Five Things To Do Before Investing in Bitcoin

ISABELLA SHOARD
Content Producer · 30 July 2020
Thinking of investing in Bitcoin? This post will outline five helpful tips to consider before you add cryptocurrency into your portfolio. Here’s what to do before you buy.

Before you get started investing in this style of investment, it’s important to consider if Bitcoin is right for you. In this article, we’ll explore what bitcoin and cryptocurrency is, shortlisting cryptocurrencies, investing strategies, safety when trading and choosing the right platform.

1. What is Bitcoin as a cryptocurrency?

Bitcoin was created in 2009 by an anonymous individual or group using the name Satoshi Nakamoto. Bitcoin was born out of the impacts of the Global Financial Crisis of 2008. The intention of this creation was to revolutionise the way money was stored and transferred and fix the current issues with the traditional monetary system. The premise that Bitcoin is better than standard fiat is that Bitcoin is backed by mathematics, whereas traditional fiat currencies are essentially backed by nothing. Other benefits of Bitcoin are that there is a finite supply of 21,000,000 Bitcoins & the technology is decentralised.

2. Shortlisting cryptocurrencies

Whilst Bitcoin was the first cryptocurrency created in 2009, there are now many other cryptocurrencies that have been created. Some have similar type goals to Bitcoin, whereas others focus on other areas and industries. Some of these cryptos work around different solutions regarding business, manufacturing, renewable energy and decentralised finance to name a few.

Whilst BTC is seen as the original cryptocurrency, there is nothing wrong with diversifying into other projects!

3. Investing strategies

Like investing in stocks or any other type of market, it’s always best to have a plan. Whether that be buying a lump sum amount of crypto or only buying after a drop in price, having a strategy often helps with long term success. A popular investing strategy is Dollar Cost Averaging (DCA) whereby you regularly purchase one or multiple cryptocurrencies no matter what the price is. That way you’re always buying no matter what the market is doing and you can end up spending the same amount in AUD but buying various amounts of cryptocurrency over time. This can help you easily track the amount you’re putting in and by automating the process, you will never forget to invest.

4. Safety & cryptocurrency

As you can keep your cryptocurrency on some platforms you buy from, it’s important to keep your trading account secure. Ensure you have Two-Factor Authentication enabled which is a higher level of account security from just a basic username and password. Utilise a password manager too so that you can have a uniquely complicated password that is only used on your cryptocurrency account. Further to this, choosing to be with a proven security-focused exchange is also a wise move, so you can feel safe knowing high-level measures are in place.

5. Choose the right cryptocurrency platform that best fits your needs

There are many factors involved in choosing the right crypto exchange that works for you and your risk profile. You can find out more about selecting the right exchange for you, and available providers in this article: How to Buy Bitcoin in Australia – 3 Step Guide.

If you’re comparing Online Share Trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to the company’s website. The information displayed is based on an average of 6 trades per month. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical). Use Canstar’s Online Share Trading comparison selector to view a wider range of Online Share Trading companies.

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