Bitcoin is a new currency that was created in 2009. Yes, it’s real… even if it does only exist on the interwebs. Real enough, that people who were the first to adopt Bitcoin as a cryptocurrency have now made millions of dollars. Bitcoin has intentional inflation with a finite amount available. This means that as long as it exists as a thing (looking good, but no guarantees), the value (in theory) should only increase. And that is just what has happened. Example: in July of 2010 one Bitcoin was around $0.08. Say you decided to invest $1,000 in Bitcoin. That’s a fairly small, reasonable investment, right? Today that $1,000 is now worth over $41 MILLION. And we won’t even get into the many people who mined Bitcoins and got them for free!
Seeing dollar signs… err Bitcoin signs yet?
I recently wrote a post giving some background and framework to what Bitcoin and Blockchain technology actually is. After people understood it (kind of), I overwhelmingly got this question- “So how do you actually buy Bitcoin?” Well, ladies and gentlemen, I am about to tell you just that. But first, let me warn you- THIS IS NOT FINANCIAL ADVICE! I am not a financial advisor. In fact, I’m not even that great at math. Dabbling in cryptocurrencies, like Bitcoin, is exciting, new terrain that is also highly, highly volatile. In fact, the only constant is that it is never constant. So proceed at your own risk, and welcome to the world of Bitcoin.
Choose a Wallet
This is the first step, and it’s kind of like choosing which bank you want to keep your money in… except it’s an app. You have to sign up for a digital currency wallet where you can securely store digital currency. There are several out there, and even more opinions. But, here are my top three favorites due to security, popularity, user friendliness, dependability, and user recommendations.
- Bitpay. Yes, they are Atlanta Tech Village graduates and they just happen to have one of the most secure wallets available boasting a multi-signature requirement. That means your money stays your money.
- Blockchain. The Bitpay founders recommended Blockchain to me before they had their wallet up and going. It’s super popular, allows you to back up your funds, and is easy to use.
- Coinbase. They are the top institutional and professional crypto trading platform in the U.S. and their wallet allows multiple cryptocurrencies like ethereum and litecoin to all be stored in one place with your Bitcoin. Big win if you’re into that kind of thing. Oh, and they just raised $100M making them the first crypto Unicorn.
So, pick your favorite, download your wallet, and set up your account.
You can actually purchase Bitcoin through your wallet. All you have to do is connect your bank account, debit card, or credit card so that you can exchange digital currency into and out of your local currency. For example in the Blockchain app, you will literally see “Buy Bitcoin” in the menu, Coinbase says “Buy/Sell”, you get the idea. You can also purchase from a marketplace like Coinbase and then transfer your Bitcoin into a preferred wallet.
When you make that purchase, you are literally buying/exchanging American dollars for Bitcoin that is then stored in your digital wallet just like a bank account… only better and more secure.
Things to Consider
1. It’s All About Timing
You may want to slow your roll before you buy and watch the markets for a bit first. Why? Because although Bitcoin is steadily climbing in value, it still falls dramatically, and often predictably, before it climbs again. If you are really into playing the crypto market, you can strategically buy Bitcoin on those drops and sell them at new highs. The catch? No one ever really know when the low is, how low it will go, or how high it will climb. It can sound overwhelming until you watch it for awhile and get a feel, although even then it is a guessing game. I use bitcointicker.co. On the upper right hand corner of the page you can set the graph to “30 day” to see where the value is. Tip? Never buy at all time highs. =)
2. Choosing How Much to Buy
First, Bitcoin’s $0.08 days are long past. As of the moment I am writing this, one Bitcoin is almost $3,400. The good news is that you can don’t have to buy a whole Bitcoin, you can buy fractions of one. Have an extra $100 this month? You can buy $100 worth of Bitcoin and slowly accrue more over time.
How much should you buy? This is where it gets tricky and you find out how really risk averse you are. No one, and I mean NO ONE, knows what Bitcoin’s future looks like. One of the more interesting and satirical sites is the Bitcoin Obituaries. It currently lists 144 articles that have pronounced the death and uselessness of Bitcoin from folks like CNBC, Yahoo Finance, Forbes, and Business Insider. And then, just to the right of each article, they cleverly list the value of Bitcoin at the time that article was published. It’s easy to see that despite these dire predictions, the value has steadily climbed.
The most sound advice I have read came from the Xapo blog. This is what they suggest:
- Own only what you can afford to lose. For most people, this is 1% of your net worth.
- Buy Bitcoin. The potential reward is so big that it makes sense to own some.
- Do not touch it for 10 years. Go for the long game to gain the most value.
3. Keep it Secure
There are stories of people who have lost all of their Bitcoin due to a hard drive loss, a forgotten pin, or special key. PEOPLE- there is no “forgot password” on a digital wallet. Here is where security is super important and interesting. The Bitcoin blockchain technology can not be hacked. In fact, it would take computer power the size of the sun to break into ONE Bitcoin account. But, forgotten or stolen pins, secret phrases, or wallet keys can cause you to lose everything. So guard that information very carefully and back up your wallet. Go old school with paper and pen and put it in a deposit box or under your mattress. You lose it, you are SOL. Consider yourself warned.
Worth the Risk?
That’s for you to decide. Again, in the future Bitcoin could fail (quickly) and be worth nothing, or it could be worth a whole lot. Here are some predictions scattered about on the internet:
- The first investor in Snapchat Jeremy Liew, and Peter Smith, the CEO and cofounder of Blockchain have made a fairly infamous prediction recently that one Bitcoin could hit $500,000 by 2030.
- Our friends at Xapo stated recently that they believe there is a 50% chance that one Bitcoin is worth more than $1,000,000 in the next 10 years, and at least a 20% chance that Bitcoin fails. And it may fail very quickly – even overnight – without much time to react.
- In a conversation on CNBC, proven Analyst Kay Van-Petersen predicted Bitcoin prices topping $100,000 in ten years.
- And of course there are all the dire predictions compiled in the Bitcoin Obituaries.
So think back to that first scenario where $1,000 of Bitcoin in 2010 is now valued at $41 million. In another 7 years, how much will Bitcoin rise or fall? It’s a roll of the dice.
May the odds be ever in our favor.