Luis Pazos 
Bitcoin has been around for just over thirteen years and has quickly become the investment sensation of the 21st century. It’s remarkable how it outperforms other investments, turning small amounts into millions. But how do you safely buy Bitcoin in 2024 and make money from it? While I don’t have all the answers, there’s no denying Bitcoin’s growing mainstream appeal. That’s why I’ve put together this guide to help you understand Bitcoin, how it works, and how to invest in it safely.
Before we dive in, I need to disclose that I invest in cryptocurrencies. I own Bitcoin, USDC (a stablecoin), and other altcoins on several crypto exchanges, some of which I’ll mention here.
What Is Bitcoin?
Bitcoin is a decentralized digital currency launched on January 3, 2009, by someone known as Satoshi Nakamoto. No one knows who Nakamoto really is; the name could represent a single person or a group. Despite the mystery, Bitcoin is now a reality.
To keep it simple, Bitcoin uses cryptography to secure its network. Account balances are recorded on a public ledger accessible to all network participants. Transactions are encrypted, so the identities of the sender and receiver are masked. Bitcoin transactions are verified by miners, who get rewarded in Bitcoin, thereby increasing its supply, much like mining gold.
Bitcoin’s maximum supply is capped at 21 million, and as of December 2023, 19 million Bitcoins have been mined. This limited supply creates scarcity, potentially increasing its value.
Bitcoin also uses a unit called Satoshi, named after its founder. There are 100 million Satoshis in one Bitcoin. For instance, if one Bitcoin is worth $100,000, one Satoshi equals 1/10 of a penny, making it suitable for smaller transactions.
Bitcoin and other cryptocurrencies function as peer-to-peer monetary exchanges, meaning transactions occur directly between users without intermediaries like banks. This setup reduces fees and speeds up transactions but comes with its own risks. Cryptocurrencies are not universally accepted, nor are they protected by institutions like the FDIC or SIPC.
How Many Cryptocurrencies Are There?
Bitcoin may be the first and most popular cryptocurrency, but it’s part of a vast ecosystem. As of March 29, 2023, there are about 23,092 different cryptocurrencies with a combined market capitalization of $1.19 trillion. However, only a few have significant impact and public recognition. As of January 2024, the ten largest cryptocurrencies include Bitcoin, Ethereum, Binance Coin, Tether, Solana, Cardano, USD Coin, Ripple, Polkadot, and Terra.
Different Cryptocurrencies Serve Different Purposes
Among the top cryptocurrencies, uses vary. Bitcoin is often seen as a store of value, while Ethereum is known for smart contracts. Tether is a stablecoin pegged to the U.S. dollar, making it easier to trade and move between exchanges. These different uses highlight the growing specialization within the crypto space.
Is It Legal to Own, Trade, and Shop With Cryptocurrency?
Yes, it is legal to own, trade, and use cryptocurrency, especially in the U.S. and most major countries. While some nations, like China, have banned crypto, others are considering regulations to make the market safer. Calls for regulation indicate the success and growing importance of cryptocurrencies.
How Do Cryptocurrencies Work?
Bitcoin exists entirely online and operates on a blockchain, which records each transaction. Using Bitcoin requires a public key (for network participants) and a private key (like a personal account number), which you must keep secure. Bitcoin has no physical form, no interest or dividends, and is not backed by any government or institution, making it more of a speculative investment.
Bitcoin’s Historical Price Performance
Bitcoin’s price has seen dramatic ups and downs. From $328 in November 2014, it reached nearly $69,000 by November 2021. Despite its volatility, Bitcoin has outperformed traditional investments over the past years, making some people wealthy. However, it remains a high-risk investment.
My Experience With Cryptocurrency Investing
I was once a Bitcoin skeptic, but I decided to jump in and learn by doing. I started with $1,000 on Coinbase in early 2018. My investments grew progressively larger, eventually totaling over $41,000. My timing was fortunate, and my holdings have vastly appreciated in value.
How to Invest in Bitcoin
Start small, maybe just 1% or 2% of your portfolio, and decide if you’re in for the long term or looking to trade. You can also consider crypto ETFs like the ProShares Bitcoin Strategy ETF (BITO). These ETFs are new but offer a way to invest in blockchain technology.
Where to Invest in Bitcoin
You can invest in Bitcoin through cryptocurrency exchanges or online brokers. Popular exchanges include Coinbase, Kraken, eToro, and Gemini, each with unique features and fees. Online brokers like Robinhood, SoFi Invest, and Webull also offer crypto trading but might limit your ability to transfer crypto between platforms.
How to Store Bitcoin
Store your Bitcoin in either hot wallets (online and convenient but less secure) or cold wallets (hardware-based and more secure). Cold wallets are more secure but less convenient for quick transactions.
How to Invest in Bitcoin Safely
Invest only what you can afford to lose. Stick to larger, well-established cryptocurrencies and reputable exchanges. Keep your private keys and wallet addresses secure, and be cautious with new, untested cryptocurrencies.
Bitcoin Pros & Cons
Pros:
- Rapid price increase with potential for future growth.
- No middleman fees for transactions.
- Freedom from government regulation.
- Growing investment and interest earning options.
- Flexibility in investment strategy (long-term or trading).
Cons:
- High volatility and risk of substantial loss.
- Lack of traditional financial metrics for analysis.
- No regulatory oversight or government protection.
- No FDIC or SIPC insurance.
Should I Invest in Bitcoin?
While I’m enthusiastic about Bitcoin and plan to keep investing, I recommend caution. Bitcoin is speculative, and its future is unpredictable. Consider investing a small part of your portfolio in Bitcoin if it feels right for you, but be prepared for the possibility of losing your investment.
