This article will be updated as things change, in order to keep everyone up to date - it's a fast paced world.
I started investing in cryptocurrency (Bitcoin is the first and biggest cryptocurrency) in late June of this year. I first heard about Bitcoin from a tech-savvy friend a year or two ago, and then heard about it again on a podcast. Whenever I hear about something from two people I trust, I run my googles. I’ve become obsessed ever since spending multiple hours a day researching this new world. I feel comfortable enough to start writing a basic guide to help friends and family, and maybe some Steemit people get started (But if you’re on Steemit already this may not be for you). I am an artist/designer with no experience in investing or finance, just interested in tech - so full disclosure this is just coming from a dude that’s been googling non-stop, not a professional advisor or anything (although they don’t really exist yet in crypto). This should serve just as a jumping off point, I would highly suggest doing your own research.
The idea of virtual money feels sketchy to me...
Lets briefly talk about the history of money. Thousands of years ago we had the barter system, where we traded things for other things… cows for chickens, silk for gold etc. Thousands-to-hundreds of years ago we started using precious metals in the form of coins and bars. Hundreds of years ago we started using paper money. In America it used to be backed by gold “the gold standard” - that went out the window in the 70s. This paper money system, or 'Fiat' money system, is controlled by the Federal Reserve (central bank of The United States) and carried out through the banks. In recent decades credit cards have become popular, we also now have Paypal and Venmo for transferring money, this is all still fiat money in different forms. The fiat system is liable to crash, as we've seen with depressions and recessions. It's very complicated to the average person and can be manipulated by banks, governments, and the super rich. Bitcoin is just the next form of money, and many people believe it and other cryptocurrencies will be a huge development for mankind, as it doesn't need a bank or government to control it's value, keep it safe, and its worth the same everywhere. Okay now get hyped off this video (warning: its a little dramatic but check it out...)
What is bitcoin, how does it work, and why is it different?
Bitcoin was invented in 2008 ironically the same year as the US financial collapse. Bitcoin is a decentralized anonymous (however not fully anonymous anymore) currency system. There are only 21 million bitcoins that can exist, no more can be created. Which is why the value of each coin keeps rising, as more people start buying and using bitcoin. Every single bitcoin transaction is stored in thousands of computers cryptographically making fraud impossible without changing the records in every computer which is currently impossible. This decentralized storage system of transactions is called blockchain. The blockchain technology system of making thousands of copies and spreading them out could revolutionize many things and is quite exciting. These videos will explain blockchain and bitcoin better than me:
Here's another good video explaining 'Blockchain' in 2 minutes
So again, basically Bitcoin and other cryptocurrency is the future of money, a new form that doesn't need banks, and doesn't care what country you live in, has very low fees (small %s of bitcoin is paid to "miners" who run their computers to process transactions), and you can't print up more bitcoin because the total amount is fixed in the code. It will be especially great for poorer people with no bank account, or countries with a corrupt bank system, and everyone basically :). Sending money through banks sometimes take days-weeks to clear, especially between country borders and have high fees. We’re in a complicated banking system that nobody understands anymore. We all just have a common agreement and trust that paper money is worth something. If we all trust bitcoin is worth something (There's $193 Billion worth of confidence as of today) and is useful, just like we all trust paper money is worth something, bitcoin will soar, and you will benefit from being an early adopter.
How do I buy bitcoin or other cryptocurrencies?
The most popular and trusted site/way to convert your 'fiat' (dollars) to cryptocurrency (bitcoin) is Coinbase.com. Coinbase has a license to operate in New York which is an important note for my NYers, most other sites do not have a license (the government is now catching up with crypto and there are some new regulations). Sign up for an account, the process is easy. Here's a video if you need help. The website design is slightly different now though.
- Important note: Make a strong password!! Use a program like Dashlanethat can store all your passwords. You will accumulate many passwords getting involved with crypto. Write all your passwords down in multiple secure places too, preferably not digital. You should have crazy passwords for your crypto things, ideally something like this: ;YnP*TVf?b}&Zq. Convenience is not more important than keeping your money safe. This new crypto world is under constant attack from hackers and you need to protect yourself. You are the bank now! and it comes with some responsibility. You will need to connect your debit card or bank account to start buying. Your buying limit will be less using a card. You will have to enter your SSN which will feel sketchy but this is normal, and is also required when you buy stocks. Now Enable 2-factor authentication- Click on Settings then Security and you should see it. Follow the steps, it requires you downloading the Google Authenticator app. This is very important for securing your account. It makes the hacker's job much more difficult.
After creating your account and signing in you will see
"Dashboard...Buy/Sell...Accounts...Send...Tools...Settings" Tabs.
Click on Buy/Sell - Here you will purchase your Cryptocurrency using your linked Payment Method (bank account or credit/debit card). You will see three options for Bitcoin, Ethereum, and Litecoin. I suggest just buying Bitcoin for now. Ethereum and Litecoin are also great coins, currently the 2nd and 5th largest cryptocurrencies, but I won't go into the differences here.
Putting in your first buy order - and getting the best price
Really any price is a good price in the long run, and by long run I mean 6 months, a year.. 5 years.. 10 years who knows how fast/much it will go up. However you want the best price right!? Cryptocurrencies are highly volatile and unpredictable. As I'm writing this, bitcoin is $3,398/per coin (now $7,077). It could easily drop down or skyrocket. Good chart readers on youtube or whatever can make accurate predictions sometimes but even the best have a high % of inaccuracy.
I can’t stress enough how much “Dollar cost averaging” is important for buying. This basically means not spending all of your money at once. Here is some strategy:
- Split up your allotted amount of money you have to spend in pieces. I would suggest minimally splitting it into 4 pieces which is aggressive but okay if you plan to keep investing. 10 pieces is conservative, and/or if you don’t plan on investing more in the near term.
- Buy with one of the pieces on a schedule. This can mean buying every friday (which is statistically the best day to buy). Or buy once a week when the price is a little lower.
The point is to just get an average buy in price. Bitcoin is very volatile and it’s hard to get the lowest price.
- A more advanced method would be to wait for a crash or “correction” in the price and scale your buys bigger as it goes lower. This is riskier for a few reasons: Bitcoin is going viral basically and there’s no telling how high it will go before coming down. Price corrections have been less and less severe over time. This also requires knowing the market better and anticipating a correction. So this method is not for beginners and you may wait for a price that never comes...
Don't drive yourself crazy checking the price every two seconds after you buy. Bitcoin/cryptocurrency is brand new and it's a roller coaster. You should just feel confident that it has promise, and will rise in value over time. Investing in cryptocurrency in 2017 is like investing in the .com bubble in the 90s. With that said, don't invest any money you're not ready to lose. The best thing you can do is learn more about Bitcoin and cryptocurrencies, this will help you sleep at night. Check out "Banking on Bitcoin" on Netflix or here on Youtube.
How do I safely store it?
You can technically just keep it in your Coinbase 'wallets' (Accounts tab) however exchanges like Coinbase are not as secure as keeping it in a 'wallet' on your computer. I recommend the Exodus wallet. Go to the 'Download' page, via button on the upper right hand corner of the page. Download for your Windows, Mac or Linux computer. Here is a tutorial video direct from Exodus, Watch the video but you'll be depositing funds into the account slightly different: https://www.youtube.com/watch?v=98xeDpl-TXY .Deposit your Bitcoin into Exodus:
- Go to Coinbase and click the Send tab.
- Now on Exodus, click the Wallet tab - then click Bitcoin
- Hit the receive button
- Copy the bitcoin address (the long string of numbers and letters)
- Paste in the 'Recipient' box (where it says 'Email, or bitcoin address')
- Click 'Use Max' and make sure it says your 'BTC wallet' then hit send.
- It will send fairly quickly, but not instantly! Don't freak out! Allow at least a few minutes for it to go through.
Keeping your money off of exchanges like Coinbase, and on your computer (via Exodus), and creating strong passwords are the best steps you can take to keeping everything safe. You can be even more secure with a 'paper wallet' or 'hardware wallet' which I won't explain here. Using exodus is way more secure as someone would need to have physical access to your computer to steal your funds (hacking into someone's computer via the internet is very difficult and not likely). As opposed to a website (exchange site like Coinbase) where if someone guesses your password they can steal your money.
Final Thoughts
This is the path I used to get started, which is the result of lots of googling, however I encourage you to do your own research. My initial investment did lose money (I bought in at bad prices), however now I am significantly up on my investment. I have however moved on to trading other cryptocurrencies which is kinda where the faster money is at. So don't expect immediate increases in value, it is kind of a long term thing that will go up and down, but far better than stocks or other investments. Now is also a great time to invest, you are still early even though the price seems astronomical. Maybe once I get better at trading smaller cryptocurrencies I will write another post. If you're interested past Bitcoin, check out coinmarketcap.com and see all the coins and projects happening. These are coins listed by "market cap" or general size in price. Investing in just Bitcoin is still a great move. Like I said it is extremely early still. It could be worth exponentially more as more people buy and use it. It has been through a lot of ups and downs already and has stood the test of time. Keep up do date with Bitcoin/cryptocurrency news. It's interesting and could really shake up the world.
PS
What is this Steem site?
It's a great new social networking site with it's own cryptocurrency. I think it's most similar to Medium and Reddit. You can make money posting, liking (or 'curating') content. The dollar amount below this post reflects real USD but in crypto form. It can be converted to real dollars (maybe I'll make another post about this too, although there are many already).
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