logo academy

Bitcoin: the Ultimate Guide for Beginners

May 3, 2022
8 min
Bitcoin: the Ultimate Guide for Beginners
Beginner
You will learn

    It’s never too late to buy Bitcoin. If you’re here you’ve realised before everyone else that the financial future really is within anybody’s reach.

    In this Beginner’s Guide to Bitcoin, you’ll find strategies, methods and tactics for buying and selling Digital Gold.

    Bitcoin in a Nutshell

    Bitcoin is a digital currency created in 2009. Unlike traditional currencies, it was not issued by a government, it does not belong to anyone and is not managed by banks. This means that nobody can ‘turn it off’, just like the internet.

    Bitcoin is free. It is based on a piece of innovative technology, the blockchain, which allows it to be global. Anyone can buy, exchange or sell BTC.

    Thanks to “Digital Gold”, we are facing a real monetary revolution that has reached a decisive milestone in 2021.

    How much do I need to start?

    Just like the euro and the dollar, bitcoin is also divisible into decimals. This means that if you want to buy bitcoin but can’t afford 1 whole bitcoin, you can easily buy a part of it.

    This is an important difference from other markets. The cryptocurrency market allows you to start with small amounts, even as little as €20. This way you can start by practising, getting familiar with the charts and see how it goes.

    How much can I gain or lose with Bitcoin?

    When you take a trip to the United States, you need to exchange your euros for dollars. The same happens when you convert euros into bitcoins.

    Buying and selling cryptocurrency allows you to make money on the price fluctuation, under certain conditions.

    If you buy bitcoin and then its price goes up, you can sell it and make money on the price difference.

    So, if it starts to drop and you still want to sell it, you will lose the difference in price from the time of your first purchase.

    bitcoin price

    Beginner’s Guide to Bitcoin: Example

    I decide to buy €10 worth of Bitcoin and its price today is €10,000.

    Ciò significa che sto acquistando 10 €: 10.000 € = 0.001 bitcoin.

    What do I do now?

    Caso A . Il prezzo del bitcoin sale a 20.000 €.

    In this case I might decide to sell my 0.001 bitcoins.

    Since the value of bitcoin has increased, I will get a profit from the sale.

    In fact, 20,000 € * 0.001 bitcoin = 20€.

    From this transaction I am therefore getting +10 €.

    Case B. The price of bitcoin falls to 5,000 €.

    In this case if I decide to sell my 0.001 bitcoins, I will get a lower amount than I spent to buy them, thus making a loss.

    5,000 € * 0.001 bitcoins = 5 €.

    I spent 10€ and got 5€ in, so I lost 5€.

    Memo

    If the market has dropped, you can also choose not to sell your Bitcoins right away and wait to see if they rise in value again. This way you avoid selling at a loss as in Case B.

    Tactics and strategies

    Once you have bought bitcoin or any cryptocurrency there are two strategies you can adopt.

    1. Short-term strategy
    2. Long-term strategy
    bitcoin

    The short-term strategy is the one we saw in the previous example. One buys and sells according to the price trend in an attempt to make margins. Compared to the long-term strategy, it is riskier, because you may get your forecast wrong and make an unprofitable purchase in a short time.

    The most common long-term strategy is similar to the traditional Dollar Cost Averaging. You buy your bitcoins with the confidence that in five or ten years their value will grow. So, you may decide to buy new bitcoins every now and then to accumulate as many as possible over time.

    This kind of approach does not take into account price fluctuations in the short term but the result you might get in many years.

    Follow a Method

    The Investor’s Handbook helps you put your finances in order and adopt a method for managing your capital. If you want to start right away with a systematic and professional method, take an afternoon to study your financial situation and optimise your savings, calculate your cash flow and what your risk profile is.

    Where do I buy Bitcoin?

    The best place to buy bitcoin for the first time is on a crypto-exchange. Crypto exchanges work like currency exchanges and allow you to convert your euros into bitcoins. Young Platform is an example of this and offers a guide on how to buy bitcoin in 5 easy steps.

    Why is Bitcoin worth thousands of dollars? 

    The coronavirus pandemic triggered an economic crisis on an unprecedented scale. To tackle the effects of this economic crisis, the governments and central banks of the world’s major powers took drastic action.

    The aggressive monetary policies implemented have led to monetary inflation and because of it, the vast majority of citizens will have to pay the consequences in the coming years.

    To protect themselves against this inflation, a growing number of people identified Bitcoin as a solution. Among them, there are millionaires like Paul Tudor Jones or Stanley Druckenmiller.

    Following their example and that of many others, institutional investors have started to buy Bitcoin. Large corporations have also made this choice to protect their cash reserves. The most famous case is PayPal, which decided to accept payments in Bitcoin.

    The combination of all these factors has completely changed the mindset around Bitcoin within a few months. Bitcoin is increasingly perceived as a safe-haven asset and as a useful asset to protect savings from inflation. According to major newspapers and industry analysts, this trend could intensify as the purchasing power of the dollar continues to erode.

    bitcoin

    How is the Bitcoin Price Trend?

    Evaluating Bitcoin’s performance is a time-consuming and challenging task, but you just need to keep in mind three things to start out:

    1. Market fluctuations
    2. There are only 21 million bitcoins
    3. The value depends on who is buying, selling and using bitcoin

    Market Fluctuations

    The price of bitcoin rises and falls rapidly. Depending on how many bitcoins are bought or sold on the market, its price updates. This is something you can take advantage of. For example, buying when the price goes down and selling when the price goes up.

    There are only 21 million bitcoins

    The algorithm behind Bitcoin has been programmed to generate only a maximum of 21 million bitcoins. Most of these are already in circulation, namely 18 million. We are therefore close to the maximum amount.

    We can now draw the first conclusion: Bitcoin is a scarce commodity, scarcer than gold.

    Spoiler: institutional investors tend to buy with a long-term perspective. This could lead to a massive consolidation of bitcoin’s price and increased scarcity, because a large amount of currency could stay held in wallets.

    Dive deeper

    Why only 21 million bitcoins? Having a maximum number of bitcoins avoids the risk of excessive inflation. Every time a government prints new banknotes and increases the money in circulation, people become poorer as their money loses value. Bitcoin, like gold, is a limited resource: this means that once this figure is reached, there will be no new Bitcoins. Due to this limit, the value of Bitcoin will only depend on the market.

    The value depends on who is buying, selling and using bitcoin

    The price of bitcoin depends on the law of supply and demand, i.e. how many people are willing to buy it and how many are willing to sell it.

    In November 2021, it peaked at over $68,700. These figures allow us to make a simple observation: right now only 1.2% of the world’s population buys and sells bitcoin. How will the price rise if mass adoption is realised?

    Related