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Investing in Bitcoin (BTCUSD) can seem complicated, but trading Bitcoin only requires an account at a service or an exchange, and safe storage practices are recommended.
Bitcoin investors need a cryptocurrency exchange account, personal identification documents if you are using a Know Your Client (KYC) platform, a secure connection to the Internet, a method of payment, and a personal wallet outside of the exchange account.
Valid methods of bitcoin payment include bank accounts, debit cards, and credit cards and it’s possible to get bitcoin at specialized ATMs and via P2P exchanges.
KEY TAKEAWAYS
- Bitcoin’s value is derived from its store of value and payment system and its finite supply.
- A bitcoin’s wallet or exchange account can be compromised so it’s important to practice proper storage and security measures.
- Bitcoin can be purchased through services like Coinbase, PayPal, and Robinhood.
Before You Buy Bitcoin
Privacy and security are important issues and investors who gain the private key to a public address on the Bitcoin blockchain can authorize transactions. Private keys should be secret and investors must be aware that the balance of a public address is visible.
Individuals can create multiple public addresses and distribute their collection of Bitcoin over many addresses. A good strategy is to keep significant investments at public addresses that are not directly connected to those used in transactions.1
The history of transactions made on the blockchain is transparent but identifying user information is not. On the Bitcoin blockchain, only a user’s public key appears next to a transaction, making transactions confidential but not anonymous.
Less Than 1 Bitcoin
Investors can buy less than a whole bitcoin. Whether a wallet is one bitcoin, 15 bitcoins, or 0.01 bitcoins, investors are equally exposed to the ups and downs. At Coinbase, a $2.00 minimum investment is required.23
Bitcoin transactions are more traceable than cash because they are available for public view and it is very difficult to trace the transacting parties on the cryptocurrency’s blockchain. However, researchers and the FBI have claimed they can track transactions made on the Bitcoin blockchain to users’ other online accounts, including their digital wallets
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