What is Bitcoin?
Bitcoins came into the picture around the beginning of 2009, just after the financial crisis of 2008 had ended and the trust of the people in the existing financial system, as we know it at that time, was at its lowest ebb. It remains open to question on whether Bitcoin could have gained the same kind of acceptance that it has, if it was introduced at another time and not after a financial crisis. It was introduced by a person who called himself Satoshi Nakamoto (though his true name is unknown) and he was the one who mined the first bitcoin.
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It was built on the Blockchain technology and its strengths lie in its anonymity and also on its transparency. All the details are on the network and yet, it is available only to those who need it. The control and the information is decentralised which is a marked change from the legacy financial systems where the control is centralised with the regulators. Bitcoins paved the way for free, fair and quick movement of funds at a fraction of the current costs but at the same time, providing high security and transparency to the transaction that exists on the blockchain. These are the humble beginnings from which bitcoins came through and it began to be accepted by more and more people who found a refreshing change from the existing financial and banking system.
During the last year, the Bitcoin community suffered a division that created alternatives to Bitcoin such as Bitcoin Cash and Bitcoin Gold.
Buy and Sell Bitcoin
Once people began to realise the growing use and ease of bitcoins, more and more people began to buy Bitcoins. There was not much speculation in the prices for the first few years. During this period, Bitcoins were bought and sold only for payments. People in countries with strict regulations on sending or receiving funds from foreign countries began to use bitcoins to send and receive payments. They found this to be a very secure, easy and quick method to send and receive funds and there were other people or businesses in place which helped them to convert these bitcoins back into fiat currencies.
At the beginning, it wasn’t very easy to convert the Bitcoins and hence many were forced to hold on to their Bitcoins as others did not want it and there were no methods to change it into fiat currencies.
All this was before the speculation on the prices started. Slowly, bitcoins began to gain acceptance and some elements also began to use the bitcoins to fund and move funds for unlawful purposes as well. This added to the demand as well as the supply and as more and more people joined in the Bitcoin market, the mining of bitcoins also began to gain traction as the value of bitcoins began to grow and it became profitable to mine bitcoins.
How to Buy Bitcoin?
One can get hold of Bitcoins in a variety of ways. Bitcoin mining was one of the most popular ways of getting bitcoins till a couple of years back. But as more and more Bitcoins were mined and with the total number of bitcoins being restricted to 21 million and with more than 16 to 17 million Bitcoins already having been mined, the difficult level for mining bitcoins has become huge and unless you have huge mining farms, profitable mining of bitcoins is out of the question these days.
The other major way to buy Bitcoins is to buy them off exchanges. There are many bitcoin exchanges all around the world and some countries have their own domestic exchanges while there are international exchanges like Coinmama, CEX.IO, as well which cater to people from various countries. People can buy bitcoins from such exchanges using fiat currencies like the dollar or the euro or by using other cryptocurrencies as well.
Bitcoin prices have been very volatile over the last few months and it’s important for the customers to buy them at the right time and the right price as well. These exchanges provide the easiest and cheapest way to buy bitcoins. There are also bitcoin ATMs that have been launched in a few parts of the world and the clients can buy bitcoins at such ATMs as well, though the problem of their location and their high transaction costs has been a bit restrictive as far as their adoption by clients is concerned.
Can I Use Regular Money to Buy Bitcoin?
With the growing craze for bitcoins, more and more people want to join in the party. While traders and investors are quite well aware of the risks and the returns and are also aware of how to invest in bitcoins and use various funding and payment methods, it is always a risk for the people who are new to this to get misguided and lose their hard earned money. It is important to understand that it is possible to buy bitcoins using regular money, which are called as fiat currencies, like dollar, euros, pounds etc. they can be used to buy bitcoins at the exchanges that are available at a growing number of countries.
Bitcoin can also be purchased from bitcoin ATMs which are also placed in various cities of many countries. All that the user has to do is input the number of bitcoins or satoshis that he needs and deposit the money into the ATM and he would be able to buy as many bitcoins as he wants. These are the main two methods that are available to buy bitcoins using regular money. Care should be taken to ensure that the clients and traders are well aware of the AML laws of their countries and ensure that this use of regular money to buy bitcoins does not violate any of the laws of their land. Purchase and usage of bitcoins is banned in certain countries and hence, in those, it can be bought only illegally which means that it is very costly and also highly likely that the buyers could be misled.
Getting a Bitcoin Wallet
Just as how you store your regular money in your wallet, bitcoins also need to be stored in a signature wallet. This wallet can be online or offline or on your hard disk or on your USB drive. The wallet has public and private keys to ensure that only the owner of the wallet can access it and the bitcoins stored within it. If the keys are lost, then it basically means that the user no longer has access to the wallet and the bitcoins stored within it are either lost or would have gone into the hands of others. This is why it is important to keep the keys in safe place.
In order to get a wallet, the user has to decide whether he wants an online or offline wallet. An offline wallet is much more secure but is cumbersome to use and maintain. An online wallet is easy to maintain and it is better to use them as long as you don’t own too many bitcoins. Anyone can get a wallet from any of the bitcoin exchanges anywhere in the world or from standard websites like blockchain.info and bitcoin.org. These are free and all that a user needs to do is to give his mail id only and hence the wallet is as anonymous as it can be. The signup for a wallet is free and simple at any of these websites and once the user gets a wallet, he can store his bitcoins there and send and receive bitcoins from/to the wallet.
Where can I Purchase Bitcoin?
Where a person can purchase bitcoins is dependent on where the person is. Some countries have totally banned the use of bitcoins and hence in such countries, bitcoins are available only in the black market and also at a high price with its resident issues and troubles. In some other countries, things are not very clear in either way and hence these countries are hosts to a number of bitcoin exchanges and ATMs where bitcoin can be freely and easily purchased at any point of time.
The exchanges generally tend to be the ones with the least charges and that is the reason why many prefer to use exchanges to purchase bitcoins.
Face-to-face, or ‘over-the-counter’ (OTC) trades
Bitcoins are not only traded online in the bitcoin exchanges but we are increasingly seeing the availability of bitcoin in OTC exchanges. These can be black market ones where the users give funds in cash and buy the bitcoins from a person and this exchange happens physically.
There are also other places where people interact with the buyer and purchase the bitcoins. This buyer or seller could be an individual or could be representing a company and doing the legitimate purchase or selling of bitcoins. These are definitely few in number at this point of time but are expected to grow. In this process, websites like LocalBitcoins, where people who want or hold bitcoins put up ads for buying and selling bitcoins, are playing an important role to ensure that even the offline buyers and sellers are tapped into. Of course, such face to face interactions has its own set of risks associated with meeting unknown people with hard earned funds but this does form a small part of the market.
There are a multitude of bitcoin exchanges all around the world ranging from behemoths like Bitfinex, Coinmama and CEX.IO to exchanges that are quite small and cater to only a small population within a country. These exchanges are basically those where people can buy and sell bitcoins and the exchange facilitates this process and in turn, takes some commissions out of this exchange of bitcoins. This is one of the most convenient ways to buy and sell bitcoins for any traders but it comes with associated risks.
These exchanges are always under the purview of the regulators of each and every country and when the regulator decides to take action, the exchanges are the first ones to face the wrath and they get shut down. This is what happened in China a few months back. These exchanges are viewed as companies which facilitate the transfer of funds between unknown and different players and regulators are simply not very convinced about such a business model which is not under their control. But going by the huge transaction volumes in such exchanges, the traders do not seem to care much about it. We are seeing the launch of more and more Bitcoin exchanges in different parts of the world serving specific geographies.
What to Look for in a Bitcoin Exchange?
With so many Bitcoin exchanges around, it becomes a very difficult choice for the customers and traders alike. It is important to choose the right exchange as it is a difficult task to keep moving funds from one exchange to another. So it is better to choose the right one and then stick to it for as long as possible. The first criteria would be to see the bitcoin price rates at the exchanges. It needs to be as close to the international rates as possible. With so many variables like exchange rates, conversion charges, premiums, commissions, fees etc. it is very easy for the exchanges to hike the rates and try and sell it to the customers. The clients need to take all these into consideration and ensure that they choose an exchange where the rates are nominal.
For buying and selling bitcoins, it is important to move the funds to and from the exchange. So, the payment methods offered by the exchanges becomes very important. The clients have to see what are the modes of deposit and withdrawal that are available and also understand the charge for each and choose those exchanges which provide a convenient way for doing this. The convenient way depends on the choice of the user and also on the country that they are in and hence it all comes down to what the user is comfortable with.
The speed of transaction is also very important. It takes around an hour to move bitcoins from one address to another but there are chances that the exchange might delay the process for its own advantage. This is again something that the user should guard against. The speed of deposits and withdrawals are also important so that the user has funds available for buying and selling when needed.
It is ideal if the exchange comes under some regulator or has some semblance of regulation. With many countries choosing not to regulate bitcoin transactions at this point of time, it becomes more a of trust thing between the user and the exchange and rather than rely on pure trust, it would be better if the exchange has some regulation that the user can trust in and can fall back upon, in case of any issues.
With the number of coins that can be mined drying up, traders and investors have had to depend on trading to buy and sell bitcoins. The trading in bitcoins has been ever expanding over the last year or so and it appears that the whole world wants to trade Bitcoin as the prices have been skyrocketing and the bitcoin market has begun to get worldwide attention. As mentioned earlier, trading of bitcoins requires the user to enrol at an exchange and deposit funds so that he can buy and sell bitcoins at the existing market prices. He can also buy bitcoins from bitcoin ATMs as well and this can then be sold off at the exchanges.
But considering the current frenzy among all to enter the bitcoin market, it is important to maintain some sanity and look for the right prices to enter so that the maximum returns are obtained and the trader is not caught in a difficult place.
For all practical purposes, for retail people, the time for Bitcoin mining is well past. With most of the coins being already mined off over the last 3 years, there is very little left and this has made mining practically difficult and financial infeasible. There is only a total of 21 million bitcoins that is possible and this limited supply is one of the main reasons for the prices to keep going up.
But of these, already 16 to 17 million coins have been mined which means that there is very little left. This has in turn increased the difficult level for the mining of bitcoins by many notches and even those who mined bitcoins earlier have given up due to the increase in difficulty level and also the returns are not commensurate with the funds that are invested in buying top notch equipment for mining.
There are a few companies which make bitcoin ATMs and have been placing them in many cities around the world. These ATMs are available even in those countries where bitcoins are not recognised and this provides an opportunity for those who are interested in cashing in on the price rise to use these to buy ATMs. These are quite convenient as the customers just have to walk to the ATMs, type in the number of bitcoins that they need, input the funds in the local currency and can buy the bitcoins. Of course, there is the disadvantage that these ATMs are available only in specific places and so those who do not have ATMs in their cities would not be able to purchase from them. Also, these ATMs tend to charge upto 5-10% as fees and this is way more than what most of the inline bitcoin exchanges charge. But in countries where there are restrictions, then ATMs provide a nice way for buying bitcoins.
Buy Bitcoin vs. Trade Bitcoin
Once the client decides to delve into the world of bitcoins, there is a difficult choice for him to make, that of whether he wants to be a trader or whether he wants to just buy bitcoin and hold it for it to increase in value later or to send as payment to someone. This is a difficult choice to make especially considering the volatility that the Bitcoin prices have. It requires nerves of steel to hold on to bitcoins and see its value change by anywhere between 5% to 10% a day and still manage to hold on and not be tempted to sell.
This might make the option of trading bitcoins seem to be the better one but in that case, the client is exposed to the risk of the market movement and may miss some great moves in the Bitcoin prices.
There is no specific right or wrong as far trading bitcoins or buying bitcoins is concerned and it comes down to the personal choice of the client. If the client believes in the long term uptrend and future of bitcoins, then he can choose to buy bitcoins and wait for it to give its best returns. On the other hand, if the user does not have the emotional strength to view the rise and fall of his hard earned money and wants to just try a quick in and out, then bitcoin trading would be the better choice. Care should be taken in both cases to risk only those funds which the client can afford to lose.
Tips on Buying Bitcoins Online
There are many exchanges to buy Bitcoins online. Some of the more famous ones around the world are coinmama and coinex.io but there are also exchanges that offer services to specific countries where the trading and the payments methods are tailored to meet the needs of the domestic clients. There are also websites like localbitcoins which is a peer to peer bitcoin exchange website where clients put up their bitcoins for sale and others in the same country or area can purchase it and the mode of payment and other details are worked out by the clients among themselves.
There are also bitcoin brokers like eToro that offer CFD trading in bitcoins. In this, the clients do not own the bitcoins but they can only speculate on the value of the bitcoin. The big advantage In these is the fact that these brokers offer margin for trading and the margin can go up to even 10:1 or 20:1. Even major exchanges like the CME and the CBOE introduced bitcoin futures trading and this is also likely to be a factor for Bitcoin’s prices appreciation.
The cryptoworld has become mainstream during the last year with leading cryptocurrencies and altcoins such as IOTA, Stellar Lumens Qtum and Cardano providing significant gains and with the ICO token sale market recognized as a legitimate way to raise funds.
For Bitcoin There are a range of ways and methods, both offline and online through which the clients can trade as well as buy bitcoins. It is important for the clients to understand the risks that are involved in the buying of bitcoins and ensure that they protect themselves against it as much as possible. It is easy to be drawn into the bitcoin craze that is going on around the world right now and it is up to the individual customer to ensure that he chooses the right product and the right platform to trade so that he does not get caught on the wrong side of the deal.