As of January 2024, there are 9,024 cryptocurrencies, which makes this market very lucrative for investors. However, today, we won’t talk about altcoins but the crypto king — Bitcoin. This guide is intended for all crypto beginners who want to start investing in Bitcoin.
With that in mind, we’ll explain the factors to consider before buying BTC. In addition, we’ll list the main advantages and disadvantages of investing in Bitcoin so you can make an informed decision.
Is it a good idea to invest in bitcoin? Let’s find out.
How Much Bitcoin Should I Buy as a Beginner?
If you’re asking yourself how much should I invest in Bitcoin, we recommend that you do not exceed more than 5% of your total capital. For example, if your total capital amounts to $20,000, you should use only $1,000 to buy BTC.
Factors to Consider When Buying Bitcoin as a Beginner
There are a few factors that you must take into account before investing in Bitcoin. On that note, you should determine the following:
What Is Your Budget?
Crypto beginners should only invest what they can afford to use. This rule applies to professional investors, as digital currencies are highly volatile. For example, during February 2024, the price of BTC varied from 42k to 51k.
Keep that in mind when determining your initial budget, and start with small investments. For example, you should use only 5% of your budget to buy BTC. This is how you’ll reduce the risks of potential losses.
Moreover, since the prices of digital assets often fluctuate, with small investments, you’ll gain more experience on when to buy and when to sell. You should also have an emergency fund to minimize your losses.
In short, by creating a realistic budget that you’ll stick to, you’ll have more control over your investments.
What Are Your Financial Goals?
The second thing you must determine is your financial goals — how much Bitcoin do I need to achieve my financial goals? For example, if you plan to buy a new car worth about $48k, you can achieve that by buying 1 BTC.
You should also determine the timeframe. Do you want to profit from short-term or long-term gains? Short-term investment strategies involve buying and selling BTC within a short time frame. The goal of this strategy is to make quick profits from price fluctuations.
On the other hand, hodling is one of the most common long-term investment strategies. This strategy is most suitable for beginners. Why? Because it doesn’t focus on short-price fluctuations but on the long-term potential of Bitcoin.
What Are the Experts’ Recommendations on Bitcoin?
Many crypto experts believe that 2024 will be a bullish year, which means that the demand for BTC will be high. High demand equals an increased value. Namely, our experts predict that the BTC price will hit the $60,000 mark by the end of 2024. Moreover, the long-announced Bitcoin halving is expected in April 2024, which could further contribute to its price growth.
That said, experts suggest beginners start with small investments and wait for the BTC price to rise to achieve maximal returns. For example, the price of BTC currently stands at $50,986. If you buy 1 BTC at that price, and it hits the $60,000 mark, you’ll make a profit of about $10,000.
Furthermore, beginners should also analyze BTC price history to understand market trends better. This will also help them determine the best time to buy Bitcoin.
What Is Your Risk Tolerance?
When asking the question — how much Bitcoin should I buy weekly, monthly, or daily? — it’s essential to be aware of the risks. As mentioned above, BTC is highly volatile. This means it can bring significant profits and losses, depending on market sentiment.
Namely, since 2009, BTC has gone through many bull and bear markets that are more extreme than the traditional stock market. For example, during the previous bullish market, its price went from $5,000 in April 2020 to $69,000 in November 2021.
At the same time, during the bearish market, BTC’s price went down from $69,000 to under $20,000 in June 2022 — in seven months, its value went down by 70%.
To sum up, investing in BTC is recommended for investors with a high-risk tolerance and strong financial position.
Learn About Market Trends and Risk Factors
Another factor that beginners must take into account is market trends. Market trends will significantly influence the prices of all cryptocurrencies, including BTC. Many factors, such as BTC adoption and regulation, market sentiment, and technological advancements, can influence market trends.
For example, after ETH started using smart contracts in 2015, the overall value of the digital market grew by about $5 million. A similar thing happened after the SEC approved BTC ETFs, which enabled investors to profit from Bitcoin’s price movements without owning it.
Beginners should also pay attention to the fear and greed index to determine when is a good time to sell and buy BTC. On the other hand, the most common risk factors associated with BTC are regulatory issues and fraud.
Utilize Dollar-Cost Averaging
Dollar-cost averaging is a long-term strategy that will enable investors to limit the amount of BTC they buy at any time. This is a low-risk strategy since investors won’t be over-exposed to one-cost price. Instead, they’ll pay a different price for BTC every week or month. This strategy will also help investors overcome periods of volatility and gain during bearish markets.
Let’s say your initial budget amounts to $10,000 and that the price of BTC is $64,000. Using the dollar-cost-average strategy, you’ll divide your $10,000 across 10 monthly investments of $1,000.
- In month 1, you’ll pay $64,000,
- In month 2, you’ll pay $50,000,
- In month 3, you’ll pay $41,000, etc.
This means that the average cost price of your BTC portfolio will amount to $49,500.
Choose a Good Exchange and Wallet
The last factor you must consider is how to buy Bitcoin and where to store it. You can buy BTC on both centralized and decentralized exchanges. The main difference between CEXs and DEXs is that the former is controlled by a centralized entity, while the latter is automated.
CEXs are more suitable for beginners because they are less complex. For example, all transactions take place via order books instead of smart contracts. Moreover, they offer higher trading volume and faster transactions. Some of the best crypto exchanges in the USA include Binance and Coinbase.
Once you buy BTC, you’ll have to store it in your crypto wallet. Crypto wallets can be custodial and non-custodial. Custodial wallets are more suitable for beginners since they do not require technical knowledge. They are also centralized, meaning third parties will store your private keys.
Buying Bitcoin Pros and Cons
Investing in BTC comes with the following advantages and disadvantages:
Accessibility
BTC is the most popular cryptocurrency in the world. This means that all prominent crypto exchanges allow bitcoin trading. Moreover, many exchanges allow their users to make small investments. For example, instead of buying 1 BTC, you’ll get to buy its denomination — satoshi.
On that note, 100,000 satoshis equal 0.00100000 BTC or $51.21 (based on the current BTC price).
Furthermore, many institutions accept BTC as a payment option, which is why its trading volume stands at a high of $23 billion.
High Growth Potential
BTC is currently the most valuable cryptocurrency. What makes it worthwhile is its scarcity, divisibility, and uniformity. On that note, BTC’s total token supply is capped at 21 million. This means that by 2140, all bitcoins will be mined. Moreover, BTC is more divisible than fiat and cannot be counterfeited.
Since its inception in 2009, BTC has experienced significant price increases. At the time of writing, the price of BTC stands at around $50k, while by the end of 2025, its value could reach $100,000.
Decentralization
Bitcoin has a decentralized nature, which means that it’s not controlled by a single entity, such as a bank. This makes it almost impossible to knock down its network. Likewise, BTC’s network is permissionless — anyone can access it, regardless of location.
Bitcoin was also the first protocol to solve the Byzantine Generals problem. On top of that, many professional traders believe that BTC could be a good hedge against inflation.
Limited Earning Potential
On the other hand, the biggest disadvantage of investing in BTC is its limited earning potential. Namely, you’ll have to invest a lot of money to gain high returns. Another thing that makes BTC a bad investment for beginners is its volatile nature.
For example, during 2022, the price of BTC varied from $16,000 to $40,000. You should also consider the transaction fees, which can be very high. This makes investing in BTC unprofitable for people with small initial budgets.
Vulnerability to Scams
Due to its popularity, BTC is often prone to scams. The most common scams include Bitcoin investment schemes. In these schemes, scammers contact BTC investors pretending to be investment managers. They will claim that they managed to earn millions of dollars by investing in BTC, promising the same to their victims.
Scammers will then ask investors to give them money, which they will never return. They can also ask for personal information in an attempt to steal their identity. Moreover, BTC transactions are irreversible.
Regulation Issues
BTC is not legal in all countries, which can be a big problem for investors. Moreover, its nodes can be located in different jurisdictions. As such, they can be subject to different legal frameworks.
If cryptocurrencies were regulated, the crypto market would become much safer because the value of BTC would become much more stable. Regulation would also solve the problem of taxation and price manipulation.
For example, when FTX 2022 filed for bankruptcy, all the investors’ assets were frozen. This allowed hackers to steal $477 million.
Conclusion
Is Bitcoin a good investment for beginners? Yes, if you use a good investment strategy. On that note, you should first determine your initial budget. We suggest you not invest more than 5% of your budget in BTC.
Next, you should determine your financial goals and choose your investing strategy. Hodling and dollar-cost averaging are the most suitable strategies for beginners. You should also monitor the current market trends as the price of BTC tends to fluctuate. And finally, you should buy BTCs on CEXs and store them in custodial wallets.