One of our most asked questions is How to Buy Bitcoin. Bitcoin has been all the rage in the headlines thanks to freakishly meteoric rise in value. In 2017 alone, a purchase of $1,000 dollars at the beginning of the year topped an amazing $19,000 by the end of 2017. Even more disconcerting, especially to seasoned investor is that same $19,000 investment topped to less than $9,000 in the first month of 2018. Still not a bad return, but volatility like that is something many have only seen in high volatility stocks like penny stocks. Not exactly the most encouraging for the conservative investor. Regardless, Bitcoin is here to stay and here is a great primer to determine if now is the time to establish and investment.
It’s important to note that Bitcoin is so very much more than just sensationalized media headlines of the price swings found in trading bitcoin. The technology used to create a Bitcoin has many more uses with ramifications that will dictate technology, currency, math, economics and social dynamics.
A shadow figure or group named Satoshi Nakamoto created Bitcoin in 2009. The goal was to create a new currency that circumvented the existing structure of centralized banking. Even more shocking is that Satoshi Nakamoto turned the concept and technology plus all source code to the Bitcoin community in 2011 and then disappeared.
What is bitcoin?
In a nutshell, Bitcoin is a decentralized digital cryptocurrency. It’s pretty amazing really, no government or other authority like the Central bank controls it. Even more amazing, it is totally anonymous. Instead of using your social security number or name, Bitcoin uses encryption keys to connect buyers and sellers. No government prints this money, it is instead “mined” by powerful computers connected via the Internet.
The “miners” maintain a huge general ledger that record every transaction that occurs. Given the nature of the digital security, these are usually supercomputers capable of handing the encryption required to completed transaction.
What determines the Bitcoin Value
Like my Father-In-Law says, “Bitcoin is worth what someone is willing sell and the other is willing to pay for it.” This is very similar to the stocks you buy individually or in your 401k.
Bitcoins are finite in that only 21 million bitcoin can ever be mine. This creates the demand in that there is a limited supply. Similar to precious metals like gold, there is not real value outside of the supply and perceived value.
It’s important to also note that Bitcoin is different than stocks as there is no relationship to a company’s performance as you would see to a stock’s price at any given time. With no government oversight controlling (some say manipulating) the supply, the value is truly open to what the market dictates.
How do I buy bitcoin?
You buy and sell Bitcoin thru what is called a digital currency exchange and it is very, very simple. We’d recommend Coinbase as they are the best established and secure of the bitcoin exchanges. Coinbase essentially converts your money (example: U.S. Dollars) into Bitcoin. Click here to visit Coinbase and learn more.
If you have a Paypal account, you can get started buying and selling Bitcoin. Using Coinbase, for example, you can use your bank (or Paypal account) to make a deposit into a virtual wallet. Once setup, you then begin exchanging traditional currency for bitcoin.
What can I do with bitcoin?
Bitcoin is literally exploding with more than 100,000 merchants accepting this as a means to purchase goods and services. Like a stock, you can sell it if it goes back up and then buy again when the price dips lower. Or you can just hang on to it. Unlike stocks, Note that there are no inherent transaction fees with bitcoin…BUT BE CAREFUL, exchanges like Coinbase typically charge a transaction fee when you buy or sell. This can be ridiculous which is why we like Coinbase as it’s been the cheapest we’ve found.
Is Bitcoin Legal?
Yes, as long as you don’t do illegal things with it. It’s important to note that there is increased pushes to regulate Bitcoin under the guise of “Consumer Protection”..In reality, the governments of the world are missing taxable income and the banks are missing fees.