Many people get into cryptocurrency trading simply because they want to acquire, and perhaps earn a profit from, Bitcoin. As the world’s first and most valuable cryptocurrency, Bitcoin is an exciting prospect for any trader, and its significant fluctuations in value can make for a healthy return on your investment — assuming you buy in at the right time, of course.
In this AAG Academy guide, we’ll teach you how to make your first Bitcoin investment and how to store any coins you buy. We’ll also look at some popular Bitcoin trading strategies.
In many ways, Bitcoin (BTC) is just like any other digital currency, especially when it comes to storing it. You can access your BTC coins through any modern centralized or decentralized wallet — which you can install in your web browser or on a mobile device — as well as in a hardware wallet that can be disconnected from the internet if that’s the method you prefer.
No matter what kind of wallet you choose, however, you’re technically not storing your BTC coins yourself. They never actually leave the blockchain; all your wallet really does is hold onto your public and private keys and allows you to see how many coins you own — as well as how much they’re worth based on their current market value.
We have another AAG Academy guide on public and private keys if you’re interested in learning about those, but that’s not totally necessary if you’re a cryptocurrency newcomer. The most important thing to note is that your private key proves ownership of your assets, and it should stay private. Never share your private key with anyone.
Choosing a cryptocurrency wallet can be a little daunting since there are so many to choose from. Let’s begin by looking at the different types of wallets available:
‘Hot’ wallets “Hot” wallets are the most popular since they are typically easier to set up and easier to manage, and they provide access to your cryptocurrency assets anywhere and at any time — as long as you have an internet connection. Hot wallets can be installed on your smartphone, tablet, or computer as a standalone app, or they can be added to a desktop web browser.
There are two common types of hot wallets, and these are centralized and decentralized wallets. Centralized wallets are provided by a centralized exchange, such as Binance or Coinbase, whereas decentralized wallets are developed by a third party and provide access to decentralized applications (DApps), which can be incredibly useful.
Some of the most popular decentralized wallets available today are MetaMask and Trust Wallet. However, we recommend the MetaOne wallet from AAG, which is built from the ground up with usability and security in mind. It allows you to access DApps and has advanced security features built-in to help protect your assets.
‘Cold’ wallets “Cold” wallets, which are also known as hardware wallets, are physical devices that typically look like a USB flash drive, but can be as simple as a piece of paper. They hold your public and private keys just like a hot wallet, but because they can be disconnected from the blockchain, they are completely inaccessible when they’re not in use.
This theoretically makes cold wallets more secure than hot wallets, but cold wallets, because they are physical, are significantly easier to lose. If you lose a cold wallet and you have no other backup of your keys, it’s physically impossible to access your cryptocurrency.
Another important thing to note is that cold wallets are mostly used for storage only, and while there may be ways to connect them to DApps in some cases, it is a much more complicated process. For this reason, many traders use both hot and cold wallets and simply move their assets back and forth when they want to use them.
What is the most secure Bitcoin wallet?
As we mentioned above, the most secure Bitcoin wallet is a cold wallet — simply because it can be taken offline so that when it’s not in use, it is impossible for it to be accessed. However, that’s assuming you are incredibly careful with it. Hardware wallets are easier to lose, and once they’re lost, there is no way to access them without a backup.
That’s why, for most traders, a secure hot wallet is preferred, which means choosing between a centralized or decentralized option. It’s likely you will need a centralized wallet either way since you’re probably going to need to acquire your BTC from a centralized exchange initially. They accept debit cards in some markets, so buying BTC is as easy as ordering a T-shirt.
Any major exchange, all of which offer Bitcoin, will provide you with a secure centralized (CEX) wallet. If you want to transfer your coins to a decentralized (DEX) wallet later, perhaps to use DApps or to swap them for other cryptocurrencies, any of the popular options, which tend to offer the same level of security, will do. But there is a more secure alternative.
The MetaOne wallet we mentioned earlier offers the same functionality as a DEX wallet but with greater exchange support and much tougher security. It does away with complex and flawed seed phrases in favor of better, more usable protections — and it integrates features like a scam warning to help protect your assets from potential attacks.
It’s unlikely you’re going to hold onto the Bitcoin you buy forever, so it’s important to learn a little bit about trading BTC coins before you start buying them. Trading is all about making educated guesses about Bitcoin’s market value so that you can determine when it is the best time to buy, hold, and sell your coins in an effort to earn a return on your investment.
You may already know that it’s a bad idea to buy BTC after a significant increase in market value, and it’s a bad time to sell after a significant decrease in market value. You’re almost certainly going to end up losing money in both cases. So, where do you begin?
Learn about Bitcoin trading strategies Firstly, do your homework. You’ll need to familiarize yourself with Bitcoin’s market value, how it has fluctuated, and what causes it to rise and fall. It will also help to know a little bit about how the market currently views Bitcoin — and whether the experts and more experienced traders are currently bullish or bearish over its prospects.
One of the most important things to remember is that Bitcoin, like all cryptocurrencies, is incredibly volatile. It can see significant increases and decreases in value, sometimes for no apparent reason, and so while quick returns on an investment are possible, so is losing a lot of value in a short period of time. It’s usually best to assume to avoid hasty decisions.
Learn about Bitcoin trading strategies online for ideas, and decide what kind of approach works best for you based on your own financial situation. Put together a trading plan that takes into account how much you want to invest, how long you want to hold onto that investment for (ideally), and what kind of return you might be happy with. It’s also key to prepare yourself for the fact that you may not see a return at all.
There is always a risk to investing of any kind, and while it’s unlikely Bitcoin’s value will sharply fall and never recover, it’s not impossible. With that being the case, you should never invest more than you can afford to lose — just in case the worst happens.
Find a good Bitcoin trading exchange Part of your trading plan should include deciding on the trading exchange you want to use. As we mentioned above, all major centralized exchanges now support Bitcoin trading, so you may want to look at things like which ones are available in your country, which are the easiest to use if you’re a newcomer, and which provide the best support.
Some of the most popular centralized exchanges are Binance, Coinbase, Gemini, and Kraken — but there are plenty of others.
“Hot” wallets are software wallets that can be installed on your smartphone, tablet, or computer and provide access to your assets on the blockchain. “Cold” wallets are physical devices that can be disconnected from the blockchain entirely when they’re not in use.
The AAG Academy is a great place to learn about market sentiment, trading, and all things cryptocurrency.
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About the author
Senior content writer
Senior copywriter for AAG Marketing team with the focus of educating our community on all things web3, blockchain and Metaverse.
This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.