Investing in regular currency and investing in cryptocurrency (Bitcoin) are two different things entirely. The former is quite simple while the latter is different as it has not been fully accepted by the general public. A lot of persons do not also know how to even invest in Bitcoin. However, it is no news that cryptocurrency is the latest form of exchange and undoubtedly the new currency that has better financial advantages.
On a general note, cryptocurrency has good trading medium and exchange rate, which accounts for its popularity.
Bitcoin is a digital currency and payment system created by a software developer named Satoshi Nakamoto. Over the last few years, Bitcoin has recently attracted lots of attention to itself in the financial world. With this widespread attention, the process of investing in Bitcoin is easier than ever before. However, it is important to note that Bitcoin isn’t an ordinary investment (like, for instance, stock). It is an extremely unstable commodity, so don’t buy until you understand the risks.
Buying and Selling Bitcoin
Create a Bitcoin wallet
Recently, buying and selling Bitcoin is easier for beginners than ever. First, you will have to sign up for something called a Bitcoin wallet. As the name implies, your wallet is a digital account that makes it easy and convenient to buy, store, and sell your Bitcoin. In other words, it is like a universal Bitcoin checking account. Unlike a checking account, however, starting a Bitcoin wallet takes less than a minute. It can be done online, and is quite easy. To create your first wallet, there are few user-friendly, reliable and reputable sites like Coinbase.com, Blockchain.info and Hivewallet.com. They are quite easy for beginners.
Link your bank account to your wallet
After creating your wallet, you can fill it in with Bitcoin. Typically, to do this, you will have to give the financial details for your real bank account just like you would if you were setting up a Payoneer account or signing up for another online payment service. Usually, you will need at least your bank account number, the routing number for the account, and your full name as it appears on the account. You can also find these on your online banking account or on your paper checks.
- Note that you may also be asked to provide contact information, like a phone number.
- Linking your bank account to your Bitcoin wallet does not pose as a risk to your personal security. Virtually all reputable cryptocurrency services always advertise their high standards for security and encryption.
- It is also possible to use your credit card to buy Bitcoin instead of your bank account.
Buy Bitcoin with money from your bank account
After supplying your bank information and you have completed the verification process, then it is quite easy to start buying Bitcoin and adding it to your wallet. On your wallet page, there is an option labeled “Buy bitcoin” or something similar, click it. You will be taken directly through the transaction process, which will use money from your bank account to buy Bitcoin.
Also, note that the price of Bitcoin can (and does) change from day to day — sometimes significantly. Because it is quite a new form of currency, its market is yet to become stable. The current dollar-to-Bitcoin exchange rate is clearly listed when you buy it. As of October 2014, 1 BTC was equal to about $350.
Use your Bitcoin to buy from retailers that accept it.
An increasing number of businesses now accept Bitcoin as a valid form of payment. Though these businesses still represent a minority, some major names have already made the transition. Below is just a short list of online vendors that accept Bitcoin:
- Victoria’s Secret
- Whole Foods
If you are market-savvy, you can also create value for yourself. By buying Bitcoin when the price is low, then purchase goods when the value of Bitcoin is high to get a favorable deal on the goods. You can then sell these goods to make a profit or simply keep them if you want.
Sell your Bitcoin to another user
It is quite unfortunate that selling Bitcoin is not as easy as buying it. There is no easy way to “cash out” your Bitcoins and receive money in your bank account. Instead, you must find a buyer who is willing to pay for them with money (or good/services). In general, one of the easiest ways is to sign up with an online Bitcoin marketplace. Once you find a buyer, you will complete the transaction through the website or will otherwise deal directly with him or her. To use this method, you will have to register a seller account and verify your identity in a process separate from the one used to create your wallet.
- In the US, CoinCola, CoinBase and LocalBitcoins are three websites that offer this sort of selling service. In the UK, BitBargain and Bittylicious are two reputable options.
- Also, some sites like Purse.io allow sellers to give Bitcoin to buyers who then use their own money to purchase goods online and send them to the seller — in essence, it is like a cycle.
Sell your Bitcoin on an exchange
Another option for sellers especially beginners is to use an exchange means. These sites work by pairing sellers with prospective buyers. Once a seller is found, the website acts as a sort of intermediary or middleman to the money until both parties are verified and the transaction is completed. Usually, there is a minor fee associated with this service. Selling with this method is not a direct process. In some cases, users complain that exchange services can take a long time to complete transactions compared to other options.
- Some reputable, well-known exchanges include Circle, Kraken, and Virtex.
- In addition, some exchange sites like Binance, Bitfinex and Bitcoinshop allow you to trade Bitcoin for other digital currencies (like Dogecoin, Ethereum, Litecoin and Monero).
Consider setting up a regular purchase scheme.
If you are serious about investing in Bitcoin, you should keep aside a small portion of each paycheck towards buying the virtual currency — this is a great way to amass lots of Bitcoin over time without any major one-time expenses. Many crypto wallet sites (like Coinbase) offer the option to set up regular withdrawals for the purpose of buying Bitcoin. This generally works almost like regular withdrawals for a 401k. All you have to do is specify a certain amount of money, and this money is withdrawn from your account at regular intervals and used to buy Bitcoin automatically.
Consider buying Bitcoin locally
If you like to keep your money in the local community, consider using a service that allows you sell to people near you. Rather than pairing you with anonymous online buyers from anywhere in the world, certain sites give you the option of looking for sellers in your local area. If you choose to meet with these sellers in person, observe all of the normal precautions you would for meeting someone you met online. Meet in a public location in the daytime and, if possible, do not show up at the venue alone.
- Localbitcoins.com is one of the most prominent local bitcoin marketplaces online. The site allows you to search for buyers in over 6,000 cities and 200 countries, including the US
Consider “mining” Bitcoin
New Bitcoins are created through a complicated computing process called “mining.” When mining, your computer competes with other users’ computers to solve complex problems. When your computer solves the problem first, you are awarded Bitcoin. The supposed benefits of mining include the fact that you are essentially “making” Bitcoin for yourself without using any of your real-world money. However, in practice, upholding a competitive status as a miner can involve quality investments in specialized hardware.
- Know that the entire mining process is a complicated one. You need to study through and ask questions.
- In addition, it is necessary to understand that because it is awarded in “blocks” of multiple Bitcoin at once. It is usually in your best interest to join an established “pool” of miners. That way, you can work together towards solving the block and share the rewards. Doing it alone can make you very uncompetitive as a miner. You may go a year or more without making a single Bitcoin. Identify yourself with already existing miners and grow from there.
Making Money on Your Investment
Buy low, sell high
The strategy for buying and selling Bitcoin is not so different from buying and selling stocks or commodities in the real world. However, the money-making proposition is buying the crypto when the dollar exchange rate is low and selling it when the exchange rate is high. Unfortunately, the crypto market is so volatile. Hence, it can be extremely difficult to predict when the price will rise or fall. So any Bitcoin investment is inherently risky.
- As an example of the market’s volatility, in October 2013, the price was hovering around $120-$125 per Bitcoin. Within a month and a half, the price had shot up almost tenfold to nearly $1,000 per Bitcoin. A year later, the price was a third of its peak value at about $350. It is however unknown when the next price spike will occur (if it will ever).
Stay up-to-date on Bitcoin market trends
As earlier said, it is impossible to predict which way the Bitcoin market will go with certainty. However, your best hope for making money off of a Bitcoin investment is probably to monitor trends in the marketplace frequently. Follow the market trends intentionally to know what’s going on. Because the marketplace can fluctuate, money-making opportunities like spikes in the exchange rate can appear and disappear in a matter of days. So keep a close eye on the exchange rate for your best chance at success. Unlike other investments, you have to follow this one up. If not, the chances of you not making anything reasonable is high.
- You can also become a member of Bitcoin discussion forums (like, for instance, the forums at Bitcointalk.org). So that you can communicate with other investors about market predictions. Keep in mind, however, that no investors, no matter their expertise, can predict the Bitcoin market with certainty.
Use Bitcoin wealth to purchase more stable investments
One way to maintain stability in your crypto wealth is to use it to buy more stable investments, like stocks. Certain sites will allow you to do this — for instance, Coinabul.com allows you to purchase gold with Bitcoin. You can even sell your Bitcoin and use the money to invest in the stock market or in bonds. While a conservative stock portfolio generally offers the best potential for a stable and moderate growth. Most financial experts agree that even relatively risky stocks generally have a lower capacity for fluctuation than the Bitcoin market.
Put as much money as you can lose
Any sort of investment is risky. It is best to think of the money you put into. In other words, if you profit, great, but if you lose it, you won’t be financially ruined. Don’t put more money than you can’t reasonably survive without. It can vanish in the blink of an eye (and have done so in the past). So the consequences for gambling too much money can be dire.
- Don’t buy the idea that you are “too deep” into an investment to pull out. Missing a price spike and selling at a slight loss is better than waiting and selling at a large loss.
- If you’re lucky, you may live near a BTM — a special type of machine that works like an ATM. It allows you to buy Bitcoins in person.
- Also, note that the price of Bitcoins varies from one country to another. If you are willing to take the risk. You can make money by buying Bitcoin cheap in one country and selling it high in another. Though, of course, it’s possible to lose money doing this if the market changes.
- If you want to maintain your anonymity, consider buying Bitcoins by mail using a service like BitBrothers LLC. For a fee, these services will buy Bitcoin for you without having you log in online.
In conclusion, investments are the only way you won’t go broke. Learn to invest, both with the regular currency and cryptocurrencies. That way, you will have multiple streams of income with ease. Get your facts right and be smart while investing.
Also read: Investments-the-reason-you-wont-go-broke