Ready to invest in Bitcoin?
It’s one of the most exciting places to put your money, and the charts show it on a stratospheric rise in value.
But you can’t get started with Bitcoin investment until you know exactly how to buy Bitcoin. In this article, you’ll learn exactly how to get started.
We’ll cover the method you’ll need for getting Bitcoins, the truth behind the Bitcoin exchanges you’ve heard about, and the best way to get Bitcoin for a fraction of their value.
You’ll also learn how to store your Bitcoins, since there isn’t a “Bitcoin bank” so to speak where you can keep your money.
Let’s dive in!
Considering how Bitcoin is a currency, you might think that you can trade it through a typical currency exchange.
While Bitcoin does have an exchange symbol, BTC, the reality is a little bit more complicated.
You actually can’t trade the currency through a normal exchange like you would for euros, pesos, or yen.
Instead, you’ll need to go through a Bitcoin-only exchange. A number of these exist, and they allow you to buy Bitcoins for the going market rate.
This works just like a currency exchanger would if you needed euros for a trip to Italy.
One question that people often have regarding buying Bitcoins is how to afford them when they’re so expensive. If a Bitcoin costs thousands of dollars, how can you afford one?
The answer is simple. Instead of buying an entire Bitcoin, you’ll buy a fraction of it. Bitcoins are divided into decimals all the way down to one one-hundred-millionths.
(This 0.00000001 BTC is known as a Satoshi, named after the creator of the Bitcoin technology.)
When it comes to choosing an exchange for your Bitcoins, you need to be careful.
Just like you should do research on a bank where you keep your money, the exchange you choose should have the security and reliability you expect for your finances.
It may surprise you to learn my recommendations. It’s probably different than what you’ve read elsewhere, but if you choose the wrong exchange you’ll end up regretting it.
Perhaps the biggest exchange you’ll find in your research is Coinbase. This is where most people buy and sell their Bitcoins.
It’s large and has a large user base, but the truth is that you need to stay away from Coinbase.
While Coinbase is a simple way to get started buying Bitcoin, for more advanced users, I recommend using a different exchange known as Gemini. It’s more reliable and trustworthy, and you’ll be able to get the coins you want quickly and easily.
To get started, you’ll need to set up an account through Gemini. Click on Open a Personal Account.
From there, you’ll need to put in your basic information to create an account with Gemini.
Once you finish the registration process, you’ll need to check your email. Gemini will send a validation code to ensure you have access to the email account you entered.
Copy the confirmation code in the email you get. You’ll need to paste this code into the box provided on the Gemini registration form, then click Submit.
Once you’ve confirmed your account, you’ll need to enter additional details to confirm your identity and ensure you can buy and sell Bitcoins as you want to.
Gemini upholds the highest standards in legality, security, and requirements, you can rest assured that your information is protected and safe.
Perhaps more importantly, they work with regulatory bodies and ensure transactions are legal. You won’t find the FBI at your door after buying Bitcoins on Gemini.
It’s a safe platform that I personally recommend you use for any Bitcoin purchasing and investing you’re considering.
In just a minute, I’ll show you the correct way to time your Bitcoin purchases.
But first, let’s look at the details of when you shouldn’t buy.
First off, you shouldn’t buy at the market price. You can think of Bitcoin exchanges like a form of commodity.
To illustrate, imagine that you’ve heard there will be a planned power outage in a nearby county next week. You know that generators are going to be in high demand when that happens.
If you wait until the power outage happens, you’ll pay the same (sky-high) price as everyone else. When generators return to their normal prices after a few days, you’ll end up losing money.
But let’s say that at a hardware store in the next county over, there’s a 20% discount on generators. If you were to buy generators in the next county and hold them for a week, you could then sell them at a large profit when the outages happened where you live.
Of course, this is the basic economic principle known as supply and demand. As demand rises, so does the price.
This graph shows how it works. If you were to buy at the first price (P2), when demand is lower, you’ll spend less money. As demand grows (D2), you can then sell at a higher price and turn a hefty profit.
So, what’s the point of this lesson in economics? Well, the same principles that apply to generators and power outages carry over into the world of cryptocurrencies.
Just instead of generators, think Bitcoin. Instead of power outages, think of a spike in Bitcoin’s price.
Because when the price of Bitcoin goes up, that’s when everyone notices. Just like in the example with the generators, watch what the crowds are doing. Most people generally buy too late–once it’s obvious there is going to be money to be made.
But just like the laggards buying generators once they power is out, those amateur investors are actually paying top dollar for Bitcoin.
The truth is that most people only jump on the bandwagon once it’s clearly a winner. But paradoxically, once it’s declared a winner, most of those investors will end up losing money (or only breaking even).
The smartest investment strategy you can take is to avoid the “retail” price of Bitcoin when it’s popular and quickly climbing in price.
Instead, look for “wholesale” deals on Bitcoin when it’s not so popular. When it’s taken a plunge, or when the hype has died down.
For most of 2017, the price of Bitcoin continued to rise, only to fall drastically at the beginning of 2018.
But the history of the cryptocurrency has shown that after periods of meteoric growth, Bitcoin fades from the headlines, only to resurface again and grow 10x or more.
It’s during one of these periods of massive unpopularity that you should take advantage of Bitcoin. Yes, it can be difficult to make the investment when it disagrees with nearly everyone in the market.
But at a time when Bitcoin’s price is down–as it is currently at the time of this writing–is actually the best time to buy.
In a manner of speaking, Bitcoin is on sale right now!
But again, it’s the only way to make real gains with your money. It’s common sense that the only way to make money from a Bitcoin investment is to buy low and sell high, but common sense isn’t always common action.
Whatever you do, don’t FOMO buy. As you might know, FOMO stands for “fear of missing out.” It’s an inherent psychological drive to keep up-to-date with the people around us, but when it comes to investing, it’s the worst motivator there is.
Buying because everyone else is buying and you’re afraid of missing out is like buying a brand new iPhone–one week before the updated version is released.
Because of your impatience, you’re left with a device that’s suddenly worth a fraction of the sticker price you paid.
Don’t let the same thing happen to your Bitcoin investments. Look ahead to the future and have the patience to let your investments grow.
In order to succeed with your Bitcoin investments, you’ll need to know a little bit about investing theory.
In particular, you need to understand the concepts underlying what’s known as technical analysis. The basic premise behind technical analysis could be summed up in the axiom “history repeats itself.”
In essence, technical analysis, or TA as it’s known in investment circles, argues that the single strongest predictor of an investment of any type is its history.
Leave the headlines, hoopla, and hype to the stock traders on Wall Street. You should focus on the historical precedent of Bitcoin, and extrapolate out what that means for you and your investment strategy.
The main premise behind TA is that markets tend to move in a cyclical pattern. It might be an irrational pattern, but it is a pattern nonetheless, built entirely on people’s ideas of what may or may not happen.
An illustration of the emotions behind a market cycle can be a great way to visualize the pattern that play out over and over again in investment markets like Bitcoin.
To take advantage of those patterns, you need to be able to buy during a slump in the market–a time when other investors view it as hopeless, and the price of Bitcoin is languishing in a valley.
This is the “wholesale” price of Bitcoin, and is usually the best time to buy in. If you’re patient and can ride out the full cycle, you’ll be able to sell Bitcoin during the “euphoria” stage, when the price is at its peak. That’s where the serious profits happen.
To ensure you’re able to snag Bitcoin when prices are at their lowest, I recommend setting up limit orders on Gemini.
A limit order is essentially a rule that tells Gemini to buy a certain amount of Bitcoin when the price reaches a specified (low) amount.
The overall price of Bitcoin soared upward for most of 2017. Many of the people with FOMO buying ended up buying Bitcoin at its peak and now regret their purchases.
But the current drop in value is an open opportunity for buying Bitcoin on the cheap before the price skyrockets again in the coming weeks or months.
This allows you to take advantage of market fluctuations, buy when Bitcoin is priced low (the “wholesale” price), and either sell when it jumps back to the “retail” price. Or, even better, wait for Bitcoin to continue to increase in value.
Most of 2017 was a stellar year for Bitcoin–it increased 10x over the course of eleven months–but that changed drastically in mid-December when the price plummeted.
By snagging a dip in the market price that’s happening right now, you can ensure you buy Bitcoin at a low enough price, and reap profits most amateur investors would kill for.
But buying Bitcoin isn’t the end of the story. If you’re going to invest in Bitcoin, you need to understand exactly how to store your investment.
And no, it’s not as simple a bank. In fact, Bitcoin “banks” can be some of the most risky places to keep your hard-earned Satoshis.
So now that you know where and how to buy Bitcoins, we’re left with the sticky problem of figuring out where to store them.
With dollars, euros, or yen, we have an easy choice for storage. We can hold the money with a physical storage method, like cash, or we can keep it in a bank account.
The cash method clearly has a few downsides. First off, it’s susceptible to damage or theft. If someone breaks into your house and takes a stack of dollar bills lying on the counter, there’s no recourse.
And if your house catches fire, or floods, or experiences some other kind of natural disaster, you might lose your cash forever. Besides, there’s a limit to how much cash you can keep safely stuffed under your mattress and hidden in drawers around your home.
(Incidentally, this last problem of cash storage is one of the many reasons I don’t recommend drug dealing as a viable career option.)
If you’re going to keep money, a bank is probably the safest place to keep it. Unfortunately, the problem isn’t so straightforward for Bitcoin and other cryptocurrencies.
The banking industry has existed for hundreds of years, is accountable to intense scrutiny from the government, and employs top-level security security experts.
Cryptocurrencies, on the other hand, are less than a decade old, and are currently in a state of limbo regarding government regulation.
While many see this as its primary advantage, it also holds a few drawbacks. One of the largest of these is that Bitcoin exchanges like Coinbase and Gemini have become the de facto form of Bitcoin storage for numerous amateur investors.
This isn’t necessarily a bad thing, except that they’re entirely outside the body of financial regulations that govern banks and other institutions, and lack the infrastructure and guarantees banks use to keep the money secure.
These regulations are easy to spot in the footers of major banking websites. Take Wells Fargo’s website, for instance, where they declare FDIC membership, explain that investments could lose value, and provide other legal-mandated statements.
The same is true of JPMorgan Chase, which provides the same language.
Banks have a number of measures protecting your investment, including private insurance and FDIC membership. These FDIC memberships are a big deal, since they guarantee that the United States Federal Government will insure deposits of up to $250,000.
In the case of a bank hack or fraud, the money you deposit will be provided back to you as long as the US Federal Government remains in place.
Unfortunately, no such guarantee is in place at most Bitcoin exchanges.
This poses a problem because these exchanges, as secure as they claim to be, are in constant risk of hacking.
While Bitcoin itself is a highly secure protocol, these exchanges may (and often do) have vulnerabilities, and hackers are trying to exploit them every second of the day.
The most famous of these was Mt. Gox, an exchange which at its peak in 2013 handled 70% of all Bitcoin transactions.
Due to a combination of what most believe to be hacking and mismanagement, Mt. Gox announced in 2014 that 850,000 Bitcoins–worth over $8.5 billion today–went missing.
The hack had gone unnoticed since 2011, and left countless Bitcoin owners with nothing to show for their investments.
A similar hack happened in August 2016 on the Bitcoin exchange Bitfinex. A hacker walked away with nearly 120,000 Bitcoins, valued at around $1.2 billion today.
Similar events have played out on other platforms as well.
Bitcoin alternative Ethereum has had two serious attacks. The first was on the DAO, meant to operate like a venture capital fund for investors in Ether, the currency used by Ethereum.
In June 2016, the DAO was hacked and lost what was then valued at $70 million in Ether. The hack was so disruptive to the community, the Ethereum blockchain was “reverted” to an earlier version before the hack took place.
But a change in the code like this, known as a “hard fork,” is an extremely rare occurrence, and there has not been one since the DAO attack.
One last example, this one also from November 2017 and involving cryptocurrency Tether, which ties the value of its tokens to established fiat currencies like the US dollar.
Over $30 million dollars in USDT, or Tether’s US dollar equivalent, was stolen from the Tether Treasury wallet.
So if exchanges and online storage websites are notorious for vulnerabilities, where should you keep your money?
There are a few options: an online wallet, and a hardware wallet.
A wallet is similar to an exchange, except it lacks the ability for your exchange your Bitcoins for another form of currency.
This makes it easier on you, because you don’t have to worry about keeping your public and private keys (much like a username and password) safe. The wallet will take care of this for you.
A program like Bitcoin Core is a common way to store Bitcoins. It allows you to manage your Bitcoin on the computer without having to manually type or memorize a complicated list of letters and numbers.
In addition to this, there’s a level of convenience with a Bitcoin wallet. Depending on the type and company you choose, you can actually use Bitcoin for real-world purchases.
Some wallets allow you to link with exchanges quickly and easily, allowing you to convert Bitcoin to other currencies, which are then accepted by major retailers.
This Redditor was able to buy a coffee at Starbucks with Bitcoin.
But while a wallet may sound like a more secure way to keep your money than by storing it an exchange, that really isn’t the case.
A wallet for the cryptocurrency Ethereum faced a unique challenge in November 2017.
The attacked platform was was Parity, a wallet for Ether (ETH). A user accidentally deleted the code that allowed other users to withdraw funds, leaving huge sums of money inaccessible to Parity’s largest customers.
(Can you imagine accidentally deleting the code that allows everyone to withdraw from your bank’s ATMs? I didn’t think so.)
Estimates are that around $156 million worth of funds were frozen, meaning the owners have no way to withdraw their money from their accounts.
So, what alternative do you have to a Bitcoin wallet? The answer is keeping your private key stored in hardware.
In the cryptocurrency community, you might hear the terms “hot” and “cold” storage.
The terms refer to different ways Bitcoin keys are stored. The term hot storage means actively connected to the internet, while cold storage refers to data disconnected from any network.
The difference is critical in understanding how hacks happen. No matter how seemingly secure a hot storage method is, there is always the potential for an attack.
Cold storage, on the other hand, is imminently secure against hacking. A wireless-disabled laptop computer, a USB flash drive (unplugged from a computer), or even a list of numbers on paper are all examples of cold storage.
True, someone could read the numbers on the device itself. But in order to do that, they would have to be physically present at the location of your cold storage.
A hardware wallet like Trezo allows you to store keys in cold storage, while being able to easily send them to a hot storage device to spend or transfer.
If you aren’t planning on using your Bitcoins anytime soon, you could invest in a device like Crypto Steel. It’s a device that allows you to record your private key in engraved steel, which is fireproof, waterproof, and impervious to hacking of any kind.
The downside of a hardware wallet is that there are no backups–you’re solely responsible if you lose it, it gets stolen, or you accidentally throw it away.
It’s a good idea to keep a few different versions of your wallet in different locations.
Ultimately, the best method to protect your investment is up to you. There are literally hundreds of different options. The question is–what are you most comfortable with?
If you’re considering investing in Bitcoin, you know exactly how to go about doing it.
It’s a simple process, but without the right knowledge, you’re going to struggle to acquire the Bitcoins you need to make your investment a success.
But be careful about when and why you buy. It’s a huge mistake to buy because you’re afraid you’re going to miss out. Instead, buy when the price is low so you can sell when it goes up.
The easiest way to do this is to set limit orders on Gemini. This will ensure that you can make big returns without putting in countless hours buying and selling every day.
Once you’ve purchased your Bitcoins, you need to store them securely. I recommend using cold, or offline storage for your Bitcoins. It’s the most reliable and secure.
Once you have your Bitcoins purchased and stored properly, be patient with the investment. Don’t try to sell too soon, or you’ll only regret it.
Instead, rely on the market trends to predict the best time to sell your Bitcoins. With smart investment strategies, you can transform Bitcoin into a life-changing investment.