How to Buy This Hot Digital Cryptocurrency
Bitcoin, Bitcoin, Bitcoin. You hear all about it and how it’s racing to the moon in the Bitcoin price. But nowhere do they really explain how to buy Bitcoin and make that money yourself. This article will go into detail about the multiple ways you can own Bitcoin and make money in this new and exciting currency.
If you don’t know anything about Bitcoin then we suggest you check out our ultimate guide on what is Bitcoin here. After that, you can then look into getting your hands on Bitcoin yourself. Bitcoin is a pure digital cryptocurrency that has no backing from a government or bank to conduct transactions. It was designed to be totally open-sourced yet very secure for transactions. And its rocketing. In 2017 alone 1 Bitcoin was worth under $1,000 USD in the beginning of the year and now has skyrocketed to almost $3,000 a Bitcoin. This huge upspring has caught the attention of everyone from the media to large banks and to the individual investor.
So without much further ado lets go into the different ways you can buy Bitcoin today.
Table of Contents
|3.||Bitcoin Exchange [UPDATED 12.2017]|
Buy Bitcoin Directly by Using a Wallet
You can buy Bitcoin directly by using a Wallet. A wallet is what it sounds but it’s a digital version of a traditional wallet. Wallets can come in different types depending on your needs. Some wallets are for instance only device specific, some are web-based and some are app-based. It’s important when you choose the Wallet which we will explain in a second.
The most popular and well-known Wallet for Bitcoin is Coinbase. They been around early on with Bitcoin and allow customers to log to their site and create an account that will be their wallet. Their account will be linked to a physical bank account or a credit card. The process is intense since Coinbase does want to prevent fraud or the use of fraud with their accounts and wallets. They actually will ask for personal ID to be submitted so they can record and match all the information on your submitted credit cards and bank accounts. Since historically in the past Wallets have been hacked into and owners have lost their Bitcoins, its better to caution on the side of security. Remember Bitcoins are not backed by an institution – so unlike your local bank, a loss of Bitcoins is not covered by the FDIC. But if you want a wallet to buy Bitcoins – you will need to go thru this venting process.
Once your Coinbase account is activated you can buy Bitcoins! First Coinbase will show you the current Bitcoin price in US dollars. When you purchase a Bitcoin, funds will be withdrawn from your linked funding account – would it be a credit card or bank. NOTE: if when you buy a Bitcoin on Coinbase or transfer money to your Wallet when done with your bank, it will take a few days for the funds to be properly moved from the bank to Coinbase. So when buying a Bitcoin at a certain price, you will not have the authority to sell it until the funds are fully vested into your account.
Business Insider has this simple post on steps to use Coinbase and buy Bitcoins. Take a look here.
Now we will talk about why it’s important to choose your Wallet. Security is vital in the keeping your Bitcoins safe. Reuters had a report last year that basically stated that 1/3 of all Bitcoin Exchanges have been breached and some Bitcoins have been stolen. So keeping your Wallet secure is very important. Wallets must be encrypted when doing any transactions and its done with a password. You need to remember your password physically on a piece of paper. Again there is no backing with Bitcoin – no customer service to retrieve your password on your wallets. If you forget it, then you may lose your Bitcoins. Many wallets like Coinbase do offer two-factor authentication before any transactions can be done. And if your Wallet is on your Smartphone then it may be easy to use but if you lose your Smartphone or get a new one, you will need your password to activate the wallet on the new device. Bitcoin.org even recommends to write down your password and store it somewhere safe.
One of the most popular investment products around is an ETF. ETF stands for Exchange Traded Fund, which is a traded fund that follows specific indexes or benchmarks. So if you want to trade in retail but don’t want to buy a specific stock, you can buy the ETF that covers the whole retail sector. So how to buy Bitcoin with an ETF? There’s an ETF to cover everything including now Bitcoin. Meet the Bitcoin Investment Trust (NASDAQOTH:GBTC). This allows an individual investor to now buys a ticker symbol on their own brokerage account. The way this ETF works is that each share represents 1/10 of 1 whole Bitcoin. But there are fees involved and if you do the calculations you are paying 5% more than the value of the underlying 1 Bitcoin for using this ETF. Remember not all ETFs are the same and some are purely created to make money for the makers of the ETF to pocket money on the fees. This current Bitcoin ETF may fit that profile
Fortunately more and more ETF or Bitcoin Funds are one their way and some will offer better value then the current Bitcoin Investment Trust.
If you currently do online trading or day trading then this option may resonate with you. There are many Bitcoin Exchanges available to actively trade Bitcoins. What is a Bitcoin Exchange you ask? A Bitcoin exchange is a marketplace that handles active trading of Bitcoins in government currencies or other cryptocurrencies like Litecoin. The exchange will operate similarly like to a brokerage exchange where you can place in ‘buy’ and ‘sell’ orders at specific price points in Bitcoin. They allow the trading of Bitcoins to a match a currency – for example Bitcoin to the US dollar (also known as BTC USD).
Some of the most well-known exchanges are MtGox and Kraken. To learn the full range of exchanges available today please check out Bitcoin exchange listing site.
These Bitcoin Exchanges are made for the professional type of Bitcoin trader who wants the order types (buy order, sell order) that is needed for short or long term profit trading via Bitcoin. Definitely, it works better than an individual has some experience and knowledge of stock trading before they actively use a Bitcoin exchange for Bitcoin purchases. These Bitcoin exchanges will have margin trading based on account value, allow stop-losses on trades and short ordering as well. A wallet like Coinbase does not offer these features and are strictly made to buy and store your Bitcoins.
If you want to know more about a particular Bitcoin exchange we recommend Kraken. They have built a solid reputation and is built on Silicon Valley know-how. Check Kraken out here.
Bitcoin Related Stocks
So maybe you’re not interested in creating a wallet with Coinbase. And you think that Bitcoin ETF is a rip-off. And you’re not really ready to do a Bitcoin exchange. What can you do? You can buy Bitcoin indirectly on the stock market. Certain stocks have appreciated greatly in 2017 and part of it is due to their close association with Bitcoin. The stocks we are talking about are the semiconductor companies: NVIDIA, AMD, Micron Technology. Their stocks relatively are NVDA, AMD and MU.
The semiconductor stocks have been on a tear and that’s because to mine Bitcoin you need serious computing power. The best chips for ‘Bitcoin mining’ machines are coming from these companies. It all makes sense. Back in the day, NVIDIA was best known for making chips for Playstations, Xbox’s and other serious gaming systems. They needed serious chip power for the graphics. Now the semiconductors are realizing that their chips can help Bitcoin miners computer faster and mine more Bitcoins. Look at the chart below on NVDA:
Since the beginning of 2016, NVIDIA went from $33 a share to $162 in July of 2017. Not too shabby.
In addition, there are blockchain technology companies that are also getting attention due to their technology association with Bitcoin. These stocks are RIOT and GROW.
Other stocks that are also getting more attention due to their use of Bitcoin as payment is Overstock (OSTK) and Square (SQ). Both of these stocks have confirmed using Bitcoin as payment options.
WRAP UP: How to Buy Bitcoins Answered
We hope this article has given some options for you to get involved with Bitcoin. While there’s a lot of hype about Bitcoin in the press, media and water coolers its still very early for this currency. There’s tons of room to go up in this currency and the whole cryptocurrency sector in general, so find the best vehicle for yourself to buy Bitcoin and enjoy the ride.