that helped me understand the topic.

Terminology

For more terms and ideas in the bitcoin ecosystem, checkout my bitcoin dictionary, where you’ll find short information for all the buzzwords you might ever hear around bitcoin and the blockchain ecosystem 🎉

Fiat Money – Currencies accepted by governments that are not backed by gold or any other asset. This means money that governments “create” out of thin air based on their confidence in the system.

The term fiat derives from the Latin word fiat, meaning “let it be done”[used in the sense of an order, decree or resolution. (wikipedia.org)

Block Reward – The additional Bitcoins miner nodes receive when they successfully mine a node or add a node to the chain. It is the “payment” for taking part in the Blockchain network and enabling transactions. The Block reward is present at the beginning of each complete and signed block to which a valid signature was found. It is important to note that block reward amount decreases over time. The reward is halved every 210,000 blocks, approximately every 4 years, and currently stands at 6.25 BTC per block.

21 Million Bitcoins – The total possible number of bitcoins in existence. One of the most interesting aspects about Bitcoin is that there will one day be a point in time where no more Bitcoins can be mined anymore. This stems from the fact that Block Rewards are halved every year and reach 0 or a low level in several years. However, getting to this point does not seem inevitable. Some people believe mining difficulty might lessen, making it possible for Bitcoin to function again, while others predict an increase in transaction fees.

Transaction Fee – Each Block is limited for a number of transactions.

Network Difficulty – The amount of time it takes to complete a block hash. When miner nodes try to find the hash for a block, they need to find a number that makes the Block’s hash start with zeros. The number of leading zeros changes periodically to keep the average block signing period at 10 minutes. It’s a mechanism to keep the network balanced, even though some other chains have shorter block periods.

Seed Phrase – A sequence of 12 or 24 words that represents the key to your wallet. These words are the only proof and key to open your account on the Blockchain if you lose access. Protect these words, both physically and online, to make sure you never lose them!

The Official Bitcoin Whitepaper by Satoshi Nakamoto – A must-read for Bitcoin enthusiasts. Most of the Crypto community knows that Bitcoin was one of the first decentralized peer-to-peer payment systems to be introduced. It was created in 2009 by Satoshi Nakamoto (possibly a fake name), who published his whitepaper where he imagines a “p2p distributed transaction database”. The whitepaper includes an explanation about how transactions are carried out. More importantly, it describes how such a system can be decentralized so that anyone will have access to it without intermediaries or central servers.

Mastering Bitcoin 2nd Edition – Get it on Amazon or online on Github. The technical essentials guide to Bitcoin, everything you need to know regarding the technology behind the scenes.

The Internet of Money – Get it on Amazon, a collection of talks and ideas by Andreas Antonopoulos, number one author when in comes o Bitcoin.

100 Trillion BTC – Stock to Flow Model – Fascinating read by PlanB, an anonymous twitter account with a model that compares bitcoin scarcity valuation to gold and other precious metals. Important read and a fascinating hypothesis for the future of bitcoin.

Cold Wallets

In the past, many exchanges and online wallets had been hacked. It is no longer safe to store large amounts of money in online services like these. Do not store large Bitcoin amounts in Warm (online) Wallets such as apps on your phone. These could get hacked and expose the wallet’s keys way too often.

When you need to securely store a large bitcoin amount, use a cold wallet. Cold wallets store your private key information offline on an external device that is not connected to the internet and are much more difficult for hackers to access. Plus, Cold Wallets have some additional security features like PIN protection or biometric verification that make them even more secure than other storage options.

Backup first!

Whenever handling cold wallets it’s of utmost importance to keep your safety words backed up. These 12 or 24 words are the only representation of your account. Make sure you have them written in at least 2-3 locations, and either engraved in stainless steel metal or on a piece of laminated paper.

Trezor

Highly recommended cold storage wallet, give you security, ability to backups offline and highly recommended by the community.

Hot Wallets

Hot wallets are described as types of online wallets usually found in mobile applications that work well for people who want to have the convenience of access to their funds anytime and anywhere with an internet connection.

Note – never store high bitcoin amounts in online wallets as these are more likely to be hacked. Use Cold Wallets for that purpose.

Electrum

Suits more tech-savvy people who want more features and control.

Blue Wallet

Simple, nice and slick Bitcoin wallet, easy to use and works on both iOS and Android.

Purchasing Bitcoin in ILS

Bit2C

purchase Bitcoin easily with direct bank transfers in ILS. Easier for tax purposes to show valid transactions and report this to the tax authorities later on. Bit2C uses anti-laundering and KYC techniques to make sure only valid money passes through them.

Buy Bitcoin Worldwide

Purchasing Bitcoin in Credit Card

Binance

One of the world’s fastest crypto-to-crypto platforms and the most reliable ones. Binance allows you to buy bitcoin using a credit card, from any fiat currency you’d like. If buying bitcoins with your credit card, or trading other cryptocurrencies is what you’re looking for, Binance is the place for you

Crypto.com

Crypto.com provides users with effective alternative financial services so that they can control their money, data, and identity. Crypto.com has over 10 million customers worldwide through its app, credit card account service (crypto Visa card), exchange platform, and wallet Defi program. All this from one convenient location on the cutting-edge innovation frontier of blockchain technology.

Anthony Pompliano – Join his amazing newsletter (small premium fee, totally worth it) to get a daily newsletter summing up the latest in Bitcoin and all around it. Definitely worth subscribing, valuable content summarized beautifully.

BTCMinute – A blog by with a lot of information, videos and content around Bitcoin.

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Guy Eshet

Guy Eshet

Having more than 10 years of experience in development, Guy Eshet has a passion for software development, web design, and technology. He is constantly on to search for tools to simplify our lives. Guy is fluent in 5 languages, loves meeting new people, learning new things, and improving his skills.

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