In 2009, Satoshi Nakamoto launched bitcoin, the world’s first fully decentralized cryptographic financial network. After bitcoin first launched, people who invested even just minuscule amounts saw their investments skyrocket. For instance, one Norwegian’s $27 investment turned into $886,000 after just four years.
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Even with fairy tail stories like these, the idea of investing in cryptocurrency was once a laughable one, especially just a few years ago. In 2013, the price went from an all-time high to just half its value by mid-2015.
However, the price of bitcoin is again at an all-time high and investors are looking favorably upon it once again. As of December 2017, bitcoin reached a record high of over $17,000!
Various economic factors have contributed to bitcoin’s appreciation in value. These include tightening capital controls and financial regulations throughout the world, including in Venezuela and China. These countries have “strict cash outflow regulations,” and bitcoin’s lack of regulation allows people to get around these rules.
Bitcoin has also continued to gain traction as more institutions are accepting payment with bitcoin in the physical world. You can now easily buy appliances, furniture, pizza, or book a hotel and rental car through major retailers.
Because bitcoin is completely digitized, many people are still unaware of just how to purchase bitcoin. Here’s our step-by-step guide on how to buy bitcoins:
1. Tell your bank you’re about to buy bitcoins
Some banks may put your account on hold for suspicious activity. Buying bitcoins can one such activity that flags your bank, at least according to one reporter for Business Insider whose credit card got declined after buying bitcoins.
2. Download an app
Using an app like Coinbase is convenient, as we are frequently managing life off our phones these days. However, if you hate operating off tiny screens, Coinbase also allows you to access your account through a desktop.
When choosing any app or trade platform, make sure it is reputable. The biggest factors are:
- Security. To buy bitcoin, you’ll be providing the trading platform with your financial information, including your credit card and/or bank account information. You’ll therefore want to ask yourself how well does the app or trade platform protect your information? Does the app store your digital currency offline?
- Insurance. Questions to answer include: Is the app or trade platform insured by the FDIC? By up to how much insurance does it offer to each customer? (Coinbase insures each customer up to $250,000).
- Fees. Some trading platforms charge high fees for credit card transactions (e.g., 5% per transaction).
Of all the apps, Coinbase is the most popular and recently even became the most downloaded app on the Apple App Store.
3. Provide your bank account and/or your credit card information
You will need to provide this information and verify your account(s) before being able to buy, sell, or trade.
4. Check the prices
A good app or trading platform will show you the current price over a certain period of time, as well as fluctuation trends. Once you decide to buy bitcoin, you’ll be notified of the exact purchase price.
5. Buy, sell, and trade all through your app
You can buy bitcoins and sell with either a bank account, credit card, or debit card. When selling, credit card and debit card transactions are instant whereas bank account transactions might take a few days.
Once you buy bitcoin, you can transfer it to friends, use it to make purchases, or invest it. Examples of major retailers that accept bitcoin include:
The last one, PizzaForCoins, is pretty genius. It allows you to pay that company in bitcoin, and that company will go ahead and order a pizza from you at a restaurant nearby (e.g., Dominos).
6. Keep yourself updated about economic trends
In the past, the price of bitcoin was extremely volatile. While the price is over $17,000 now, the price of one bitcoin was at times fallen by 50%. It’s therefore important to protect your investment by remaining updated on the latest market trends.
Moving into 2018, experts predict bitcoin is likely to appreciate in value by up to four times, and could “easily” reach $40,000 by the end of next year. But don’t just rely on their word for it. Continue to check for major economic trends, like the appreciation of the US Dollar and tightening of capital controls throughout the world.
Finally, keep in mind that at the end of the day you’re really just speculating – essentially gambling your money on the hopes that when you buy bitcoin today, tomorrow someone will buy it from you for a higher price. Cryptocurrency technology may have value, but bitcoin inherently does not. If you’re a value investor, it might be wiser stick to your circle of competence, make sure that you protect your principal at all costs, and just don’t get caught up in the hype.
On the other hand, it’s hard to see exactly what might pop this bitcoin bubble – if anything. So if you are going to buy bitcoin I suggest that you follow the steps in our how-to guide above, don’t put too much of your hard-earned money at risk, stay on top of the news, and – above all – have some fun with it!
Article by Vintage Value Investing