As Facebook positions itself to launch a digital currency and .U.S. Senators are admitting Bitcoin is the real deal, more and more people are wondering how to invest in Bitcoin. In this post, I’m going to explain to you how you can go about investing in Bitcoin and why you should do it. Some of the reasons for this are obvious in others not so much. But, by the time you’re done reading this, you will at least be excited about the prospect of taking a chance and finally diving into the dynamic, exciting and revolutionary world of cryptocurrencies.
Why Invest in Bitcoin After All?
Even if you don’t know much about Bitcoin, cryptocurrency or blockchain technology, you probably at least remember friends and family talking about it around Christmas time in 2017. That’s because the price of Bitcoin reached its all-time high of over $18,000 USD during that month. Even though the hoopla stays at a fever pitch whenever Bitcoins price spikes, odds are you, your friends and family don’t know why Bitcoin is so valuable.
Allow me to explain.
What is Bitcoin?
Bitcoin is a decentralized peer-to-peer payment system. It allows users to exchange value without the need for a central authority. This means no individual or corporation makes the rules. It also means that nobody is taking a cut of the transaction just for guaranteeing its validity. Bitcoin is a digital currency in the average person’s mind, but what it really is a computer program built on top of a decentralized database that nobody can hack or manipulate. That decentralized database is known as a blockchain, and blockchain technology can be used to store a wide range of data, not just that related to financial transactions. In fact, companies like IBM use blockchain technology to store data related to the management of their supply chains, yet IBM is not invested in Bitcoin.
What adds to the mystique and excitement surrounding Bitcoin is the fact that its inventor is an anonymous person or group of people that goes by the name Satoshi Nakamoto. To this day, nobody knows who Nakamoto is. One of the reasons he/they remain anonymous because Bitcoin has the potential to overthrow a central banking fractional reserve system that is hundreds of years old and places the power of currency in the hands of very few.
Bitcoin’s aim therefore is not only to take power away from central banks and the Federal Reserve banking system, its goal is to put the wealth back in the hands of the individual using technology to facilitate democracy.
Bitcoin is Here to Stay
Bitcoin’s technical whitepaper is now 11 years old. At its inception, the earliest adopters were preaching about the value of it. Today, even United States Senators are admitting that nobody can stop Bitcoin. In fact, July 2019 saw multiple hearings take place where several notable House representatives admitted Bitcoin can’t be stopped. The irony surrounding these admissions is that these representatives need Facebook (a large private company governed by a central authority insisting on creating its own cryptocurrency in the name of corporate profit), to truly shine a light not only on how valuable it genuinely decentralized public ledger is, but also on how dangerous it is to let a central authority covered the exchange of currency.
So how is it that Bitcoin is able to facilitate transactions without a central authority like the government or Facebook? Well, the Bitcoin network validates transactions on a public ledger for everyone to see uses the computing power of individuals to keep the network itself secure. In exchange for validating transactions, users receive Bitcoin for their efforts.
Investing In Bitcoin for the First Time
Now that you have a basic understanding of how Bitcoin works, perhaps you’re ready to make your first investment. There are several ways you can do this:
- Exchange money for Bitcoin in person
- A Bitcoin ATM machine
- Use a Cryptocurrency exchange
- Use your bank account
Each of these methods will take care of you whether you’re just looking to dip your toe in the water and join the excitement or you’re considering making a substantial investment. If you’re looking to make bitcoin part of your retirement portfolio, don’t fret, we’ll get to that in a little bit. For now let’s dive deeper into your shorter-term options.
Acquire Bitcoin in Person
LocalBitcoins.com is a website where you can buy and sell bitcoin in person. That’s the purest way to exchange value on a peer-to-peer network. The main benefit to transacting in person is that you’ll keep your name “off the grid” so to speak. No need to complete Know Your Client verification. You simply log onto the website and search for the buy or sell rates you deem favourable. Then connect with the user offering the exchange by sending them a message. Meet with them in person and trade your cash for bitcoins or vice versa. The main disadvantage to this approach is that you don’t know who you’re meeting in person. Also if you’re making a large transaction, you’re taking on a bigger risk if something goes wrong.
Use a Bitcoin ATM machine
Bitcoin ATM machines look like more compact versions regular cash ATM machines. They are more compact because the machine doesn’t have to hold nearly as much paper money. Download a Bitcoin wallet onto your phone and feed money into the ATM machine. Choose the option to receive bitcoin on your wallet app of choice and let the machines scan the QR code. After scanning, the machine will send you Bitcoin. You’re on your way!
Using a Bitcoin ATM machine is a great option if you want to acquire it instantly. The downside is that you’ll probably get your Bitcoin at a worse exchange rate because of the convenience factor.
Use a Cryptocurrency Exchange
Cryptocurrency exchanges are for you if you want to consider dabbling into digital currency is not named Bitcoin. Coinbase.com runs one of the most popular exchanges called GDAX (Global Digital Asset Exchange). The reason why it’s so popular is not so much because of the exchange platform, but because Coinbase allows you to buy Cryptocurrency instantly with your credit card. Just like using an ATM machine, using your credit card at coin base will cost you an extra convenience fee. Unfortunately you’ll pay those fees anywhere so you really can’t avoid it. You’ll also have to turn over identification to Coinbase meaning that if a government tax agency ever asks for information about your transactions, Coinbase will likely be legally obligated to handed over.
Using Your Bank Account to Buy Bitcoin
If using a credit card to buy Bitcoin is not an option for you, many exchanges will allow you to register your bank account and complete a direct debit transaction. This is usually necessary if you’re looking to purchase cryptocurrency in large amounts exceeding thousands of dollars. It may also be necessary if your credit card issuer blocks you from using websites like Coinbase. The positive in using this approach is that you can make purchases in large amounts but the downside is usually have to wait several business days to get your hands on your crypto. Again, you also likely need to provide things like your full name, address and banking information to a third party which is always a risk.
Investing in a Bitcoin IRA
Now that Bitcoin is gaining traction with politicians, institutional investment firms, and the world’s largest tech companies, considering a Bitcoin investment for your retirement account is certainly a feasible option.
Several investment companies now offer you the opportunity to invest in Bitcoin within an IRA or 401k retirement plan. If you’re serious about investing digital currencies as a way to secure your nest egg in time for your golden years, working with an IRA provider is your best bet for several reasons.
Firstly, investing in cryptocurrency involves a high degree of risk. You need to work with an IRA company that has a proven track record of success and that does things aboveboard. Remember, if you talking about investment retirement accounts, you’re talking about accounts that are registered with the government. Doing a cash transaction in person to keep your name off the map is out of the question you. Investing in retirement means trying to save up enough money so that you can enjoy decades of your life without ever having to go back to work.
The second thing you must consider is that retirement investing means taking advantage of tax shelters and being keenly aware of tax regulations relating to your choices. Choosing a solid IRA firm means steering clear of potential issues with the Internal Revenue Service. Regal Wallet, BitcoinIRA and BitIRA are three of the best options to consider that are proving they can satisfy customers time and time again.
Other Ways to Keep Bitcoin Secure
The overwhelming majority of cryptocurrency investors are young millennials. If you fit into that group, you’re probably not thinking about retirement. That’s okay. However, you still need to think about keeping your investment in Bitcoin and other digital currencies secure.
Here’s the thing about buying into digital assets that are not under the control of any central authority. There’s no hotline to call if your Bitcoin gets stolen. This means you’ll need to keep your assets offline, away from potential hackers.
There are two key ways you can do this.
The first way is to use a hardware wallet. A hardware wallet is basically a USB key that stores your cryptocurrency. When you’re ready to send or receive a digital, you plug you key into your computer. You then download a free software that enables you to interact with the key on your computer. From there you can send and receive cryptocurrency as you wish.
Hardware Wallets for Bitcoin
Your hardware wallet is secured by a 12 or 24-word password that you shouldn’t share with anyone. It protects your private keys. A private key is really a string of characters that assigns a transaction and the appropriate corresponding crypto value to your wallet. If you share your password with anyone including a major exchange, the entity in possession of your information can steal your cryptocurrency. That’s why they say if you don’t own your private keys, you don’t really own your coins.
Two companies stand above the rest when it comes to investing in a hardware wallet. Ledger Nano S and Trezor. Both will cost you a few hundred dollars. It’s worth investing in if you’re spending thousands of dollars to get into crypto or if you plan on consistently day trading. Either way, you should leave your cryptocurrency online for very long. There is no bank you can complain to of something goes wrong. In the cryptocurrency world you are the bank!
How to Invest in Other Cryptocurrencies
If you already know about digital gold, maybe you’re looking to purchase other cryptocurrencies and expand your horizons. If that’s the case, Binance.com is the best option for getting access to the market. Binance hails from China, but don’t let that scare you. The website is by far the largest player in the cryptocurrency space. You can get access to hundreds of different trading pairs that will allow you to get into alternative coins.
Before you invest, keep in mind that trading your own assets involves a high degree of risk, whether it’s digital currency, real estate, or traditional stocks. Cryptocurrency exchanges use the same order types as a stock trading platform would and use currency pairs much like a foreign exchange market. Digital assets themselves represent a departure from the traditional, old-school financial system. Yet ironically, even the Cryptocurrency world still uses much of the same language when it comes to making trades and trying to earn a profit. If you’re new to trading it’s best to start in small amounts and learn about the different order types until you get comfortable with what you’re doing. Paper trading might be a good start.
Now that you know a little bit more about how to invest in Bitcoin, it’s up to you to take action. Remember that in the world of digital banking, you are the institution, the banker and the customer. Take care of your personal information and do everything possible to protect your digital assets. Keep a long-term view of things even if you have short-term goals.
Get excited, because you’re officially becoming a part of a revolution!
As time goes on, you’ll see the price of bitcoin continue to rise. 2019 is being good to investors so far. There’s no reason that it won’t continue. Especially given how people like you are starting to open their eyes to the amazing potential of digital currencies.