If you have become interested in buying and holding Bitcoin in your portfolio, congratulations, you are earlier than most. The more you educate yourself the more confident you will be in the long run. This is very important as this asset has wild price swings and you shouldn’t invest more than you are willing to lose. Bitcoin is still very young so there is almost a guarantee of another 80% drawdown at some point in the future. You need to be secure enough with your investing decision to be able to sleep at night. If you feel confident and you would like to start buying and holding your own Bitcoin, we will go through the steps on how to do that.
*Reminder - I am not a financial advisor. These articles are intended as educational material only, not financial advice.
Find a Bitcoin Exchange
Personally, I like to send people to Swan Bitcoin as they are a Bitcoin only company who not only run an exchange, but also put out great learning content, offer a retirement fund and have great support to help you through the process if needed. I also recommend Cash App and Strike which utilize the lightning network for low fees, and they are both very user friendly. Once you have an account created for any of these exchanges, the process of buying is pretty straight forward. Simply connect a bank account and set an amount you would like to buy. I have put some referral links in the Bitcoin resource page if you would like to use them. With that being said, I am not looking to get anything from this other than providing education and resources for others.
I would recommend avoiding Coinbase and Binance who are large “Crypto” exchanges that will promote any coin out there, whether it is a known scam or not. They have been known to openly give your data to other entities and they do not promote self-custody. There are many other exchanges out there so please do your own research when it comes to choosing an exchange that suits you best.
Get a Hardware Wallet
One of the highest recommended hardware wallets on the market is the Coldcard from Coinkite. It is one of the most secure, and the difficulty of setting it up is moderate. There are others such as Fountain Passport, which is a bit more on the pricey side, as well as two of the most popular wallets Trezor and Ledger. These two are cheaper and easy to set up but have had a few privacy concerns as of late. More hardware wallet devices are coming out all the time so please do your own research on which one is best for you. Links to view these hardware wallets are also on the Bitcoin resource page (part 8).
Once you have a hardware wallet you will be ready to self-custody your Bitcoin. The device will come with a step-by-step guide on how to set up your wallet. The most important part is that the device will give you a “seed phrase.” This is a 12 to 24 word phrase that you need to write down and place somewhere secure. This seed phrase is the “key” to everything. Imagine it is the key to your bank vault and whoever has the key has access to the funds. If you self-custody correctly and you are the only one that knows the seed phrase, then no one can take your funds. However, if you type them into a computer, someone finds them, or you lose them, then your funds are in jeopardy.
This is also relevant when you buy from an exchange. When you purchase Bitcoin from an exchange, the exchange owns the keys to the Bitcoin until you send it to your own hardware wallet. The exchanges have been known to be hacked or use funds in ways they are not supposed to. Examples of this are FTX, Mt. Gox and Voyager. There is a saying in Bitcoin, “not your keys, not your coins” (keys meaning your seed phrase). This is a reminder that whenever you get to a point where you feel uncomfortable with an amount of money on an exchange that you wouldn’t want to lose, it is time to send it to your hardware wallet to make sure you own the keys. I recommend starting with a small amount of money, like $5, and sending that to a wallet that you own to get a feel for it before sending a larger amount. Sending and receiving Bitcoin is just one of those things you must do a couple times before being comfortable with it. It is like riding a bike, a little intimidating and difficult at first, but once you try it and get the hang of it, you realize how simple and powerful it is. You can now send money on your own to anyone in the world with no middleman and no permission from anyone else. No one can freeze, delay, or confiscate your funds as long as you know the seed phrase. You can even recover your funds if your device is lost or broken, by entering your seed phrase into a new device. The seed phrase is the most important piece.
BTC sessions is a fantastic resource for step-by-step instructions on just about anything in this space. If you visit https://www.youtube.com/c/btcsessions, you can simply type in the name of your hardware wallet in the search bar and several how-to videos will come up showing you how to set them up.
Important
I know some of this can seem daunting or intimidating, and you will come across options such as an ETF, where companies will tell you that they will custody your coins for you. Please do not trust such options and learn how to self-custody. If you do not own the keys, there is a risk that that company will lose your coins. Again “NOT YOUR KEYS, NOT YOUR COINS.”
Multi-Signature Storage
There are ways to set up multi-signature storage which includes multiple keys. This can be done in ways such as a 2 of 3 multi-sig where you hold a key, a company such as a wallet provider holds a key, and maybe your spouse holds a key and all you need is 2 of the 3 to access the funds. This takes some of the fear of losing a key away. I would recommend doing your own research with companies such as Unchained Capital who make this very simple if that is something you want to do in the future. Sparrow Wallet and Specter Desktop also offer multi-sig solutions that you can set up on your own for free without a company holding a key. Mult-sig does add a level of security to holding your coins, but it may not be what you want to start off with in the beginning of your journey, especially with a smaller amount of Bitcoin.
Bitcoin vs Crypto
I hope these articles helped you get a better understanding of Bitcoin and money in general. The rabbit hole is endless, and I still learn something new about Bitcoin almost every day. With all that information you may have noticed that I never touched on any other “crypto” coins. This is my own personal opinion, but I believe there is no reason to look at the other coins as none of them are trying to compete to potentially be the global monetary network that underpins society. For full disclosure, I did buy altcoins before learning about Bitcoin and making the switch.
Most altcoins are scams and all are trending to zero against Bitcoin. You will hear the Proof-of-Work vs Proof-of-Stake argument if you are in the space long enough and the Proof-of-Stake coins will claim that they are faster or better for the environment, but what they will not touch on is that we have had proof of stake for hundreds of years. Our fiat currencies all run on proof of stake. This means the more coins or wealth you hold the more powerful you become in the system. This is akin to lobbyists and large corporations swaying politicians. The larger holders of coins in these Proof-of-Stake ecosystems can bend and change the rules to what they prefer. It ends up being a very centralized feature in the long run as more power and more coins consolidate to the top holders. Proof-of-Work is about undoing that and giving the world a system built on fair rules that no one can change. In Bitcoin, just because you have a lot of coins, does not mean you have any more power over the protocol than anyone else.
All the other coins promise something faster, cooler, or full of features, but they all make tradeoffs to security, privacy or scarcity when they make these claims. I personally view Bitcoin as a path to a better future for humanity by giving the world a monetary network that gives everyone in the system an equal chance. While I see Bitcoin as allowing humanity to save which can provide a more abundant future, I see the rest of the crypto market as a casino, where you might get lucky in the short term, but will have difficulty timing the market trying to pick the next winner in the long run. If you do want to look at altcoins, please ask; What value do they bring to society that Bitcoin doesn’t?
Unlike Bitcoin, which has been recognized as a commodity by the SEC, most coins have been viewed as unregistered securities. These other coins have a centralizing feature, single points of failure or lack a network effect. There is a lot of “smart money” (institutions and hedge funds) beginning to pile into the newly approved Bitcoin ETF which should be telling. Before buying any other coins, I would highly suggest Jeff Booth’s article that delves into Bitcoin vs Crypto called, “The Greatest Game” if you would like to learn more.
Please do your own research with whatever you are investing in and know that nothing is guaranteed, not even Bitcoin.
The final article, Bitcoin Resources can be found here.