Over the past decade, cryptocurrencies, mainly Bitcoins, generated a lot of buzzes that are still hard to wear off. Two years ago, when Bitcoin (BTC) hit its highest price ever, reaching $19,783, a lot of BTC holders got amazingly rich. Why did it happen? The answer is simple – the hype around the subject. Cryptocurrencies are valued by supply and demand. The price is fluctuating, which means it can increase at a high pace and then drastically fall. But hey, nothing ventured, nothing gained, right? If you are at least thinking about investing in Bitcoins, our guide will give you a full understanding of the process.
Why invest in Bitcoin?
Bitcoin is the first and most popular cryptocurrency created by humankind. Its limited supply makes miners crazy in the race to unlock as many bitcoins as possible. The fixed amount is one of the things that makes Bitcoin attractive as banks are kept in check and not allowed to issue fiduciary money.
While many still mistreat cryptocurrencies, it has a much more significant impact on the financial industry that you can imagine. Today in many parts of the world like Korea and Singapore, Bitcoin is recognized as an official means of payment. And the list of countries that are welcoming cryptocurrencies with open arms is growing. People are no longer using it for speculation purposes; they are actually spending it. To show you that this is not alleged, let’s take a look at official Bitcoin stats.
These days, it has real applications; the circulation of Bitcoin is constantly growing. So does the number of investors and bitcoin holders. Over the past two years, the number of people to set up a bitcoin wallet has increased twice, reaching its peak at 44’447’909 users. The stats also show that bitcoin holders don’t just sit on their money; they are using it within the blockchain. Grown from 284’769’568 to 484’481’386 transactions over two last years, the amount of transaction is 1,7 times higher than it used to be.
There is a fast-growing number of crypto-enthusiasts among celebrities who influence multimillions of people and spread their confidence in cryptocurrencies. World’s soccer superstar Lionel Messi become a global brand ambassador for Sirin Labs, the developer of the blockchain-based secure smartphone and all-in-one PC. Boxing legend Mike Tyson partnered with Bitcoin Direct to introduce Bitcoin ATMs (we are going to talk about those as one of the alternatives for buying BTC). Oscar-winning Jamie Foxx simply used his Twitter to reach out to his 5M audience and support the ICO of Cobinhood, a ‘zero trading fee cryptocurrency exchange’.
We won’t lie, Bitcoin has had a very volatile trading history since it was first created in 2009. Initially, it was traded for next to nothing. The first real price increase was spotted in the summer of 2010 when bitcoins went from around $0.0008 to $0.08 for a single coin. Since then, the currency has seen some significant ups and downs.
The year 2013 was the real start point for Bitcoin. It began trading at $13.50 per bitcoin; then in early April 2013, the price rallied to $220 before dropping back to $70 during a month-long period. With the price going up and down, it reached its peak in November trading for $ 1’120 by the end of the month. This was caused by China’s miners entering the marketplace and new bitcoin exchanges opening.
Very few had hope for Bitcoin to re-emerge from its crypto winter in 2018. However, 2019 was a great year as 2017, when the first peak occurred. The typical way to measure the efficiency of any investment is by calculating your ROI (Return On Investment). The percentage refers to the amount of return on a particular investment, relative to the investment’s cost. So, in other words, it reflects how much you earned given all your expenses – buying a cryptocurrency, paying commissions, selling it, or keeping until the price change.
According to the stats, those who entered at the beginning of this year are enjoying 200% ROI, while those who managed to snag the price in June claim to have a 346% ROI. This year, Bitcoin has been reborn. We can see that in price and volume, rising to around $10,000, about where it trades today (November 2019).
When to buy Bitcoin
This is the question everyone wants to know that answer too. And yet there is no good answer because it really depends on the reason ‘why you need Bitcoins’.
If you’re in for buying on the low and trading it at high, then you need to get familiar with the basic techniques, look at its behavior over the course of time, keep monitoring the market, make assumptions, take a risk and just try it.
On the other hand, if you’re a blockchain enthusiast who believes in Bitcoin’s bright future, you can use the Dollar Cost Average or DCA technique. It implies that you buy regularly buy a fixed amount of Bitcoins despite the current price. Purchasing $50 worth of Bitcoins every week, for example, would be dollar-cost averaging. Crypto experts say that it doesn’t really matter if you buy it now or at a lower price because, in a long-time perspective, the difference is unimportant.
Either way, make sure you know why you need Bitcoins. As these days it’s quite an expensive asset, you need to be prepared for a drop in price more than an increase. Our piece of advice – don’t invest the money, you’re not ready to lose.
Where to buy Bitcoin
This is the most common way to buy Bitcoins. Those are online exchanges where you can trade cryptocurrencies for other assets, such as fiat money or other digital currencies. As keeping crypto assets on an exchange is a risky idea, custody services are another option to consider. They act like independent storage systems with enhanced security used to hold large quantities of cryptocurrencies. Although this sounds like a good fit, custody services charge commissions for every breath. Think of them as a bank that keeps your money safe, and this security comes pricy.
Binance is the most powerful and well-known exchange in the crypto world. It currently has a 24-hour trading volume of ₿ 80’937.07 from 179 coins and 588 trading pairs. The fee charged for makers and takers is 0.1%, which means you pay the same amount for exchange services if you want to buy or sell your Bitcoins.
Coinbase is another popular exchange platform for buying, selling, and storing Bitcoins. It currently has a 24-hour trading volume of $ 88’215′ 716 from 23 coins and 54 trading pairs.
These guys have a more confusing system when it comes to crypto transactions. They charge 0.50% for cryptocurrency purchases and sales. On top of that, they charge a percentage fee determined by region, product feature, and payment type. On average, their makers and takers fee is 2%, and there is no withdrawal fee whatsoever.
Bittrex is a US-based trading platform that emphasizes security among its other benefits. It currently has a 24-hour trading volume of $ 6’879′ 957 from 226 coins and 337 trading pairs. The fee charged for makers and takers is 0.25%, and the withdrawal fee for Bitcoins is 0.0005 BTC.
OKEx is another popular crypto exchange. Their 24-hour trading volume of ₿ 71’533.22 from 151 coins and 380 trading pairs. This platform also has a more complicated system as they charge fees according to your trading volumes and offer discounts for users of different levels, including maker and taker fee rates. Roughly speaking, the takers’ fee is 0.15%, makers fee is 0.10%, and the withdrawal fee is 0.0005 BTC.
These are non-custodial exchanges, which means they don’t hold your assets. Instead, they just help you to exchange crypto for money and then send it to your wallet.
Changelly is an instant crypto exchange based in Hong Kong. They act as an intermediary between crypto exchanges and users, offering access to 150+ cryptocurrencies. The fee charged for makers and takers is 0.25%, and the withdrawal fee for Bitcoins is 0.0001 BTC. As funding methods, they accept credit cards and wire transfers and also encourage crypto-to-crypto transactions.
ChangeNow is a user-friendly limitless crypto to crypto exchange that offers a simple and affordable solution via their website and app. It supports over 170 cryptocurrencies and has 30’000 trading pairs. They support Visa and Mastercard for fiat-to-crypto purchases, which are done via their partner Simplex. You are charged 5% for each purchase (at least $10) from Simplex and 1% by ChangeNOW.
Coinmama is another popular trading platform. It’s more like a store rather than an exchange. You can easily buy Bitcoins from the exchange itself, but you can’t sell any cryptocurrencies. They accept credit cards and bank wires for crypto purchases and charge as high as 5.5% of the order value, plus another 5% (or no less than $10) if you purchase your cryptos with a credit card.
CEX.IO is a cross-platform solution for cryptocurrency trading via the website or mobile app. They currently support 133 fiat currencies and 15 cryptocurrencies. You can use bank transfers and credit cards to purchase Bitcoins. Their deposit fees vary depending on the fiat currency you’re using from none and reach up to 2.99%. The platform fees differ based on the number of Bitcoins — the maximum charge for takers in 0.25% and 0.16% for makers.
Other Ways to Buy Bitcoin
Bitcoin ATMs are a new option. It’s like a traditional ATM, but instead of connecting to a bank, it’s directly hooked up to a Bitcoin exchange. You can use fiat or a bank card to buy Bitcoins and, in some cases, also convert BTC to local currency and withdraw cash. They charge an 8.93% transaction fee on an average but typically charge a percentage rather than a flat price, like bank ATMs.
Localbitcoins allows you to trade directly with a person. It’s a website that helps Bitcoin holder to post advertisements about selling their BTC. If you want to accept their offer, you reply to the ads and meet the person to buy Bitcoins with cash, or use online banking. It’s available in many countries and allows people to use local fiat to buy a Bitcoin.
Atomic Wallet is a cryptocurrency wallet with a build-in purchase of Bitcoins. All you need is to register the wallet, link your credit card and you’re good to go. The minimum deposit is $50, and there is a 2% fixed fee on top of the exchange rate. Thirty minutes later, you have your Bitcoins.
Where to Store Bitcoin
After doing research, finding the right exchange, and buying a Bitcoin, you’re finally the lucky owner. There is still another step you need to take to make sure your cryptocurrency is safe and sound. The question is, ‘where are you going to store it’? You can leave your money in the custody service or choose from the abundance of crypto wallets to find the best fit.
As practice shows, keeping your money with an exchange is not the best decision. As it takes massive skills and a significant amount of work even to attempt to hack a decentralized system, there were still bad precedents when entire exchanges were hacked. We should learn from significant hacks that happened in the past – UPbit, Mt. Gox, Bithumb, BitGrail. For secure storage of your Bitcoins, we strongly advise hardware and desktop wallets with mnemonic capabilities like Atomic, Guarda, and Exodus.
If you consider buying a Bitcoin, you need to be prepared for a bumpy ride. Handling Bitcoin as an investment is not an easy thing, so you need to understand the risks and be mentally prepared for the ups and downs. It’s vital to understand and accept the fact that Bitcoin is volatile, and it’s a high-risk investment opportunity. If it doesn’t scare you off and you’re prepared to take a chance, make sure you have enough data to make a correct decision about when to invest and how to store and use it after you become a Bitcoin holder.