As the most well-known cryptocurrency on the market, Bitcoin has drawn much attention lately. With the growing number of wallets on the Bitcoin blockchain, plenty of people are starting to invest in the ecosystem.
But what has allowed Bitcoin to last as long as it has in the crypto space? What can you expect to happen when you buy and store Bitcoin for the future? Let's take a look at this volatile asset and see if we can make sense of what goes into purchasing this coin.
What is Bitcoin?
Bitcoin is the original cryptocurrency, a peer-to-peer payment method that combines pseudonymity with cryptographic encryption to create a trustless system. Transactions in the Bitcoin ecosystem confirm using Bitcoin's Proof-of-Work (PoW) model and are added to blocks, thus making the blockchain.
At its core, Bitcoin is meant to solve several problems that the creator of Bitcoin, Satoshi Nakamoto, saw with modern financial institutions during the 2007 recession. In his whitepaper, Satoshi mentions the inflationary nature of fiat currency and the manipulation of money by financial institutions as reasons why Bitcoin needed to exist.
The blockchain's purpose was to create a peer-to-peer currency that anyone could review. The blockchain refers to the public ledger of transactions in the Bitcoin ecosystem. As miners process transactions, they add the confirmed transactions to a data block. That data then goes to the blockchain, and the next block is created.
Now, many consider Bitcoin to be the major cryptocurrency of the space. As the first cryptocurrency and one of the most robust, Bitcoin commands a solid market dominance despite its twelve-year age. Bitcoin continues to see development thanks to its community improvement proposals and the work of many different developers.
What to know before buying Bitcoin
Before buying into Bitcoin, it's important to remember that bitcoin is very different from other payment methods. While other methods rely on the fiat or regional currency, Bitcoin is its own ecosystem with its own rules:
- Bitcoin is volatile: Because Bitcoin has fewer users, its value compared to fiat currency changes frequently and sometimes widely.
- Cryptography provides security: Cryptographic signatures, long wallet addresses, and distributed ledger files prevent people from trying to game the ecosystem.
- Transactions are irreversible: Unlike a false charge with a credit card, you can't unsend Bitcoin unless the other wallet agrees to send you your funds back.
- Bitcoin works everywhere at any time: Because Bitcoin is an entirely digital currency, it works at any time of day at the speed of the Internet.
- You choose your fees: You don't spend any money to receive Bitcoin to a wallet, and you can select your network fee when sending coins, so all network fees are known when you commit to a transaction.
- Bitcoin is pseudonymous: Wallet addresses are the only identifying information on the blockchain, meaning that it takes some detective work to learn who owns which wallet.
- A digital asset, not currency: Many countries view Bitcoin as an asset, subjecting it to tax laws that other assets have to follow.
With this list, it's easy to see that Bitcoin works much differently than other payment methods. However, these differences are features programmed into the ecosystem to decentralize the network and make it genuinely peer-to-peer.
If you want to start getting into Bitcoin, purchasing some of this asset is the easiest way to do so nowadays. Still, if you're new to the Bitcoin ecosystem, below are some essential questions you should understand about buying Bitcoin. Review the answers before taking your first step in buying BTC.
How easy is it to buy Bitcoin?
For the most part, Bitcoin is straightforward to buy with modern cryptocurrency exchanges, like Knaken. Gone are the days of setting up an independent wallet using console commands on your PC. Now, Knaken can hold Bitcoin for people to buy and sell.
Also, many forms of payment are accepted at Knaken. In addition to allowing connections to bank accounts, you can use payment processors such as iDEAL to buy Bitcoin.
Overall, Bitcoin is more accessible to buy today than ever, thanks to greater adoption and tech advancements.
What should I expect to pay to buy Bitcoin?
As mentioned before, Bitcoin is still a volatile asset. Because of that fact, the amount of Bitcoin that you can purchase changes day-to-day. It's not uncommon for the price of Bitcoin to change between 2% and 5% on a given day, depending on market sentiment.
This phenomenon is easier to understand by reflecting on the long-term changes in Bitcoin pricing. It initially cost nothing and took almost two years to reach the price of one dollar. Bitcoin peaked in June 2011 at a peak price of $32 but plummeted within a few months to just over $2, and it took almost a year for Bitcoin to regain traction.
2016 proved a pivotal year for Bitcoin with prices surpassing $900 by December. Though the growth plateaued for a few years, the COVID-19 pandemic triggered a surge that sent crypto pricing through the roof. Bitcoin saw prices ranging from $20,000 up to over $60,000 from 2020 through 2021.
Still, this volatility is part of what draws many people to Bitcoin. While Bitcoin can swing in price day-to-day, the coin's overall value tends to trend up over time. Buying Bitcoin now tends to net you more total Bitcoin than waiting a few years.
Why should I buy Bitcoin?
Because Bitcoin does not have any physical coins or assets, many people are leery of purchasing into the ecosystem. However, there are still several reasons to buy into Bitcoin despite this lack of a physical good:
- Bitcoin's price tends up over the years: As a general trend, Bitcoin has increased highly in value year over year compared to other asset classes.
- The entry for many other cryptocurrencies: Bitcoin is how many people enter the cryptocurrency space before going on to explore different projects and applications in crypto.
- Bitcoin can hedge against inflation: Because of its deflationary nature and its historic increases in value, Bitcoin has made for a stronger hedge against inflation than other standards such as gold.
In other words, Bitcoin has offered many people the chance to grow their wealth as this speculative asset continues to grow and see adoption.
Buy Bitcoin safely
Part of the attitude behind Bitcoin is that it allows one to become their own bank. As long as you have access to your Bitcoin wallet, you can access and transaction with your Bitcoin anywhere at any time.
Still, there are a few practices you want to do to keep you and your Bitcoins safe:
- Buy your Bitcoin from a trusted source: It's better to buy your Bitcoin from a trusted and cryptocurrency exchange or broker, like Knaken than it is to do so from a third party online.
- Secure your account with 2FA Enable 2FA in your Knaken account to increase the security of your account. With 2FA people won’t be able to login to your account even if they have your login details.
- Don't tell others how much Bitcoin you have: When you talk about your Bitcoin wealth, you could open yourself up to theft or extortion if someone wants your Bitcoin wallet.
By following these tips, you ensure that your Bitcoins are purchased and stored in the most secure way they can be. These tips will also keep you from divulging too much info about your financial circumstances.
Buy Bitcoin with iDEAL
To make buying into Bitcoin even easier, iDEAL is a service that lets you buy crypto like Bitcoin using your bank account. Rather than doing so through a separate app, iDEAL partners with different exchanges, like Knaken to act as a payment processor and fiat on-ramp into Bitcoin.
Before you buy Bitcoin with iDEAL, you should read these steps to see what the process looks like:
- Open an account at Knaken: Create an account at Knaken and complete the verification process.
- Buy Bitcoin from the dashboard Click on ‘buy’ next to bitcoin on the dashboard and buy bitcoin with iDEAL.
- Manage your Bitcoin: Check your balance and the live bitcoin price on your dashboard.
Knowing these steps, you can see buying bitcoin with iDEAL can be done safely and easily.
Storing your purchased bitcoin right
Once you've purchased your Bitcoin, there's more to do to secure your coins. A safe place to store your Bitcoin is in a non-custodial wallet. However, it's important not to get mixed up between these wallets and the wallet address you have on the blockchain. Wallet addresses on the blockchain are the public addresses people use to send and receive Bitcoin. All Bitcoin wallets also have a private address, represented by the private keys.
These private keys let you access that Bitcoin wallet from anywhere. Exchanges are the ones that hold the private keys for their Bitcoin wallets, making them custodial wallets. Non-custodial wallets are the ones where only you have access to the keys.
In general, a hardware wallet where you have private keys is the best place to store your Bitcoin. The hardware wallet takes the coins offline, preventing any transactions from requesting the coins in your wallet.
Transferring Bitcoins into a hardware wallet is similar to sending Bitcoin to anyone else. Once you have the public address of the hardware wallet, you'll send your Bitcoin to that wallet, paying the fee for the transaction. Once the Bitcoins have transferred to the hardware wallet, you can disconnect it from the Internet and know your Bitcoins are now safe.
It is important that you store your wallet, private key, and login details in a safe place to prevent theft. It is also important that you don’t lose your wallet, private key, and login details. Doing so may result in you being unable to access your Bitcoin. If you don’t want to worry about this, you can store your crypto in your Knaken account.
How to Sell Bitcoin
For some folks, buying into Bitcoin is a trading opportunity. Plenty of day traders rely on Bitcoin's volatility to generate profits by selling Bitcoin at a higher price than what they bought into. From there, they use the profits to buy more Bitcoin when the price dips, repeating the cycle as the price fluctuates.
If you want to sell your Bitcoin from your hardware wallet, you'll have to follow these steps:
- Plug in your hardware wallet: The coins won't be accessible without reconnecting the hardware wallet, so make sure you do that first.
- Transfer the Bitcoin to Knaken: The easiest way to sell your Bitcoin is on a Knaken, so feel free to send the coins to Knaken.
- Sell your Bitcoin on the dashboard: Click on ‘sell’ next bitcoin on the dashboard to sell your bitcoins.
After selling your bitcoin you can use your euro balance to buy other crypto. Alternatively, you can withdraw your euros to your bank account.
Buying Bitcoin is one of the most common ways for people to enter the cryptocurrency space. As the most well-known and well-established coin on the market, numerous people consider Bitcoin one of the safest investments in the volatile cryptocurrency space.
If you haven't tried to buy Bitcoin before, iDEAL makes the process accessible by giving you a way to buy bitcoin easily.