How To Start Investing In Bitcoin As A Beginner

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Bitcoin trades have attracted plenty of interest over the last few years. If you are just starting out, it may be difficult to know where to begin. There are a few aspects you will have to consider and research you will need to conduct to avoid common pitfalls.


Here we have gathered the most important information you require if you are a first-time investor or a beginner. Read on for more!

Understanding Bitcoin

Bitcoin is one of the most widely used types of Cryptocurrencies which operates without the involvement of the government or other institutions.

It was created by a person under the pseudonym Satoshi Nakamoto in 2009, with the aim of eliminating the need for intermediaries such as banks.

Bitcoins act as a medium of exchange instead of physical cash. Bitcoin work using blockchain technology which ensures that a user’s Bitcoins are kept safe.

When you make a transaction using Bitcoin, this is recorded on a blockchain which is a ledger or database whose entries cannot be changed. All transactions are verified by ‘miners’ which is a group of people with computing hardware. 

Acquiring Bitcoin

You can buy and sell Bitcoin, or you can use it in online transactions wherever it is accepted. There are many ways you can receive Bitcoin such as accepting it from a friend or as a payment for goods and services.

You also have the option to acquire Bitcoin using ‘real’ money. For example, Paxful lets you buy Bitcoin with credit cards making it safe and easy to navigate.

Thanks to the growing awareness, there are a variety of products and services which can be purchased using Bitcoin and other Cryptocurrencies. These could include electronics, jewelry, watches, and even cars. 


Obtaining a Bitcoin Wallet

Firstly, in order to begin investing, you will need to get a Bitcoin wallet. This is a type of digital wallet which stores your Bitcoins and keeps track of all transactions.

There are two main types that users can choose from depending on their needs. The first one is a software wallet which is similar to a mobile application with the option to get connected to your bank account.

The second one is a hardware wallet that resembles a traditional wallet. It is considered to be safer and more secure as it is offline. In order to make the best decision for yourself, make sure you read this comparison guide.

Connecting Your Wallet To Your Bank Account

Once you have obtained a Bitcoin wallet, you will need to connect it to your bank account. This will allow you to purchase and sell coins.


The transactions which are made using a bank account initially take about four hours to complete for new investors. Keep in mind that whilst a bank account is recommended for larger purchases, credit and debit cards are more suitable for smaller ones.

Also, linking a bank account will require more set-up instructions, whereas credit or debit cards will take less time and offer more convenience. 

Linking A Bitcoin Exchange

Next, you will have to register with a Bitcoin exchange. This is an online place where Bitcoins are exchanged for traditional currencies such as dollars, euros, or sterlings.

There is a wide range of Bitcoin exchanges to choose from. They may vary in the type of services they offer, the Cryptocurrencies available, processing fees, reliability, trading security, and reputation.


Therefore, it is important for you to conduct proper research and determine which Bitcoin exchange is best for you. Once you have found a Bitcoin exchange, you will need to register and complete security checks.

Managing Your Bitcoin Investments

Following a successful setup, you will now be able to purchase Bitcoin. You will notice that the value of some coins might be considerably higher. However, it is possible to start investing with fractions of a single coin.

Afterward, you will be able to manage your Bitcoin investments. There are several options to explore. You could use your coins to make online purchases. If you are wondering where you can spend your coins, check out this list of major companies which accept bitcoins.

Alternatively, you can hold your coins for longer with the hope they will increase in value or perform day trading with other people by using your Bitcoin exchange.


Advantages Of Bitcoin Trading

One of the biggest advantages is the accessibility and versatility of Cryptocurrency. It also offers flexibility as it can be used to purchase products and services. 

The process of using Bitcoins is simple and easy since you can make transactions with another user in no time with a minimum amount of fees applied.

In comparison to traditional currency systems, you will not be required to share any personal information during transactions. The aspect of anonymity adds to the security of Bitcoin trading.

Another important reason why many users opt for Bitcoin is its decentralized system. Cryptocurrency provides full autonomy as it does not depend on a central authority.


Bitcoin Mining

Bitcoin mining is a process that involves adding new transaction records to Bitcoin’s public ledger known as the blockchain. Mining is performed using hardware that aims to solve a complex computational math problem.

The first computer which finds a solution is awarded the next block of Bitcoins. The more computing power you have, the easier it will be to mine Bitcoins.

The process of Bitcoin mining is intentionally designed to be resource-intensive, costly, and difficult so that the number of blocks found every day remains steady. Keep in mind that profitability based on mining is uncertain due to the high upfront costs such as equipment and electricity costs.

Taxation On Bitcoin

Bitcoin is legal in the UK and many other developed countries. If you are holding Crypto-assets as a personal investment, you will need to pay capital gains tax (CGT) which needs to be reported using self-assessment.


For more guidance on this, ensure you familiarise yourself with the manual covering tax on crypto assets. Bitcoin may also be subject to income tax and National Insurance if you receive it as payment from your employer.

If HMRC establishes that you are earning money from Cryptocurrencies as a business, you will be taxed in the same way which applies to companies. 

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