What is Bitcoin?
Bitcoin is a decentralized, peer-to-peer, digital currency system designed to enable online users to process transactions through a digital unit of exchange known as bitcoins. In other words, it is a virtual currency.
The Bitcoin system was created in 2009 by an undisclosed programmer(s). Since then, Bitcoin has attracted enormous attention as well as controversy as an alternative to the US dollar, the euro and commodity currencies such as gold and silver.
Rise to popularity
Bitcoin had not attracted much attention in the world of business and finance before 2009. It rose to prominence in 2011-2012 when it gained over 300%. Bitcoin has seen a 400% increase in value since last August. As a result, venture capital firms and investors around the world continue to place importance on cryptocurrency.
In the first half of 2014, venture capital firms invested $57 million in bitcoin in the first quarter, followed by another $73 million in the second quarter, for a total of $130 million, up 50% from the total of $88 million for last year. This is a stark contrast to the scenario in 2012, when Bitcoin firms amassed a relatively modest sum of $2.2 million.
These statistics prove without a doubt that Bitcoin is worth your investment, which begs the question, how can you buy and invest in Bitcoin?
Guidelines for Beginner Bitcoin Investors
The easiest and least complicated method to invest in Bitcoins is by buying Bitcoins. There are many established firms, mainly in the US as well as abroad, that are involved in the business of buying and selling Bitcoins, abbreviated as BTC.
If you live in the US, then Coinbase is the place to be. Coinbase provides its customers with BTC at an estimated 1% premium over the existing market price. United States residents have the option to sync their Coinbase wallets with their bank accounts. As a result, future payment transfers are seamless. This company also gives you the opportunity to automatically buy bitcoins from time to time. For example, if you are interested in buying $50 in Bitcoins at the beginning of each month, Coinbase allows you to set up an automatic purchase for that amount.
Please read the terms and conditions before you start using this service. If you have subscribed to an automatic bitcoin service, then you will not be able to control the price at which BTC are bought each month. Note that Coinbase does not function as a Bitcoin exchange, ie. you buy and sell the coins directly from the company. Because the firm must source coins from other buyers, you may experience delays or disruptions when placing orders during rapid market movements.
BitStamp meets the requirements of a conventional Bitcoin exchange. Bitcoin acts as an intermediary that allows you to trade with other users rather than with the company itself. Liquidity is higher here and you always have a good chance of finding someone willing to trade with you. There is an initial fee of 0.5% which can be reduced to 0.2% if you trade $150,000 in a 30 day period.
Alternative Ways to Buy Bitcoins
Exchange is not the only method of investing in bitcoins. Local Bitcoins are often used to buy BTC offline. The website is designed to connect potential buyers and sellers. Bitcoins are held by the seller in escrow and can only be provided to buyers.
Buying bitcoins offline is not always very reliable or safe. So it’s best to meet the sellers during the day and have a friend tag along with you in case things go south.
Bitcoin is not just a modern trend. Venture capital firms consider Bitcoin a decent substitute for conventional currency in the long run. There are countless ways to enter the realm of Bitcoin investing. As mentioned above, Coinbase, BitStamp and Local Bitcoins are the most popular channels for investing in Bitcoins in the United States. Do your homework and find out which avenue meets all your requirements.