If you’re suddenly interested in Bitcoin, it’s probably because of the recent crypto crash.
Editor’s note
Be careful with cryptocurrency. Bitcoin – and the entire crypto market – is very volatile and we do not recommend any particular cryptocurrency.
While there are more than 10,000 different types of cryptocurrency in circulation, Bitcoin was the first to be created and is by far the most widely used. Despite that, it remains surrounded by a mountain of myth and confusion, the latter of which has likely been inflamed by recent price falls.
In a survey from 2021 (opens in a new tab), nearly half of American adults regretted not buying Bitcoin sooner. Despite the popular belief that Bitcoin will make you money, people in the US and beyond (opens in a new tab) say that the main reason they haven’t bought it is a lack of knowledge.
In 2022, knowledge may be an entry barrier, but price is not. With as little as $1, almost anyone with internet access can start investing in Bitcoin. But that doesn’t mean you should.
What is Bitcoin?
Bitcoin is a form of cryptocurrency. Like other types of crypto, it can be bought, sold and used to make financial transactions online.
Every transaction you make with Bitcoin is recorded in the blockchain, or virtual ledger, which was invented for Bitcoin and then adopted by other cryptocurrencies.
Like all cryptocurrencies, Bitcoin’s value can fluctuate widely, based on everything from investor demand to sensational tweets, but there are a few other things that make it unique:
- Bitcoin’s market cap – or the total value of all Bitcoin in circulation – is more than double that of any other cryptocurrency.
- Both El Salvador and the Central African Republic have adopted Bitcoin as their official currency.
- As of 2021, more than 2,300 US businesses accepted Bitcoin as a form of payment.
- Unlike some other cryptocurrencies, Bitcoin has a limited supply (21 million).
How to use Bitcoin
As cryptocurrencies become more widespread, there are an increasing number of ways to spend Bitcoin.
It was originally conceived as a tool to make digital transactions without involving a third party (such as the government), but now Bitcoin can be traded for other cryptocurrencies or regular (fiat) currency.
You can also use it to make purchases from merchants that accept Bitcoin as a payment method. The options include:
- Transferring Bitcoin to a payment platform that converts it to fiat currency (such as PayPal)
- Using a retailer’s approved third-party app to purchase an item using Bitcoin (Walmart and Home Depot both have this option)
- Using an app that accepts Bitcoin in exchange for gift cards or prepaid debit cards (like Bitpay)
How to buy Bitcoin
A single Bitcoin can be worth five figures, but you can buy a fraction for as little as $1 to $10.
There are a few different ways to buy cryptocurrency, but this is how it usually works:
- Choose an exchange or broker: Choose either a crypto exchange (like Coinbase or Gemini) or a broker (like Robinhood or SoFi). Please note that each one displays different currencies and each has unique fees, features and limitations.
- Create an account. Take the necessary steps to verify your identity, then enter your payment information.
- Place an order. Select Bitcoin, or whatever currency you want to buy, and enter the purchase amount.
Should You Buy Bitcoin?
There is no harm in buying Bitcoin, but there is harm in buying too much.
Investors tend to buy when cryptocurrency is performing well – when prices are at their highest – and sell when values fall. In other words, crypto investors tend to lose a lot of money.
During the recent crash, investors lost more than $700 billion in two months, and specialists predict (opens in a new tab) they will lose more when prices fall before the end of the year.
Despite large price swings, experts do not recommend avoiding crypto altogether. But they recommend limiting your investment to as little as 1% of your total portfolio or total assets.
If you plan to invest in crypto, you can keep it even safer by diversifying. Bitcoin is a great option, but it should only be one of the coins you buy. Try to choose other coins based on past performance, security ratings (opens in a new tab)and the indexes they attach the value to.
