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Investing in a Bitcoin exchange – essential things to know

Investing in Bitcoin can be a great way to grow your wealth, but before investing via a crypto exchange, ensure it’s the right one.

hand holding Bitcoin in front of computer with charts
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Bitcoin is a crypto asset and a digital payment system. Satoshi Nakamoto, a pseudonymous group or individual, created this cryptocurrency in 2008.

It’s a decentralized virtual currency, meaning no government or entity controls it. Trading can also be done through exchange platforms. Bitcodemethods.com is an excellent example of a dependable platform.

People or organizations create new Bitcoins through a mining process. Bitcoin mining entails solving cryptographic or complex math problems. In return, the Bitcoin system rewards them with new digital coins.

However, people can also purchase Bitcoin on crypto exchanges, digital platforms where you can buy or sell Bitcoins in exchange for other currencies or altcoins. 

Crypto exchanges are intermediaries between Bitcoin buyers and sellers, which charge a small fee for their services. BitIQ is an example of a cryptocurrency exchange.

But before investing in Bitcoin via a crypto exchange, ensure you know the following. 

The exchange rate

Crypto currency market with a bitcoin
Image: Unsplash

The exchange rate is the price of one currency in terms of another. When you buy Bitcoins on an exchange, you essentially buy them at the market rate. The same goes for selling bitcoins.

Therefore, know the current exchange rate on the platform where you purchase Bitcoins. That way, you will see whether it’s the right time to buy this crypto asset. 

The fees

Most crypto exchanges charge a reasonable fee for their services. The cost is usually a percentage of the transaction. So, for example, if you’re buying $100 worth of Bitcoin, the exchange might charge a $1 fee.

That’s a 1% fee. Compare the charges of different crypto exchanges before settling on one. Some platforms don’t even charge fees.

Crypto exchange availability 

Not all exchanges serve people in all countries. Some countries have regulatory challenges, which is why certain crypto exchanges don’t do business there. Ensure the platform you signup with supports your country. 

Bitcoin exchange’s reputation

crypt coins bitcoin
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Before trusting an exchange with your money, find out what other people say about it. Read reviews to know what they say about the platform’s customer service, fees, security, and more. 

Government regulations

Many countries don’t have rules regulating Bitcoin. That’s because the cryptocurrency industry is relatively new and still unregulated. Therefore, some crypto exchanges aren’t subject to government oversight.

That’s not necessarily bad, but it’s something to remember. However, some countries regulate crypto assets, and traders or investors pay taxes.

Therefore, understand Bitcoin’s regulatory status in your country or region before investing.

Bitcoin’s characteristics

Bitcoin is a digital asset but shares some characteristics with traditional investments, such as stocks. For example, like stocks, Bitcoin’s price can go up or down and be bought or sold on an exchange.

Also, similar to company stocks, there’s no guarantee you will make money by investing in Bitcoin. In other words, it’s a risky investment. 

Also, Bitcoin has some distinguishing characteristics, which include the following: 

  • Volatility: Bitcoin’s price is notoriously volatile, going up and down very quickly. Therefore, prepare for its wild price swings before investing.
  • Decentralization: As mentioned earlier, Bitcoin is decentralized, meaning no government or financial institution controls it.
  • Limited Supply: Miners will create 21 million Bitcoins only, meaning it’s different from conventional assets with an unlimited supply. 
  • Scarcity: Bitcoin’s limited supply causes scarcity and high demand. 

Understanding these unique traits helps you know what you’re getting into before investing in Bitcoin. Therefore, take the time to understand their implications and how they will affect your investment. 

The bottom line

phone showing a chart and money coins bills
Image: Pixabay

Investing in Bitcoin can be a great way to grow your wealth. However, make sure you know the essential things before doing so. And this will help you avoid potential pitfalls and maximize your chances for success.

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