What is Bitcoin and How to Buy Bitcoin
This post was most recently updated on December 17th, 2017
In 2013 my friend wrote an ebook about bitcoin. She was very emphatic that it was the future and that I should buy into it. I found it way too confusing to understand how it works or how to buy bitcoin. Too bad. If I’d listened to her and invested in bitcoin even a few years later, it would be worth A LOT today. Now all these years later I’ve caught the vision of bitcoin and have learned more about it.
Are you interested in learning more about bitcoin? Here’s a beginner’s guide.
The following year my friend Austin got married and decided to take a Bitcoin challenge. He and his new wife Becky decided to try to live on bitcoin only while traveling the world as a newlywed couple. Pretty bold experiment and it wasn’t easy. The movie is called Life on Bitcoin – you can rent or buy it on Amazon or watch on VidAngel. They explain how it all works but I’m not going into that depth here. I’m mostly covering the basics, how to buy bitcoin and how to learn more/stay current on it.
First, a Bitcoin success story. Tyler and Cameron Winklevoss (The Winklevoss Twins) won $65 million in a lawsuit against Facebook in 2011. What did they do with the settlement? They invested the money in Bitcoin. Today they’re billionaires and are said to be the first to reach that figure in Bitcoin. That’s pretty gutsy of them – but it paid off! They’ve invested in or started cryptocurrency businesses since.
With the dramatic rise of Bitcoin it seems like every marketer is creating a Bitcoin course. I even heard an old guy talking about it at the gym today. It’s hitting the mainstream and money is coming into the bitcoin and crypto market like crazy. You can find experts who are bullish and those who think bitcoin is a farse. Mark Cuban calls bitcoin “more religion than asset.”
There are two views on Bitcoin:
1. It’s the future of currency and financial system
2. It’s going to crash or go to zero and it’s based on nothing and you’ll lose every penny you put into it
This is a screenshot of my phone. Look at the two stories on Bitcoin. One saying it’s monopoly money and the other says it’s going to hit $50,000 in 2018. Mark Cuban calls bitcoin a religion (a little extreme). Jim Cramer calls it monopoly money. I call it opportunity.
What is Bitcoin?
Ok, let’s start with the basics. What is Bitcoin? Bitcoin is a currency that you can buy and sell but it’s digital. It’s a global currency that was started in 2009.
As I’m writing this the exchange rate is 1 Bitcoin = 17699.99 US Dollar
Bitcoin was created as a free market. It’s not based on one computer. It’s not tied to any central bank. It’s also not regulated by the government. It’s actually considered much more secure than money kept in a bank (although your investment could be lost or stolen, as well as lose value). There is no one backing Bitcoin. If you make a mistake and type in an extra 0 and buy more than you meant to it’s too late, there’s no recourse. I’ve actually heard of people mistyping a number and sending their Bitcoin balance to who knows where. It can vanish because of a mistake.
Bitcoin is a way to move money globally and avoid paying huge fees that places like Western Union, etc. charge. There are fees to buy or sell bitcoin but they’re much more reasonable. You pay the fees to exchange to the miners who create Bitcoin.
Bitcoin is a cryptocurrency but there are hundreds of other coins you can buy. Some people think Bitcoin is too expensive so they buy other coins hoping that they’ll take a dramatic rise too. If you want to keep on up it all, I recommend you join the Facebook group Cryptocurrency For Beginners. This group helps me the most. When I joined I didn’t even know how to withdraw or buy Bitcoin. Just be discreet because you don’t know who is in the group or their motives. Don’t mention numbers and be aware that you can’t trust everyone, so do your homework and be skeptical.
How Do I Buy Bitcoin?
To buy bitcoin, you need to find a trusted website or app.
I use Coinbase which has a solid reputation and is easy to use. I think part of the reason is their referral program. If you buy $100 worth of Bitcoin through this link, you get $10 of FREE bitcoin. And I do too. That referral program encourages people to share it and has contributed to Coinbase being one of the more well known and popular places to buy Bitcoin. Besides bitcoin as of right now they also help you buy/sell Ethereum and Litecoin.
How Coinbase Works: you set up an account and connect it to your bank account. They will deposit money into your account which you must then verify the amounts of. At that point you can buy Bitcoin. It can take several days for the transaction to be completed and there is a fee that can change based on the volume of bitcoin being exchanged. You can set up automatic drafts daily, weekly or monthly so you won’t be affected by the swings in price. This is how I prefer to buy.
Coinbase is good for beginners, it has higher transaction fees, and is limited to only 3 different crypto currencies. However, it makes the bitcoin market easy to follow and is a good place to learn. It has a very intuitive interface:
I just joined Binance because it’s where you can go to buy bitcoin and a lot of alternative coins that you cannot buy on Coinbase. That’s the extent of my experience so far with them. I like that you can do limit and stop orders (not supported by Coinbase). So that’s why you may want to set up an account at both Binance and Coinbase.
If you want to buy other coins then you’ll need to register on another exchange such as Cryptopia. It’s a bit more advanced trading site. You can deposit, trade, and withdraw Bitcoin, Litecoin, and over 400 other crypto currencies. Note that the price of cryptocurrency can be different depending on where you buy it. Cryptopia lets you compare the “Ask” and “Bid” price from four (4) different websites. It’s based in New Zealand.
I find that Bittrex is the easiest to use. My second pick is Cryptopia. This is coming from a beginner.
You buy Bitcoin in dollar increments. For example, even if 1 Bitcoin is worth over $4,000, you don’t have to buy a whole Bitcoin. You can buy a portion of a Bitcoin. You can buy $5, $10, or more of Bitcoin. You decide how much you want to spend. They have an active forum and it’s set up to do arbitrage if you’re interested in that.
This video walks you through the basics of setting up an account on Cryptopia:
If your country isn’t supported on these exchanges there’s another option for you: in person trading from Localbitcoin.com. It works in the US and all over the world. I haven’t tried it myself but I found out about it from a friend who lives in a country that’s not supported by the other exchanges.
Where can I spend Bitcoin?
You can actually buy things with Bitcoin and this list will grow. Today, thousands of merchants accept Bitcoin (although it’s still pretty rare), here are a few you might recognize:
Newegg (US and Canada).
Cheapair is an online travel booking website.
How to Give Bitcoin As a Gift
My next step is to gift bitcoin to my son so he can be an investor and learn the joy of watching what your money does. I would only invest money if I have extra, nothing that I cannot lose (because there is risk in buying anything but bitcoin can have dramatic swings).
Here’s how it works: get your private key. Give it to the recipient either printed on paper or hand written in a card. Just be careful about how you send it because if someone sees your private key then they can get the money. If they lose the number, it’s gone forever. Don’t send it over email. I’ve read that you should write the number down, then photocopy it or take a photo with your phone and email it to a secure email address.
If I can’t figure that out I’m going to buy the t-shirt! A true bitcoin geek will have the t-shirt. It’s just what we do! I had a Twitter tshirt with my username on it. I need a bitcoin tshirt next!
Unisex All I want for Christmas is Bitcoin Long Sleeve T-Shirt 2XL Dark HeatherMIK Apparel Ugly Christmas Sweater Cryptocurrency Bitcoin Shirt – Holiday Funny SweatshirtMan’s Hooded Sweatshirt – Bitcoin Logo Bitcoin SignUnisex Bitcoin Logo Vintage Hoodie Large BlackUnisex Bitcoin Logo Text Sweater Medium BlackArtys Hoodies Bitcoin Logo 100% Cotton Man \r\nHoody Novelty Hooded Sweatshirt With No PocketUnisex Bitcoin Logo Vintage Sweater Medium Navy
Your turn. Would you buy bitcoin? Have you bought any? Do you have any questions about bitcoin I can try to help answer?