Step by Step Guide on How to Invest in Bitcoins Profitably - A Beginner’s Guide

Now that Bitcoin is hot news out there, many people are still wondering how to invest and actually make money from these digital coins.

Step by Step Guide on How to Invest in Bitcoins Profitably - A Beginner’s Guide

While some people have a clue, the conservative ones are clueless about the entire topic. They don’t know what crypto-currencies are or even how to go about making money with them.

If you’re that kind of a person, fear not. This is the ultimate step by step guide on how to Invest in Bitcoins profitably. We are aiming to teach beginners on how to do it correctly so they can also jump on board and start making money from the soaring prices of Bitcoin.

You see, this year has been an amazing period for Bitcoin investments. Crypto-currency investments took off on a higher note at the beginning of 2017. All of a sudden, everyone started talking about how to make money with Crypto currencies. More Crypto currency exchanges were set up, more trading software came on board, more cloud mining sites joined too.

While this was happening, scams too joined the industry. It’s quite normal for scams to do so in any thriving industry that has a potential.

We saw these scams entering this space with the pretext that they were offering ICOs to members of the public. Most of those ICOs have since gone under. They disappeared with people’s money or simply morphed into other websites and continued to scam investors anyway.

So, before we can begin discussing the steps on how to Invest in Bitcoins, we need to talk about everything that there is to know about Crypto currencies in general.

Since this is the ultimate beginner guide on the internet, we’ll try and keep it as simple as it can get. We’ll also choose our words carefully to ensure that everyone is following the steps without encountering any difficulty. But just in case you feel lost, you can simply write your questions in the comment section below.

Step by Step guide on how to Invest in Bitcoins

What is Bitcoin?

Perhaps it’s best to start by describing what Bitcoin is. That way, we can help even the most rookie of investors to understand the entire process that we are going to highlight in this post.

The simplest answer we can find to this question is that Bitcoin is a type of Crypto-currency. Since Bitcoin was invented in 2009, there has been a surge in the number of Crypto-currencies coming into the limelight. These include Ethereum, Dash, Monero, Ripple, and so on.

Of all the Crypto-currencies available in the word right now, Bitcoin is the most popular. Chances are that you’ve heard about Bitcoin but you’ve never heard about Ripple, Dash or Monero.

Oxford Dictionaries describe the word Crypto-currency as a form of digital currency where special encryption technology is used to control the generation of currency units and verifying transactions too. This is a form of digital currency that is free from Central bank’s control.

In other words, Bitcoin is just a form of currency that can allow two parties to transact without involving a middleman in the process.

Transactions between peers is direct and private. There’s virtually no cost to these transactions, unlike if you used the American dollar to conduct these transactions for instance.

This transaction is accomplished by something known as blockchain technology.

Blockchain technology

Every time people talk about step by step guide on how to Invest in Bitcoins, you will hear them mentioning Blockchain technology. Thus it’s important to understand what Blockchain technology is and its role in the Bitcoin generation process.

You see, for any Bitcoin transaction to take place online, a special decentralized ledger has to exist, and it has to be accessed by many different parties at the same time.

When someone fulfills a transaction on the network, it is completed and labeled as a ”block”.

When the memory of that block is filled up, it is added at the end of the blockchain. This has to be in a successive manner, hence the chain.

Once the block is added into the blockchain, it permanently becomes part of the transaction that forms that blockchain. In the Bitcoin blockchain, transactions are recorded in terms of amount and time. Personal details such as the name of the person who did the transaction isn’t recorded.

However, blockchain technology isn’t used in Bitcoin transactions only. It can be used for other purposes as well to record different types of information.

This is why some companies have already began using blockchain technology for other applications as well. These applications range from supply control chain to proxy voting and even financial trading and so on. The uses of blockchain are unlimited when Bitcoin is not in the picture.

Now, you must be asking: who monitors this blockchain and its operations?

The answer is simple. It is monitored by computers which are connected to a network dubbed ”nodes”. When a computer joins the network, it receives a downloaded copy of the blockchain

The function of nodes is to independently recognize and verify transactions when they happen. And once information is recorded in a block, that information cannot be changed or altered unless the entire network unanimously agrees to change the information.

How to buy Bitcoin

Step by step guide on how to Invest in Bitcoins

Now that Bitcoin is the most popular form of Crypto-currency, it is now widely accepted across the world. Big brands are accepting payment in Bitcoin, which shows that indeed this Crypto currency has tremendous potential and value. No wonder its price keeps skyrocketing high and higher as months pass by.

That being said, any investor who wants to know how to buy this digital coin must learn the correct steps of doing so.

Thankfully, this is a step by step guide on how to Invest in Bitcoins profitably

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(1) Get yourself a proper Bitcoin wallet first

The reason why you should first get a Bitcoin wallet is because with this facility, you can store your digital coins until you’re ready to spend or change them into another currency. That’s why a digital wallet is a must-have for this purpose.

But in as much as the topic of Bitcoin wallets sounds easy to understand, it’s still a confusing area even among those who consider themselves knowledgeable enough on all matters related to Bitcoin.

We find that using the analogy of a traditional wallet very useful when trying to explain what a digital wallet is and how it works.

A traditional wallet keeps your bank notes and credit cards intact. The same way, a digital wallet for keeping Bitcoin will store them for you.

You will need to open your digital wallet software to see how much you have. If you want to pay or send money to someone else, you simply select the amount you wish to send and click send.

For all practical purposes, it will appear as if this digital wallet is storing your Bitcoin and enabling you to use them as you wish whenever you want to.

Now, unlike a traditional wallet, your coins won’t be stored in a single location. Instead, they are stored in the blockchain which we discussed earlier.

That is why coins will arrive in your wallet even if it is securely shut using private keys (we’ll get into this shortly). In essence, digital coins are not being sent to your wallet. Instead, the shared blockchain which contains records of ownership is simply updated with the relevant data to reflect the fact that you now own the coins.

Blockchain, as described earlier, is updated every time new information needs to appear on it. This will automatically cause balances held by each address to be reflected on the respective wallets.

Whenever you want to spend the Bitcoin in your wallet, you will simply announce to everyone in the network that you wish to spend your coins. However, for others sharing the same network to be convinced that you are the owner of that wallet where the coins are coming from, you will have to ”sign” that transaction using something called private keys.

Each Bitcoin address will have its own private keys created at the same time as the address.

The bottom line is that this digital wallet is just a software which some times is referred to as client software. The function of that digital wallet is to:

  • Create addresses alongside their corresponding private keys.
  • Give you information on how many Bitcoins is being held by your address.
  • Make use of your private keys to sign transactions, a process that is required in order to spend your coins.

A Bitcoin wallet (client software) may create and control many different addresses. This feature is quite useful since it allows people to create separate addresses for individual and business usage.

Although you have multiple addresses, you can still receive coins from various addresses for purposes of making payments.

You also have the capacity to choose how many coins you’d wish to take from an address. This feature is known as coin control. Not every Bitcoin wallet has this feature anyway.

To find yourself a proper Bitcoin wallet, you’ll need to understand the types of wallets that are available out there.

The most popular ones are desktop computer wallets. This category includes any application that one can download and install in their computer’s hard drive.

The advantage of having a desktop computer wallet is that it relieves you from the burden of trusting someone else to hold your coins for you. They may steal them, you know?

If you follow good security practices, this option should suit you best. This is because it’s the most reliable and easier to maintain platform than if you chose to have your Bitcoin on a central server where hackers could just target that one particular server and steal coins from several people unlike targeting each computer, one by one, and trying to launch an attack. It could be tedious for them.

The downside is that all responsibility of seeing that your coins are safe is with you. That means you have to secure your wallet against hacks and against computer problems which may inflict losses in the event that the hard disk was damaged.

Running a full node

The simplest definition of a node is a point in a network. That point is your PC in this case. To have a full node in your PC means that you have the entire blockchain in your PC and you only need to update it each time a transaction is happening.

Now, this method obviously has a big disadvantage. You see, the Bitcoin blockchain is something that keeps growing. It is already very big. The size keeps increasing withe every minute that people mine Bitcoin. That means downloading it will take forever. Synchronizing it with the rest of the network will become a huge challenge.

Due to this challenge, many people don’t prefer to run a full node. On the other side, Bitcoin miners, developer and even service provides will run and maintain a full node.

Using light weight desktop wallets

You can choose to use light weight desktop wallets because they give you the advantage of keeping a PC wallet without suffering the hustles that come with running a full node.

You will retain complete control over the wallet since your private keys are held by your PC. Today, most desktop wallets are designed around this category. That means you have a variety of options to consider.

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Mobile app Bitcoin wallets

If you choose this direction in the era of mobile apps, you have many advantages to enjoy. People who use their smartphones or tablets to shop at physical stores definitely need such apps in their phones.

But most people still don’t know that mobile apps for Bitcoin wallets fall into two categories. These include locally run apps and web services app.

In the first option, you will download the light weight client software on your phone. In the second option, you will use the app as a second way of accessing that service as if you were directly visiting the website.

If you choose to run apps locally in your mobile device, your Bitcoin will be more secure than if you used a desktop software since computers are more prone to viruses than mobile devices.

Browser-based wallets

This wallet is ideal for those who want to enjoy the advantages of both a desktop and web wallet in one.

You first sign up with a service that provides browser-based Bitcoin wallets using a strong password. This password is then run through a special cryptographic program which will generate private and public keys for your wallet.

This wallet can be accessed from any device that has a browser.

Each time you login in, you will not be logged into the server that has your private keys. Instead, your action will prompt the regeneration of a private key each time you log in.

The private keys is only related to the browser which you’re using. This private key is used to sign transactions, and will never leave this browser. The Browser Bank website offers such a service.

Note: In case you want to use a hardware wallet (best for security of your funds) for storing your bitcoins and possibly other cryptocurrencies, we recommend using Trezor for doing so as it’s the best in the market.

And of course there are many other recommended wallets which include web wallets (like IQOption), Multi-sig wallets (where two people must sign a transaction before it is considered valid — more like a joint bank account), hardware wallets like Trezor, and paper wallets.

By the way, it would be important to remember that the main use of a Bitcoin wallet is to sign transactions. Meanwhile, the blockchain stores your Bitcoins, and that information is recorded and shared among other miners.

In layman’s terms, this would mean that you don’t need software or any electronic processes to store Bitcoin. What you need is your private keys.

Whenever there is need to use your Bitcoins or change them into another currency, you only need to ”import this private key” into the software (which we described above) to make a transaction.

Step by step guide on how to Invest in Bitcoins profitably

(2) Choosing sites that let you exchange normal currency into Bitcoin

These sites are known as Bitcoin exchanges. There are hundreds of them on the internet. In fact, new ones keep coming every month.

In the year 2014, there were at least 6 well-known Bitcoin exchanges. Fast-forward to 2017 and we find at least 200 sites running this business on the internet.

As you can see, it’s easy for new bitcoiners to feel lost in the process of choosing these sites.

First and foremost, as a Bitcoiner, the security of your funds is a priority before anything else. That’s why you need to choose a site that is safe, secure and trustworthy for purposes of purchasing Bitcoins.

Another thing to consider is your preferred means for depositing money into that exchange in order to acquire Bitcoins.

Most sites accept credit cards, and a few more use PayPal as well. If these options are not viable for you, then you could also purchase Bitcoin with cash (this is the least popular method).

IQoption is a highly reliable exchange for this purpose. They even accept credit cards. That should be convenient for you.

Purchasing Bitcoin with Credit card

The most popular sites in this category include IQoption (recommended), Cex, and Bitstamp.


Cex offers a diverse range of services to its audience.

Cex originally started as a Cloud Mining service before they got overwhelmed by the demand. It now offers Bitcoins for sale.

The site currently has 700K users, and accepts payments in USD, EUR and Russian Ruble.

Last but not least, BitStamp is now gaining popularity in the European continent as the most preferred place to get your Bitcoins at.

The site recently added a feature that now lets users buy Bitcoin using their credit cards (MasterCard and Visa). It’s headquartered in London, and continued to expand its user base each month.

Purchasing Bitcoins with PayPal

There are a few sites in this category that offer the option of users buying and selling their Bitcoins in exchange for PayPal money.

The reason why most sites haven’t integrated the PayPal feature is because they fear the risk of reversible transactions and charge backs too.

A Bitcoin seller on a platform that accepts PayPal will charge a higher commission to cover the risk of chargebacks — in case they occur (because buyers of Bitcoin could still reverse transactions).

Sites that have integrated PayPal into their system include Localbitcoin, IQOption, Xcoins, and WeSellCrypto. If you want to buy Bitcoin worth between $10 to $1500, Localbitcoin will give you the opportunity to do so. But you cannot buy Bitcoin that exceeds the value of $1500 and we recommend using IQoption in that case.