Bitcoin is here to stay.
Even just a decade ago, the digital currency was only part of fringe investment strategies. Few understood how crypto worked and even fewer accepted it as real money.
But in April of 2021, Bitcoin’s price hit an all-time high.
Banks, retailers, and credit card issuers are moving to deal in cryptocurrencies. And now that 46 million Americans own at least one share of Bitcoin, there’s no denying that Bitcoin and crypto have gone mainstream.
However, it’s important to realize it’s also gotten increasingly volatile. This is why Bitcoin investing requires shrewd planning as well as a crypto tracker that helps you chart its fluctuations (more on that later).
So how do you keep up with the trend and start investing — smartly?
Keep reading for everything you need to know.
What Is Bitcoin — And How Does Bitcoin Work?
Bitcoin is a digital token that can be sent between users over the internet. It’s decentralized, meaning that instead of funneling every transaction through a single hub, like a bank or Paypal, the system is run by a network of computers monitored by people called miners. The system records and verifies all Bitcoin transactions on a public ledger known as the blockchain. This technology secures Bitcoin’s purchases and sales.
To use Bitcoin you need a digital wallet, which you can get via a mobile app or computer program. This allows you to electronically send and receive Bitcoin to other users, exchange it for cash, and often purchase goods and services.
Bitcoin is the most popular form of cryptocurrency — which is the name of any digital coin that’s decentralized and uses blockchain technology. And there are hundreds of them.
Why Is Investing in Bitcoin So Popular These Days?
Bitcoin’s value has risen exponentially since its launch in 2009. When the price spikes, Bitcoin investing can be the most profitable strategy in your portfolio.
Investing in Bitcoin and other cryptocurrencies is also so alluring because it provides a reliable store of value. The supply of Bitcoin is limited. Since it works independently of any central bank, government authorities can’t lessen its value by producing more of it.
It’s also easy to swap for cash or other commodities at low exchange rates, making Bitcoin one of the more liquid financial assets.
Bitcoin investing is also easier than trading stocks because you don’t have to go through a broker. You can buy and exchange any cryptocurrency yourself with a digital wallet, and make transactions immediately. All you need to get going is your bank account information and an internet connection.
The 5-Step Guide to Bitcoin Investing
Buying Bitcoin online is easy, but the crypto market is incredibly complex. And since it’s untethered to any central financial institution, the digital token is largely unregulated.
This to say — the reasons why Bitcoin investing is so exciting are the same reasons why it’s dangerous if you don’t know what you’re doing.
To play it a little safer, follow this guide for tips on how to get started.
1. Dedicate a Small Amount of Your Portfolio to Bitcoin Investing
Bitcoin’s sudden price explosions can look seductive. But it’s important to never pump more money than you’re willing to lose into any cryptocurrency. It’s best to decide in advance how much of your portfolio should be tied to these investments.
This, of course, is up to your own discretion. However, most experts recommend allocating a small amount — somewhere between 3% and 5% — of your portfolio to Bitcoin or any other digital token. The rest should be tied up in more surefire bets, like stocks and real estate holdings.
This is just one of the many reasons that we’ll uncover that make it really important to have a single wealth tracker that manages all the components of your portfolio at once.
2. Choose a Bitcoin Exchange
Similar to stocks, cryptocurrency holders need a platform for trading. These are called cryptocurrency exchanges and serve as middlemen for Bitcoin investing.
Since most banks and investment brokerages don’t deal in crypto, these exchanges are all found online. The most popular options are Binance and Coinbase. But there are several others, including Kraken, Gemini, and Bisq.
Regardless of which exchange you choose, expect to pay transaction fees for buying and selling crypto. Those new to Bitcoin investing should look for options with the lowest trading fees and user-friendly interfaces. It can be helpful to research comparisons to assess how the cryptocurrency exchanges differ.
3. Purchase Bitcoin
After choosing an exchange, you need to fund your account. Most options will let you transfer U.S. dollars into the exchange platform from your bank account or debit card. But this isn’t the same thing as buying Bitcoin, and it’s best to never leave any money sitting in the exchange uninvested.
To complete the step, most exchanges will let you enter the dollar amount you want to trade for Bitcoin and then sell it to you at its current value (plus any fees).
You don’t necessarily need to buy a full coin. Nor should you if you’re new to Bitcoin investing. Since the price of one coin has fluctuated between $30,000 and $60,000 in recent months, you likely want to purchase just a small, fractional share.
4. Store Bitcoin in a Digital Wallet
Lots of the crypto exchanges let you keep your Bitcoin investment directly in your account. But you can go the extra mile to secure these funds by storing them in a virtual location called a digital wallet. There are two types of digital wallets: hot and cold.
Hot wallets let you access Bitcoin through the internet or software programs. Some exchanges provide them automatically, but there are also separate hot wallet providers. Electrum is one that lets you store Bitcoin on your computer. Mycelium is another in the form of a smartphone app for Android and iPhone users.
But storing money online makes anyone susceptible to hackers. Which makes cold wallets a good option to further back up purchases.
Cold wallets are pieces of hardware — similar to a portable flash drive or SD card — that store Bitcoin. This is the most secure way to hold crypto and is a great Bitcoin investing option if you’re storing large quantities.
Regardless of which digital wallet you choose, they all enable you to send and receive Bitcoin. They also provide a full record of your transaction history and current balance.
5. Choose a Platform to Track Your Bitcoin Investments
Once you’ve purchased Bitcoin, you can trade it however you see fit.
Digital wallets can be great for monitoring cryptocurrency trading with one coin. However, it’s helpful to have an all-in-one wealth tracker that monitors all of your investments — digital, traditional, and otherwise — together in one place. This provides the most comprehensive look at your entire portfolio.
Is Bitcoin a Good Investment?
It’s the question everyone’s asking. Some prominent investors think Bitcoin is the currency of the future, while others think it’s a speculative bubble destined to burst.
But just like with any asset, whether Bitcoin investing is right for you depends on your personal financial goals.
Before deciding when, and how much, to allocate to Bitcoin, it’s worth asking what you’re looking to get out of it. For example, day trading Bitcoin on its short-term volatility may help you earn a passive income. But holding onto it long-term could be a small part of a multi-faceted plan to save for retirement.
Regardless of these goals, Bitcoin investing has the potential to return a huge profit — maybe as high as 200% or more!
But, that’s only contingent on timing the market properly — something only high-risk investors who are paying close attention (and are a little lucky) can do.
What Are the Risks of Investing in Bitcoin?
Cryptocurrencies are subject to huge price fluctuations, dependent on market demand. Values can spike or plummet in a matter of seconds.
Such volatility means there’s risk involved. Bitcoin investing is prone to “pump and dump” schemes that lead to buying surges that only temporarily boost its value. And it’s impossible to predict when those surges subside.
However, there’s little harm and lots to gain from dedicating a small portion (again, between 3% and 5%) of your portfolio to Bitcoin and other cryptocurrencies.
What is a Better Investment: Bitcoin or Another Cryptocurrency?
Bitcoin is definitely the most popular cryptocurrency. It has a proven track record of security, an expansive network, and is more liquid than any of its competitors — which are known as altcoins. Because it dominates the market, it’s recommended that most of your crypto position should be in Bitcoin investing.
But there are countless other options to choose from, with more popping up every year. And some cryptocurrencies can even outperform Bitcoin. Ethereum, Bitcoin’s most successful alternative, did so earlier this year. Litecoin, which launched in 2011, also has a decent track record of performing well.
It may be tempting to focus investments on the obscure, up-and-coming cryptocurrencies in the hopes that they’ll surge the way Bitcoin did. But your best bet is to go for the coins with the most stable track records. While Bitcoin and Ethereum should probably take the lead, the most resilient portfolios cast a wide net (remember, diversity is king!) and have a blend of coins with high (50%), medium (30%), and low (20%) market caps.
Keeping Track of Your Investments
Knowing the basics of Bitcoin investing is an important step towards a forward-thinking portfolio. But, that knowledge is meaningless without the proper tools to track your crypto investments. Unfortunately, most conventional tools for managing your portfolio don’t support newer kinds of digital assets, like Bitcoin.
Since cryptocurrency should only make up a sliver of your portfolio, this makes it difficult to track how it’s performing in conjunction with all your other assets. What falls by the wayside? A comprehensive accounting of your entire portfolio.
But you don’t have to rely on separate tools to track crypto and more traditional investments. There’s one all-inclusive option, friendly for new and experienced investors alike.
Kubera: The Modern Portfolio Tracker
Kubera is a web-based app that was created by a small team of investors who needed a financial tracking tool that kept up with every asset in their portfolios.
Yes, even cryptocurrency.
With Kubera, you can manage all of your assets in one place. This runs the gamut from traditional investments (like stocks and real estate holdings) to digital assets (like cryptocurrency) to, well, anything else (like web domains and even vehicles)!
It’s also the perfect wealth-tracker for investors who own more than one kind of cryptocurrency, specifically.
Kubera supports tens of popular exchanges — including Coinbase, Binance, and Kraken. It also tracks digital wallets for Bitcoin, Ethereum, and other digital assets and can even connect to some cold wallets.
Kubera is as easy to use as a spreadsheet. You can add rows of crypto holdings as you buy them, pooling them all onto a single dashboard.
But it’s even more intuitive than Microsoft Excel or Google Sheets. After connecting the platform to your online bank, crypto, and other investment accounts; your holdings will update automatically, in sync with your transactions.
And, crypto values and exchange rates are updated in real-time. You can even fill rows with notes and uploaded documents to be in total control of managing your assets and calculating your net worth at the drop of a hat.
Bitcoin investing doesn’t have to be difficult to manage. Nor does it have to be siloed from the other assets in your portfolio — be it other digital currency, stock, or real estate holdings.