The chances are that you have already heard of bitcoin and the concept of cryptocurrencies. Well, that is because digital currencies have lately been in the spotlight more than usual.
The value of bitcoin has spiked from just under $1000 to more than $10,000 this year alone. That is 1000% in less than a year. Adequate people have made substantial returns through this coin that investment groups are taking notice.
For example, CME, the biggest futures and options trading group have launched Bitcoin futures with the aim of opening an exchange-traded fund (ETF), a form of investment where you can buy and sell on the same share market, just like a company.
However, as of now, individuals are on their own when it comes to investing in Bitcoin. So how do you get started?
Here are a few things to bear in mind before you dive in:
Bitcoin Is Very Volatile
Back in the year 2014, the Federal Bureau of Investigation attacked silk road, a deep web marketplace that allowed people to purchase drugs and other illegal things using bitcoins. After it was shut down, the value of bitcoin suddenly reduced. Also, in 2013, Mt Gox briefly stopped deposits and bitcoin fell more than 20 percent
On the contrary, positive moves lead to huge changes as well. The futures and options trading group announcement alone about its plan for Bitcoin futures saw the value of the coin rise above its price point then.
Another thing to keep in mind is that a currency is only as good as the place that accepts it. So, if all stores agree that they do not accept bitcoin payments, then its value will fall.
The bottom line here is that you should not invest on Bitcoin with money that you cannot afford to lose.
So, How Do You Purchase Bitcoin
The easiest way to get bitcoin is by purchasing individual coins through an online exchange. Some of the most popular exchanges are Coinbase, Bitfinex, Gemini, and Coinjar. They all follow a similar process.
The first thing is to sign up for an account, which may require some form of verification. Next is to connect a bank account or debit card to start buying the coin. The rest is a matter of transferring money from your bank account to the exchange and purchasing as many coins as you wish.
I would, however, advise you to be cautious when choosing an exchange. Most of them are reputable, but you won’t lack a scammer out there. Also, exchanges without strong security measures are vulnerable to hacks.
Store Your Bitcoins Somewhere Else
You can store your bitcoins in an exchange, but I would highly advise against it. All exchanges are susceptible to hacking, and you will have no one to blame if you become a victim.
So, what is the solution?
Well, get a bitcoin wallet. A wallet is an encrypted address that allows you to keep your coins in one place. There are several types though:
These allow you to store your coins secured with account credentials. They are perhaps the simplest to use but remember they are also based online. Online wallets have been known to be victims of hacks before, so be careful here.
These are downloadable and even let you keep your bitcoins on a USB stick. Some call this cold storage. Offline wallets are excellent for those who want to ensure that their bitcoins are on their computer, and that alone. However, keep in mind that offline gadgets can spoil, leaving you with no bitcoins.
The best solution comes down to how much risk you are willing to take. However, I would again advise you to avoid keeping bitcoins in an exchange.
How To Sell Bitcoin
Well, it’s simply reversing the process. Send your coins from your wallet to the exchange and then change them into the currency you want.
Most exchanges, however, put a limit to how much you are allowed to transfer, usually $2000 or $3000 a day. So, if you made a wise investment and made millions, you will either have to cash out across various exchanges or do it over a longer period in a single exchange.