You want to invest in Bitcoin, that’s fantastic! Your friends are probably already doing so and you certainly don’t want to miss out on one of the most amazing asymmetric bets of our life time. Many get nervous the first time and think it’s a complicated process due to all the garbage advice “experts” circulate, but knowing how to invest in bitcoins is actually very straight forward.
If you’ve downloaded an app to your computer and clicked “buy” on Amazon then it’s basically the same thing. While there are a few important details you should definitely be aware of when investing in bitcoins for the first time, it’s not hard and we’re here to answer all your questions and guide you step-by-step with our years of experience and specific Bitcoin knowledge.
Contents
What is Bitcoin & How Does Bitcoin Work?
Thou shalt not invest in anything thou doesn’t fully understand
When getting started with bitcoin the first question people normally ask is just what exactly is Bitcoin? Bitcoin is the first and most globally recognized cryptocurrency. It is a free, fully open source, decentralized and entirely digital currency for all.
Created by cryptographers (Cypherpunks technically) to cure the money problems caused by big governments and big banks it joins their other world changing technologies such as encryption of the Internet, encrypted messaging and the Tor project.
While you likely want to jump straight into buying some bitcoins for yourself (and that is a great way of learning), we encourage beginners to learn as much as they can before investing serious amounts. To do this you can read our seminal piece that’s over 5,000 words: What Is A Bitcoin? or if that’s a bit much for you, we also have our shorter read: How Does Bitcoin Work For Dummies?
Should You Invest In Bitcoin & How Much?
Once you’ve learnt a bit more about Bitcoin you should stop and seriously ask yourself, should you be investing in it at all? We don’t say this to discourage you, but instead to be up front and honest about what to watch out for and to know when it’s right for you.
Bitcoin is considerably volatile and this should be something you understand before starting. You should also ensure that you’re in a good financial position in general to begin investing (in anything).
We cannot give specifics of what this looks like as we don’t know your unique financial situation. But in general, most recommend that you make sure to pay off any high interest debts first as well as have a decent safety fund built up to cover your expenses (3-6 months) in case things go south.
We see Bitcoin maturing as a Store Of Value over the next 10 years and achieving mainstream adoption as it begins the Medium Of Exchange stage of monetization. Thus, when we talk about investing in Bitcoin here we’re talking about investing for a number of years.
This is what’s generally considered to be a serious long term investment and is in stark contrast to what most people do, which is jump from one fad stock / crypto to another or worse, day trading on leverage. That’s not what investing is, that’s gambling.
Thou shalt take on risk commensurate with thy ability to sleep well at night
Knowing how much to invest in bitcoins is also another very personal decision that you’ll have to determine yourself. There have been many studies and recommendations by portfolio managers that advise allocating anywhere from 1-7%, but maybe you’re more comfortable with even higher risk than that.
Maybe you’re young and have time on your side to ride out any storms… or perhaps you’re retiring soon we really don’t know. If you’re unsure, we can only recommend that you consult a registered financial planner to help you decide. You can also learn more about other specific investment related questions in our piece Is Bitcoin Real? And Is It Safe?
You can also learn more about Bitcoin Carrying Costs and how they compare to other more traditional investment assets. Bitcoin is extremely unique in that it has virtually zero carrying costs and can be stored for decades with no upkeep or storage costs.
How To Invest In Bitcoins: Strategies
Once you’ve decided that you’re happy to accept the volatile nature of Bitcoin investing and are OK to invest we can get into the actual process. Many think they’re already too late to invest in crypto but you’re not. In fact, not only are you not late, you’re actually early!
Bitcoin was created to be an online digital currency that serves the entire world. As it requires no ID or permission to use, it means all 8 billion humans can use it. Given that the best estimates say there are currently around 300 million or so people currently holding / using Bitcoin that’s only 3.75% of the population.
This means that if you know how to properly invest in Bitcoin it’s still got a huge amount of room to grow. To take advantage of this most recommend the investment strategy of Dollar-Cost Averaging (DCA).
DCA is also often referred to as “stacking sats”, the process of regularly buying Satoshi (sats) which are the smallest unit of bitcoins
This is where you allocate a certain amount of money each week, fortnight or month and commit to investing that amount regardless of the price of Bitcoin. This tried and true method has been around for decades, long before Bitcoin and helps to average out the costs.
It’s also useful for those with a job as it means you can invest a little each pay rather than saving up for years and then dumping it all in one go. Investing in bitcoins can be done even if you only have a little amount of money each week. You can buy $5, $50, $500, $5,000 or $50,000. There’s no minimums and the trading fees can even be 0% if you pick the right Crypto Exchange!
If you’re broke and still want to know how to invest in bitcoins then you can always earn it! The number of random jobs, requests or payments being done via the Lightning Network on Bitcoin is growing every day. Whatever your day job is, there’s likely a way you can get into bitcoin investing even if it’s at the lower end to begin with.
When’s The Best Time To Invest In Bitcoin?
Everyone buys bitcoin at the price they deserve
Buying bitcoin isn’t hard, but in order to have the knowledge and confidence to do it requires learning about it and understanding what it is and why it’s important. Too often people instead just veg on the couch watching Big Brother 37 or whatever season they’re up to now (we stopped watching TV a decades ago).
As a result, those who sleep on learning about Bitcoin only hinder themselves as it means they have to buy in at a higher and higher price. This of course is all based off historic price and as they say, history is no guarantee of the future, but as you come to understand Bitcoin more most people tend to increase their investments not reduce it.
So when should you start investing in Bitcoin? That’s up to you. Bitcoins price will gyrate around 100 times a second as people all over the world gamble on it. But. The probability of it going up over the long term seems to be quite certain at this point given its 10+ year history. There’s even a dedicated Bitcoin Rainbow Chart for exactly this!
As you can see above, there’s some months that seem to more often be “green” than red. However will that trend continue and will it keep going up? We don’t know and anyone that says they do for sure is lying.
It’s highly unlikely you’ll be able to time the top or bottom correctly. So don’t play the gambling game and instead DCA and stack sats.
How To Safely & Privately Buy Bitcoin
At this point most guides tell you to go to some big crypto exchange that pays them the biggest kick backs. That’s not how we do things around here. Instead, we prioritize your safety and privacy. As such, before buying one cent of bitcoin please go and read:
These two free pieces will help ensure you don’t fall down the wrong rabbit hole and include a number of critical safety measures, least of which is avoiding KYC/AML Crypto Exchanges.
Once you’ve read both of those pieces check out our reviewed and rated list of Crypto Exchanges that will help guide you to a safe and private way to buy bitcoins. We add to the list frequently and most exchanges (60%+) fail our tests miserably. These tests are openly detailed in our in depth Crypto Exchange Rating Methodology page.
Our list can be easily filtered to find the best exchange for your requirements and most of them allow you to pay with common payment methods such as PayPal, Credit Card, cash, bank transfer, Revolut and more. Hell, you can even pay with a Tesla Model 3 if you want!
Whether your top priority is low fees or an Android app that uses E2EE and is FOSS we have you (and your privacy and security) covered.
What Do You Need To Invest In Bitcoin?
To begin investing as quickly as possible we recommend a few key things:
- Knowledge: Read some of the free Beginner guides and get up to speed
- Wallet: See below on how to choose and get your own Bitcoin Wallet
- Exchange: As outlined above, pick a non-KYC exchange that best suits your requirements
- Filthy Fiat Money: Obviously you’ll need some dollars, euros etc to trade for bitcoin
This is assuming that you’re a Beginner who is just getting started and is investing the “pocket money” levels of funds. As you start to invest more and more we have Advanced and Expert levels to help guide you on everything from privacy to security to in depth Bitcoin mechanics and backup.
Choosing A Bitcoin Wallet When Investing
Once you buy your first bitcoins you’ll need a wallet to store them in (even though bitcoins are not actually “stored” in wallets). To help with this, we have an in depth pieces on both What A Bitcoin Wallet Is as well as What Are Public And Private Keys that will guide you through which ones to use and when.
If you’re too lazy to read those free guides then our top recommendation is Sparrow Wallet on Linux, Mac or Windows.
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How To Invest In Bitcoin And Make Money – Examples
Be not swayed by the fantastic plans of impractical men who think they see ways to force your (digital) gold to make earnings unusually large. Such plans are the creations of dreamers unskilled in the safe and dependable laws of trade
The Richest Man In Babylon
There are a limited number of ways you can invest in bitcoins and get various levels of Return On Investment (ROI), but the most tried and true one is simply buy and hold. While this doesn’t technically give you any “return” as the amount of Bitcoin you own doesn’t increase, your purchasing power against all other fiat currencies historically has gone up and so you’re able to buy more with the same amount of bitcoins.
In order to get actual return, there are many products out there such as peer to peer lending or other ones that offer to give you “yield” or interest if you hand over your bitcoins to them… but we wouldn’t recommend doing this. While they mostly are legitimate businesses and you will get 1%, 2% or higher rates, the risks that it adds is far too high.
This is because in order for them to give you “yield”, they must take your bitcoins and loan it out to someone else at a higher interest rate. This means you’re trusting some random company, usually the degenerate cryptocurrency exchange industry, with your money. If you think this sounds like a good idea, take a walk through history with our list of Crypto Exchange Bankruptcies piece and think again!
You’re trusting them to be responsible custodians of your funds… all while they’ve made it painfully clear that they cannot be trusted and in many cases are doing outright illegal things (Google FTX).
The original intention and entire reason for Bitcoins existence is to remove trusted third parties from your money. To eliminate what’s called counter party risk. Yield products not only reintroduce these risks, they jack them up to 11. For your security and safety, just don’t go there.
At the end of the day, tried and true investment methods are used for a reason.
FAQ
how much could i make if i invest $100 in to bitcoins?
A key difference with Bitcoin is that when you buy $100 worth and hold it, this is not actually “investing”, it’s saving. This is because investing is where you place your money at risk in order to receive a return. Savings on the hand is simply storing that same money away with no risk (say under your bed).
By buying and holding Bitcoin you are saving. You are not risking it on any company venture or loaning it out to someone who may then default on that loan. It’s yours, under your control and no one else can touch it. Bitcoin is savings not investing and as such, you will not earn any new bitcoins no matter how much you buy.
That being said, Bitcoins purchasing power has traditionally grown over time versus all other fiat currencies. As such, even though you still might only have 0.005 BTC after a year of holding it, it’s likely that it will buy you more goods and services than before and be worth more than the $100 you originally committed.
how do i buy bitcoin stock?
Bitcoin is not a stock or company. In fact, Bitcoin has no CEO, shares, governing body or owner of any type. Instead it is an open, permission-less network just like the Internet is.
To “buy bitcoin” you need to exchange something for bitcoins, the token that is used on the Bitcoin network. You can do this through Crypto Exchanges or a Bitcoin ETF.
how much can you invest in bitcoin?
As much as you wish. Bitcoins Market Cap is hundreds of billions of dollars and so you can buy $100, $1,000 or $1,000,000,000. Doing so requires different types of exchanges, but it is possible to buy billions if you’re really that rich. Simultaneously there’s no minimums and you can buy $1 if you want too.
how to make money investing in bitcoin?
Most long term investors in Bitcoin follow the simple path of DCA and holding for the long term. While this doesn’t produce extra bitcoins, the increase in purchasing power that has historically occurred with Bitcoin essentially gets the same result.
Some other ways to make money investing in Bitcoin include things like peer to peer lending of your bitcoin or signing up to yield products. These are extremely risky though so we heavily advise against it.
does charles schwab offer cryptocurrency?
Yes. Schwab does offer various ways for investors interested in cryptocurrencies to invest. However according to their website, they currently don’t support spot trading and only offer various ETFs, stocks, futures and Trusts.
