How to Buy Bitcoin SAFELY and Make Money in 2024

Bitcoin has only been around for over thirteen years. But during that time, it has become the investment story of the 21^st century. Seriously, no other investment has come close to matching its price performance. People are literally becoming millionaires after making just small investments.

How can you buy Bitcoin safely and make money in 2024? I don’t have all the answers, and I doubt anyone does. But there’s no question Bitcoin is fast becoming a mainstream investment and one you can’t afford to leave out of your portfolio.

For that reason, I’ve created this guide to help you better understand Bitcoin, how it works, how to invest in it, and where to invest in it—safely.

Before we go any further, I must disclose that I do participate in cryptocurrency investing. I have positions in Bitcoin, USDC (which is a stablecoin), and other altcoins on several crypto exchanges, some of which will be described in this article.

What Is Bitcoin?

Bitcoin is what’s known as a decentralized, digital currency. It was launched on January 3, 2009, by a mysterious person known as Satoshi Nakamoto.

No one knows who Satoshi Nakamoto is, or even whether that is the name of a single individual or a group of people operating under a pseudonym. No person by that name has ever come out and been legitimately confirmed as being the founder of Bitcoin. But whoever it is, Bitcoin is now a reality.

But let’s get back to exactly what Bitcoin is. I’m going to intentionally avoid getting too technical here because not many people will understand—including me!

The use of the word “cryptocurrency” in describing Bitcoin stems from the use of cryptography in keeping the network secure. Account balances are maintained on a public ledger, which everyone in the network has access to. At the same time, each transaction record that passes through the system is encrypted, so the exact identity of either the sender or the receiver isn’t known to other users.

Bitcoin uses what are called miners who act as something like gatekeepers within the network. These are individuals who verify Bitcoin transactions. The word mining comes from the fact that those who operate as miners are paid in Bitcoin for the work they do.

This payment to the miner is what causes the amount of Bitcoin in circulation to increase. It’s something like the way mining for gold increases the global supply of the metal.

When Bitcoin was created, its founder(s) limited the number of Bitcoin that can ever be mined into existence to not more than 21 million. As of Decemember 2023, 19 million Bitcoins have been mined into existence. The limit on the number of Bitcoin that can be mined creates a rarity that may enhance its value.

Satoshi, a.k.a., Bitcoin Change

Do you know how pennies, nickels, dimes, and quarters are smaller denominations of the dollar? Not to be outdone, Bitcoin has its own small denomination. But in this case, the small denomination is, well, really small.

What we might call little Bitcoins are what are known as Satoshis, named for Bitcoin’s mythical founder.

What is the conversion of Bitcoin to Satoshi?

Are you ready for this?

100 million Satoshi = 1 Bitcoin

Put another way, a Satoshi is worth 1/100 millionth of a single Bitcoin. That’s 0.00000001, or a one following seven zeros to the right of the decimal point.

I’m not even sure how to calculate that into dollars, but I did take a stab.

If one Bitcoin is worth $100,000—let’s keep the number a round one—one Satoshi is worth 0.00000001 Bitcoin, which translates into 1/10 of a penny.

That means you need 10 Satoshi to equal one penny, and 1,000 Satoshi to equal $1.

Though it sounds like a ridiculously low value, it makes sense when you consider that a single Bitcoin, valued well into the tens of thousands of dollars, is too high for everyday transactions. I’m guessing the Satoshis are designed for smaller transactions.

At the moment, with everyone focused on the price of Bitcoin itself, no one’s paying any attention to Satoshis.

But who knows? This whole thing is still developing.

No Institutional Backing

This is one of the most important facts to keep in mind with Bitcoin or any other cryptocurrency.

Cryptocurrencies have been developed to function as peer-to-peer monetary exchanges. That means one party sends money, and another receives it.

While there is a miner somewhere in the middle verifying the transactions, there is no institution processing payments and taking out fees as they do.

The purpose was to create a person-to-person currency that can be used worldwide, circumventing international barriers, government regulation, and institutional fees. In other words, it was designed to be a fast, low/no-cost means of transacting business.

Many even see it as ultimately replacing government-issued currencies, which are referred to as fiat currencies, since they get their value entirely from the government that issues them.

It was believed the absence of a government connection would eliminate currency manipulation, like exchange rates, interest rates, or the possibility of governments inflating national currencies.

All that’s good, at least in theory. But it does come with some important limitations.

Because crypto isn’t issued by governments, it isn’t universally accepted. And because it’s not regulated, there is the possibility of manipulation by unscrupulous players.

It also means there is no FDIC or SIPC protection for your Bitcoin holdings. And if someone should stiff you on a transaction, you won’t be able to go to a government agency and file a complaint to get compensation.

It’s also important to understand that banks have nothing to do with crypto either. The good news on that front is that they aren’t able to charge fees, the way they do for bank transactions. But the bad news is that you can’t walk into your friendly, neighborhood bank and open an account to transact business in Bitcoin or any other cryptocurrency. At least for now, banks don’t even recognize cryptocurrency.

How Many Cryptocurrencies Are There?

While Bitcoin is the first, largest, and most popular cryptocurrency, it’s hardly alone. According to e-cryptonews.com as of March 29, 2023, there are currently 23,092 cryptocurrencies with a combined market capitalization of $1.19 trillion.

That’s just an estimate based on a single crypto exchange. Given that new cryptos are appearing all the time, and existing ones are disappearing, the exact number of cryptocurrencies will never be more than a loose estimate.

But of the many thousands of cryptocurrencies that exist, only a handful are making an impact, and are even known to the public. According to Yahoo Finance, the 10 largest cryptocurrencies by market capitalization are as follows (as of January 2024):

1. Bitcoin (BTC), $899.2 billion
2. Ethereum (ETH), $278.71 billion
3. Binance Coin (BNB), $98.32 billion
4. Tether (USDT), $93.09 billion
5. Solana (SOL), $62.18 billion
6. Cardano (ADA), $18.71 billion
7. USD Coin (USDC), $25.81 billion
8. Ripple (XRP), $31.61 billion
9. Polkadot (DOT), $28.66 billion
10. Terra (LUNA), $26.58 billion

Bitcoin, with a total current value of nearly $1 trillion, makes it comparable to the market capitalization of popular stocks like Tesla and Facebook (META). It’s even larger than other Wall Street favorites like Berkshire Hathaway, J.P. Morgan Chase, and Johnson & Johnson. That’s even more remarkable when you consider that Bitcoin has only been in existence since 2009!

The top 10 ranking above shows that Bitcoin remains the dominant crypto at the moment. But it also shows that Ethereum is coming on strong as an increasingly competitive #2.

Different Cryptos With Different Purposes

It’s also worth noting that among the top 10 cryptos, there are variations in what each is intended for. For example, while Bitcoin is considered a store of value, Ethereum is for smart contracts, Tether is a stablecoin, and Ripple is a digital currency.

Wait, digital currency—aren’t all cryptos digital currencies?

Technically speaking, yes. But as the crypto space grows and develops, specializations are beginning to emerge.

For example, while Bitcoin is a digital currency, it’s rapidly risen to become viewed as a store of value. Just look at the main page of popular investments sites, like MarketWatch and Yahoo!Finance and you’ll see Bitcoin listed with other popular investments, like the Dow Jones Industrial Average, the S&P 500, U.S. Treasury securities, crude oil, gold, and foreign stock exchanges. It’s clear that Bitcoin is now being viewed more as an investment/commodity than simply as a digital currency.

Going in a different direction, USD Coin is considered a stablecoin. The term applies to this crypto, and others like it, because its value is tied to the U.S. dollar. That direct conversion is more than casual. As a stablecoin, USDC is readily convertible into dollars, and more easily transferred between crypto exchanges.

There’s a lot more to the cryptocurrency specialization story, but I’m giving you just a high-altitude view for the moment.

Is It Legal to Own, Trade, and Shop With Cryptocurrency?

This question comes up all the time. Not sure exactly why it does, but maybe it has something to do with the fear of cryptocurrencies competing with the dollar and other major world currencies as a medium of exchange.

And for sure, some countries—most notably China—have made it virtually illegal to use crypto within their borders. But at the moment, owning, trading, and shopping with cryptocurrency is perfectly legal in the U.S. and in most major countries.

That said, there have been calls in the U.S. to regulate cryptocurrency, but certainly not to ban it.

The Washington Post recently reported increasing calls within the government to develop some sort of industry regulation. The article reports:

“The impending regulatory reckoning has some industry insiders trembling that federal rules will squash the sector before it finds its footing. Others are cooperating with Washington policymakers in the belief that the technology’s potential to streamline banking and payment options for consumers is too great to snuff out — and that it may be time to impose some order onto the digital currency chaos.”

In a way, calls for federal regulation of crypto speak volumes about the success of the currency. And fortunately, no one is calling for an outright ban on crypto. That means its place in the future looks secure. After all, stocks, bonds, mutual funds, and other investments are also federally regulated. And those markets are larger than ever, even with regulation.

We can reasonably expect the same outcome for the regulation of cryptocurrencies. Also, think about this: if regulation makes cryptocurrencies more trustworthy, their popularity is only likely to grow.

How Do Cryptocurrencies Work?

This is where any discussion of Bitcoin starts to get really complicated.

Let’s start with this…

You know those pictures of physical Bitcoin, the ones that look like they’re made of gold and have a mechanical “B” on them?

They’re a complete fiction!

There are no Bitcoin coins, any more than there are Bitcoin bills ($1, $5, $10, etc.). Bitcoin has no physical substance at all, which is part of what makes it so technical.

I mean, when you think about it, we’re all used to money as having some kind of physical form, whether it’s coins, bills, or paper checks. And even though money has become increasingly electronic, the numbers we see in our bank and brokerage accounts can easily be converted into some familiar physical form.

None of that is true with Bitcoin. It exists entirely on the Internet, which makes it something beyond traditional electronic money.

Bitcoin operates on what’s known as a blockchain. A blockchain is a list of transactions that contains a record of each transaction within the network, whether currency is sent or received. The blockchain makes it possible to view and verify those transactions, without knowing the identity of the parties involved. It also what makes it possible to conduct financial transactions without banks or credit cards.

When you use Bitcoin, you’ll use either a public or private key. It’s a very long string of numbers and letters that is created by a mathematical encryption algorithm. The public key is the one other participants on the network use, while a private key serves as something like a personal account number.

You’ll need a private key to access the Bitcoin network. But since it’s also the key to your entire Bitcoin life, it should be considered as a deep, personal secret. No one but you should have access to your Bitcoin private key.

Is Bitcoin a Good Investment?

It’s hard to classify Bitcoin as an investment, at least in the true sense. After all, not only does it have no physical substance or backing from governments or banks, but it also doesn’t pay interest or dividends. In fact, unlike the companies issuing stock, Bitcoin has no cash flow or earnings to rely on for evaluation.

By this definition, Bitcoin is more of a speculation than an investment—at least up to this point.

There are all kinds of wild predictions about where the price of Bitcoin will go. Some claim it will soon blow past $100,000. Ark Invest’s Cathie Wood has gone on record saying it will pass $500,000 within the next five years.

Still, others are certain a Bitcoin price crash is just a matter of when, not if.

Personally, I’m not making any predictions about where the price of Bitcoin will go. But I do invest in Bitcoin, which puts me in the company of those who think the price is heading a lot higher, even if I have no idea what that will be.

Bitcoin’s Historical Price Performance

Predictions aside, let’s take a look at the price performance of Bitcoin over the past few years.

The screenshot below from Coinbase tracks the price of Bitcoin going back to November 3, 2014. At that time, the crypto was trading at $328. And though the price is currently trading at just above $46,000, it reached an all-time high of nearly $69,000 this past November.

As you can see from the chart portion of the screenshot, the price of Bitcoin has moved at extreme levels, both up and down. The word volatility doesn’t quite capture the price action.

But even if we look at the price of Bitcoin going back to November 3, 2014, when it was $328, it’s risen by more than 15,000%! And that’s in the space of a little over seven years.

Do you have any other investments that have even come close to that price performance over the past seven years?

Whatever the predictions are for how high Bitcoin will go, you can’t argue with the fact that this crypto has easily outperformed all traditional investments, including stocks and real estate.

That doesn’t necessarily make Bitcoin a good investment. But the trend has certainly made a lot of investors rich, at least up to this point.

Bitcoin vs. The S&P 500 – Best Return Last 10 Years

The 15,000% gain in the price of Bitcoin since 2014 certainly looks impressive. But does it stand up to that other asset class – the S&P 500 – that has set the standard for investing excellence for most investors over more than a dozen years?

Yes. And it isn’t even close!

The table below provides a side-by-side comparison of Bitcoin and the S&P 500 going back to 2010. Bitcoin actually started trading in 2009, but as you can see from the 2010 information in the table, it traded for pennies in the early going.

But notice in the table that Bitcoin outperformed the S&P 500 in 10 out of the past 12 years. And while it did underperform the S&P 500 in 2014 and 2018, its gains in the other 10 years were exponentially higher.

When you start looking at some of the returns Bitcoin has made (1,510% in 2011 and 6,092% in 2013) you start to understand why it has been the best-performing asset over the past 10 years. Just to put it into perspective, look how those returns stack up on this chart (data provided by Koyfin):

The S&P 500 has been on a tear for the past decade but compared to Bitcoin, it looks like it hasn’t moved. 😳

I’m not suggesting that you abandon investing in the S&P 500 (or any other investments) and put everything you have into Bitcoin. But the dramatic price action in the crypto makes a strong case for holding at least a small percentage of your portfolio in Bitcoin.

My Experience With Cryptocurrency Investing

I have a confession to make. Not too many years ago I was a cryptocurrency skeptic. A lot of people in my Wealth Hacker YouTube channel tried to talk me into investing in crypto.

At the time, Bitcoin was running for upwards of $20,000, but soon it dropped down to maybe $3,000. It’s not that I had anything against it; I really didn’t understand it. But I was definitely against the people who I felt were trying to promote it, even though they didn’t understand it any more than I did.

An investing rule I learned a long time ago is that if you can’t explain how an investment works to your grandmother, you got no business putting your money into it.

That’s how Bitcoin looked to me at the time. Even after crashing back down to a few thousand dollars, I didn’t get into the game for maybe a year and a half.

I opened an account with Coinbase early in 2018, with just $1,000. And even that sat for a while. But just having an account open was exciting to me, and it motivated me to learn more about both Bitcoin and Coinbase.

Taking the Bitcoin Plunge for the First Time

March 8, 2018. That was the day I got off the fence and made my first crypto investment. I invested $1,000, plus $14.90 for the transaction fee.

Then, not much happened for nearly a year. But around the beginning of 2019, I began plunging in deeper. From there, my investments were not only more consistent but also progressively larger:

• January 3, 2019 – bought $740.43 of Bitcoin
• November 13, 2019 – bought $8,867.87 of Bitcoin
• November 21, 2019 – bought $10,838.51 of Bitcoin
• January 21, 2021 – bought $19,706.38 of Bitcoin

My total investment in Bitcoin, all through Coinbase, came to $41,168.09. You could say that, at that point, I was all in on Bitcoin.

It wasn’t long before I opened an account with Robinhood, where I bought more Bitcoin but also added Ethereum and Dogecoin.

Thus far, my timing on crypto purchases has been excellent. My total crypto holdings are well above what I paid for them, and they’ve become one of the best investments I’ve ever made.

How to Invest in Bitcoin

My first recommendation is that you start with a very small investment. That may be no more than 1% or 2% of your portfolio. Most of your investments should be held in traditional assets, like stocks, bonds, and real estate. Bitcoin is mostly a speculation at this point, and you shouldn’t invest any more than you can afford to lose.

Second, decide if you will invest for the long term, or trade in Bitcoin. The long-term price trend of Bitcoin makes a strong argument in favor of buy-and-hold. But the volatility has some choosing to trade based on price bounces. There’s no way to know when Bitcoin will rise or fall, which is why I prefer to be a long-term investor.

Thirdly, if you’re familiar with traditional ETF investing, you may also want to consider investing in a crypto exchange-traded fund (ETF). They are only starting to come on the scene, so there’s not much history to go on.

Money/U.S. News.com recently published a list of several ETFs that invest in crypto, including Bitcoin. One recommendation was the ProShares Bitcoin Strategy ETF (BITO). In October, it became the first cryptocurrency ETF allowed to trade on major US exchanges. It holds various Bitcoin futures contracts and already has $1.4 billion in assets under management. Other ETFs listed are either very small or are still somewhere in the pipeline phase.

I can’t make any recommendations on crypto ETFs since I don’t invest in them myself. But it may be a way to invest in the technology—the blockchain—which could ultimately be the big winner in the crypto game.

Where to Invest in Bitcoin

As the popularity of cryptocurrencies has grown, so have the options where you can invest in them. Cryptocurrency exchanges are the go-to platforms because they are crypto-specific and offer many more crypto options. You can also invest in crypto through several investment brokers.

Let’s look at both types of platforms for Bitcoin investing:

Cryptocurrency Exchanges

TIP: If you invest through a cryptocurrency exchange, be sure to link your bank account for funding purposes. Direct transfer of funds from a bank account will be much less expensive than the up-to-4% fees you’ll pay for funding your account with either a credit or debit card.

Coinbase

Coinbase is not only one of the largest crypto exchanges in the industry, but it also has one of the largest lineups of services. Not only can you trade in 70 cryptos with a minimum investment of just $2, but they also offer a Visa debit card so you can access your crypto balance. You can earn up to 4% cash back with the debit card.

Trading fees work on either a flat fee—starting at $0.99—or a percentage scale ranging from 0.05% to as high as 4.00%. They do offer a digital wallet, or you can use your own. I can vouch for Coinbase because I have an account there myself.

Kraken

Kraken is a full-service crypto exchange with plenty of features. They offer trading in more than 50 cryptocurrencies, with maker and taker fees ranging from 0% to 0.26% of the amount of crypto bought or sold. However, they do not provide a digital wallet; you’ll need to use a cold wallet on the platform. I’ll talk about wallets and storage later.

One advantage Kraken does offer is leverage. That includes 5X leverage on buying and selling cryptos, and up to 50X leverage trading crypto futures. Minimum investments vary by crypto, and the exchange doesn’t offer a debit card.

eToro

eToro serves as an investment brokerage outside the U.S. but is limited to crypto investing only within the U.S. The platform has over 20 million users worldwide and enables you to trade in 27 different cryptos. Fees range from 0.75% to 5.0%, depending on the crypto you are trading in.

eToro offers a virtual trading account with up to $100,000 to help you learn how to trade. But they also offer their copy trading feature, which allows you to observe the trading patterns of successful traders. That means eToro may be the best choice if you want to invest in crypto as an active trader.

Gemini

Gemini is something truly different in the crypto exchange space. It’s regulated by the New York State Department of Financial Services, making it the only government-regulated crypto exchange. It also offers private insurance coverage of crypto you hold on the exchange.

The minimum initial investment requirement is $0, and you can trade more than 40 cryptocurrencies, including the Gemini dollar, which is a stablecoin. Trading fees are based on either a flat fee, starting at $0.99, or on a tiered percentage, ranging from 0.03% to 3.99%.

Online Brokers

Robinhood is a popular investment app offering commission-free trades of stocks, options, and ETFs. But they’ve long since added crypto investing to their product menu. They charge no commissions on crypto trades, but like many exchanges and brokers, there is a basis point spread on both purchase and sale. Robinhood offers trading in seven different cryptocurrencies.

One factor to be aware of with investment brokers is that they don’t allow you to transfer crypto from one platform to another. You can invest in crypto on the app, where it will be both bought and sold. For that reason, a digital wallet will be needed.

SoFi Invest is best known for refinancing student loans. But they’ve branched into investing, and now offer commission-free trades on stocks, as well as a robo-advisor with no annual fee. They also offer crypto investing, in 28 different cryptocurrencies, including Bitcoin, Ethereum, Dogecoin, and Cardano.

The minimum investment for crypto trading is $10 and there’s a fee of up to 1.25% of the amount of crypto you purchase. However, they don’t offer an interest-bearing stablecoin or a debit card that will access your crypto balance.

Webull does not charge a fee to trade crypto, but they do have a 100-basis point spread on both the purchase and sale of crypto. The minimum investment for cryptocurrency is just $1. But be aware that they don’t offer an interest-bearing stablecoin, nor do they provide a debit card to access your balance.

Comparison of Cryptocurrency Investment Platforms

Platform	Features	Fees
Coinbase	• 70+ Cryptos, $2 Minimum Investment • Visa Debit Card, Digital Wallet	• Fees: $0.99 Flat Fee or 0.05% to 4.00%
Kraken	• 50+ Cryptocurrencies, 5X Leverage • No Debit Card, Cold Wallet Needed	• Maker/Taker Fees: 0% to 0.26%
eToro	• 27 Cryptos, Copy Trading, Virtual Trading Account	• Fees: 0.75% to 5.0%
Gemini	• Regulated by NY State • 40+ Cryptocurrencies, No Minimum Investment	• Fees: $0.99 Flat Fee or 0.03% to 3.99%
Robinhood	• Commission-Free Stock, Options, and ETF Trades • 7 Cryptocurrencies, Basis Point Spread	• No Crypto Transfers, Needs a Digital Wallet
SoFi Invest	• Commission-Free Stock Trades, Robo-Advisor • 28 Cryptocurrencies	• Fees: Up to 1.25%
Webull	• Commission-Free Stock, Options, and ETF Trades • 25 Cryptocurrencies, 100-Basis Point Spread	• No Stablecoin or Debit Card

How to Store Bitcoin

Whether you plan to invest in Bitcoin or use it for making purchases, you’ll need a place to store your crypto. These are typically referred to as digital wallets.

Digital wallets come in different forms, but their main purpose is to enable you to store and even transfer your crypto. In fact, certain types of digital wallets even allow you to take physical possession of your crypto.

Whatever type of wallet you choose to store your Bitcoin, it will come with a wallet address code. That’s a very long alphanumeric code that might have 30 or 40 characters. You’ll need to have a way to privately store that code since it is the only way you’ll be able to access your wallet. If even one number or letter is missing or incorrect in the code sequence, your transaction will be denied—or worse—it will go to the wrong party.

You’ll need to come up with a way to store your wallet address code somewhere you can get to it quickly, but where no one else will think to look.

Let’s dive into the different types of digital wallets that are available.

Hot Wallets

These are sometimes referred to as software wallets because they require no special equipment. They’re offered by cloud providers, and often by cryptocurrency exchanges. In other words, they’re available to be accessed online at any time through your mobile device or your computer.

Hot wallets have the advantage of being stored on crypto exchanges. There, it can be freely used on the exchange. You can convert one crypto to another, convert it to dollars, or even invest it on the platform to earn interest on your balance. Just as important, hot wallets are often available on crypto exchanges at no charge.

The main disadvantage of a hot wallet is that it’s less secure. That is, it is no more secure than the platform it’s held on. That holds the possibility that it could be hacked, and your crypto lost forever.

Cold Wallets

This is a wallet that enables you to store your crypto outside an exchange or on the cloud. They’re sometimes referred to as hardware wallets because they make use of a storage medium, like a thumb drive. Popular examples of cold wallets are Ledger and Trezor.

Cold wallets have two major advantages. The first is that it makes your crypto completely portable. You can purchase Bitcoin on one exchange, and then move on to another by connecting your cold wallet to another exchange.

The second advantage is that it is the most secure way to store crypto. Since you maintain physical possession of your crypto on the cold wallet, it’s not sitting on a crypto exchange or other platform, where it can be hacked. When the cold wallet medium is removed from your computer or smartphone, the crypto is inaccessible to potential thieves.

There are some disadvantages with cold wallets you need to be aware of:

• You’ll have to pay for a cold wallet, which could easily be a couple hundred dollars.

• Cold wallet contents aren’t as readily available for transactions. You’ll need to connect your wallet device to your computer or mobile device to access the crypto.

• If you lose your cold wallet, there’ll be no way to recover the crypto; it has been lost.

Choosing a digital wallet is one of the most important decisions you make if you want to invest in Bitcoin or any other cryptocurrency. Decide which wallet type will work best for the way you want to use your crypto and your own personal security needs.

How to Invest in Bitcoin Safely

There are two incredibly important realities to be aware of when investing in Bitcoin or any other cryptocurrency:

1. The whole crypto thing has only been around for about a dozen years and is evolving right before our eyes.

2. There is no FDIC or SIPC insurance to protect your investment if the platform you invest on fails or if you’re defrauded.

Those two realities make it mission-critical to emphasize safety when investing in cryptocurrency.

When you invest in Bitcoin, look to do the following:

• Only invest with money you can afford to lose. Neither Bitcoin nor any other cryptocurrency is guaranteed to have a positive return in the future.

• Don’t load your portfolio with crypto, thinking it can’t miss. It absolutely can!

• Stick with the bigger cryptos. Hundreds of cryptos come and go each year, and the latest “hot crypto” could be only weeks away from blowing up and disappearing.

• Invest with larger, better-established crypto exchanges. The industry is growing rapidly, and a lot of new competitors are springing up. Like so many of the cryptos themselves, those newer companies may not survive, taking all your money with them.

• Keep your private key and your wallet address code safe, and out of reach of anyone else.

• If you use a cold wallet, develop a strategy to keep it safe at all times. There’s no backup plan if it’s lost or stolen.

• Avoid initial coin offerings (ICOs). Those are the equivalent of stock IPOs, except they apply to new cryptos. There’s no way to know if the people behind them are legitimate.

• Avoid buying crypto from individuals. You won’t have any recourse if it turns out to be a fraud.

As is the case with all investing, you are your own best first line of defense. But that’s even more true with crypto since it’s unregulated.

Bitcoin Pros & Cons

Pros:

• The price of Bitcoin has exploded in just a few years, and there’s no indication that won’t continue.

• There’s no middleman, like a bank, collecting fees when you make transactions with merchants or individuals.

• There’s no government regulation limiting what you can do with your crypto (but don’t do anything illegal!).

• Investment options with Bitcoin have expanded with the popularity of the crypto. It’s now possible to earn high interest on your crypto balance.

• You can be either a buy-and-hold investor for the long term or play price movements as an active trader.

Cons:

• The price of Bitcoin is incredibly volatile. Buy at the wrong time and you could get burned big time.

• Unlike traditional investments, there’s no balance sheet, profit and loss, or marketing plan to analyze. Investing in crypto is definitely a high-wire act.

• Bitcoin is completely unregulated by any government agency or bank, which means you’re on your own if something goes wrong.

• There is no FDIC or SIPC insurance if the exchange where you hold your crypto fails.

Should I Invest in Bitcoin?

I’m enthusiastic about investing in Bitcoin because I am a crypto investor and it’s worked out very well for me. I plan to continue holding Bitcoin and other cryptos.

But that doesn’t mean I’m making a blanket recommendation that everyone should invest.

Cryptocurrency is still very much a speculation. At least up to this point, there’s nothing driving the price of Bitcoin, other than the anticipation that the price will keep going higher. It may, but it may not.

I think we are getting close to the point where most investors should hold at least a small amount of their portfolio in Bitcoin. It’s become a mainstream investment and investing even a few hundred dollars in it may improve the long-term performance of your portfolio.

Just don’t take my experience and opinion (or anyone else’s) as a signal to jump into crypto with both feet and a lot of money. This is one of those investments where either a small amount of money will grow into a large amount, or a large amount will collapse into a small heap.

Invest if you feel it’s right for you, but don’t invest any more than you can afford to lose.