The Essential Guide On How To Buy Bitcoins

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.

Summary

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



About the Author

VintageValueinvesting
Ben Graham, the father of value investing, wasn’t born in this century. Nor was he born in the last century. Benjamin Graham – born Benjamin Grossbaum – was born in London, England in 1894. He published the value investing bible Security Analysis in 1934, which was followed by the value investing New Testament The Intelligent Investor in 1949. Warren Buffett, the value investing messiah and Graham’s most famous and successful disciple, was born in 1930 and attended Graham’s classes at Columbia in 1950-51. And the not-so-prodigal son Charlie Munger even has Warren beat by six years – he was born in 1924. I’m not trying to give a history lesson here, but I find these dates very interesting. Value investing is an old strategy. It’s been around for a long time, long before the Capital Asset Pricing Model, long before the Black-Scholes Model, long before CLO’s, long before the founders of today’s hottest high-tech IPOs were even born. And yet people have very short term memories. Once a bull market gets some legs in it, the quest to get “the most money as quickly as possible” causes prices to get bid up. Human nature kicks in and dollar signs start appearing in people’s eyes. New methodologies are touted and fundamental principles are left in the rear view mirror. “Today is always the dawning of a new age. Things are different than they were yesterday. The world is changing and we must adapt.” Yes, all very true statements but the new and “fool-proof” methods and strategies and overleveraging and excess risk-taking only work when the economic environmental conditions allow them to work. Using the latest “fool-proof” investment strategy is like running around a thunderstorm with a lightning rod in your hand: if you’re unharmed after a while then it might seem like you’ve developed a method to avoid getting struck by lightning – but sooner or later you will get hit. And yet value investors are for the most part immune to the thunder and lightning. This isn’t at all to say that value investors never lose money, go bust, or suffer during recessions. However, by sticking to fundamentals and avoiding excessive risk-taking (i.e. dumb decisions), the collective value investor class seems to have much fewer examples of the spectacular crash-and-burn cases that often are found with investors’ who employ different strategies. As a result, value investors have historically outperformed other types of investors over the long term. And there is plenty of empirical evidence to back this up. Check this and this and this and this out. In fact, since 1926 value stocks have outperformed growth stocks by an average of four percentage points annually, according to the authoritative index compiled by finance professors Eugene Fama of the University of Chicago and Kenneth French of Dartmouth College. So, the value investing philosophy has endured for over 80 years and is the most consistently successful strategy that can be applied. And while hot stocks, over-leveraged portfolios, and the newest complicated financial strategies will come and go, making many wishful investors rich very quick and poor even quicker, value investing will quietly continue to help its adherents fatten their wallets. It will always endure and will always remain classically in fashion. In other words, value investing is vintage. Which explains half of this website’s name. As for the value part? The intention of this site is to explain, discuss, ask, learn, teach, and debate those topics and questions that I’ve always been most interested in, and hopefully that you’re most curious about, too. This includes: What is value investing? Value investing strategies Stock picks Company reviews Basic financial concepts Investor profiles Investment ideas Current events Economics Behavioral finance And, ultimately, ways to become a better investor I want to note the importance of the way I use value here. It’s not the simplistic definition of “low P/E” stocks that some financial services lazily use to classify investors, which the word “value” has recently morphed into meaning. To me, value investing equates to the term “Intelligent Investing,” as described by Ben Graham. Intelligent investing involves analyzing a company’s fundamentals and can be characterized by an intense focus on a stock’s price, it’s intrinsic value, and the very important ratio between the two. This is value investing as the term was originally meant to be used decades ago, and is the only way it should be used today. So without much further ado, it’s my very good honor to meet you and you may call me…