10 Things Everyday People Need to Know When Buying Bitcoin

By on November 28, 2017

Tempted to invest in Bitcoin? Here’s ten things to keep in mind as a beginner:

  1. It’s a risky investment. Bitcoin prices are extremely volatile. The cryptocurrency has rocketed up from $959.36 on January 1 of this year to $7,752.75 on November 19, but it’s been a wild ride in between, with massive single day crashes such as the drop of 7.7% on September 8.
  2. What’s a Bitcoin wallet? Bitcoin wallets are programs to send, receive, and store your balance of Bitcoin, like an online bank account, and the private key to the account is a long string of numbers that serves as the account’s password.
  3. Cold storage or hot storage? There are many different Bitcoin wallets, but they break down into two main categories: hot wallets, or wallets connected to the internet, and cold wallets, which are not connected and therefore invulnerable to hackers. Hot wallets are less secure and best used for spending cash, whereas cold wallets are best for investment.
  4. What’s a Bitcoin exchange? A Bitcoin exchange is where you will buy Bitcoin, and where you can exchange it for regular cash. Typically, it’s best to choose an exchange in your home country to more easily move between Bitcoin and your own currency.
  5. What’s the exchange rate? Some exchanges have low fees but then they give you a terrible exchange rate.
  6. Payment methods. Exchanges that allow methods via which a buyer can ask for their money to be returned, such as PayPal or credit cards, charge higher fees than those that are irreversible, such as wire transfers.
  7. Fees. Bitcoin exchanges charge deposit fees, transaction fees, and withdrawal fees. You’ll want to compare fees when choosing your exchange.
  8. Play it safe to avoid fraud. Fake exchanges, fake wallets, phishing scams, Ponzi schemes – just like the rest of the financial world, fraud abounds in the Bitcoin space. Consult this guide put out by Bitcoin itself to avoid the pitfalls, and avoid buying from individuals.
  9. Trading platforms or brokers: You can also buy via trading platforms that connect buyers/sellers directly, or through brokers, who charge more but make for an easier process.
  10. Ownership: Like on any exchange, it’s not really yours until you get it into your wallet, so remove from the exchange and into your storage.

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