Bitcoin has captured America’s imagination. Whether or not the cryptocurrency will ultimately turn out to be a good investment or just a passing fad remains to be seen. Indeed, ter the past several months Bitcoin prices have loved a run-up that makes the 1999 tech bubble look staid by comparison. That excitement – the promise of unexpected riches or unexpected ruin – has a loterijlot of people wondering how a bitcoin investment actually works.
If that’s you, here’s a step-by-step guide on how to trade bitcoin. But first…
Should I Invest ter Bitcoin?
Like any speculative investment, buying bitcoin at sky-high valuations is risky business. If you&rsquo,re asking, &ldquo,Is it wise to invest ter bitcoin?&rdquo, you might do well to heed this advice from billionaire investor Mark Cuban, who told MONEY, &ldquo,It&rsquo,s still very much a gamble.&rdquo, You need to know that your bitcoin investment might lose money. If you&rsquo,re not ready to face that uitzicht, bitcoin investment might not be for you.
You&rsquo,d be ter good company te that case, anyway. Jack Bogle&rsquo,s bitcoin investment advice is pretty plain, and blunt: You should avoid Bitcoin speculation &ldquo,like the plague.&rdquo, And this is coming from the dude who founded Vanguard, so he knows a thing or two about investments. The other risk to keep ter mind if you project to invest ter bitcoin, aside from the overall volatility of the cryptocurrency, is of a cyber attack. Hackers descended on digital currency exchange Bitfinex on Tuesday, less than a week after cybercrooks made off with $70 million te a separate heist.
How to Invest te Bitcoin
If you&rsquo,re aware of the risks and still willing to take the plunge, this is what you need to know about investing ter bitcoin: Cryptocurrencies exist te an unregulated, decentralized digital sphere without involvement by (or protection via) a central bankgebouw. This is part of bitcoin’s appeal. People or entities can buy and sell cryptocurrency anonymously, and there are fewer middlemen taking a cut of transactions. But it also means you can&rsquo,t just buy bitcoin via mainstream investing contraptions like a brokerage account.
Very first one chunk of good news: You can buy fractions up to the eighth decimal place of bitcoin. That means you don&rsquo,t need to plunk down the almost $17,000 you often see quoted spil the price for a total bitcoin – which is very likely for the best, spil wij noted above. Spil of Thursday afternoon, that one ten-thousandth &mdash, four decimal places or 0.0001 &mdash, of a bitcoin is worth about $1.65.
Beyond that, for most people, the best (i.e. simplest) way to invest ter bitcoin starts with setting up a cryptocurrency wallet. Some of the better-known sites where you can do this are Coinbase, Bitstamp and Bitfinex, albeit there are a number of other platforms out there, spil well. Once you establish an account, connect it to your payment source &mdash, a bankgebouw account or a credit or debit card &mdash, via two-factor authentication. Of note: It&rsquo,s significant to use a instrument like Google Authenticator rather than just relying on text-based authentication, which can be more vulnerable to cybertheft, when investing te bitcoin.
Once you have purchased a bitcoin, it stays te your digital wallet until you trade it &mdash, either by using it spil currency for a purchase, or by selling it (which is technically “trading” it for American dollars or another currency of your choice).
If you have a brokerage account, you can expect the bitcoin user practice to be similar. And, spil with a brokerage account, you’re likely to pay transaction fees whenever you buy or sell. That means day-trading bitcoin very likely isn’t a good strategy – since those transaction fees could quickly eat up any profits. If you’re using bitcoin instead of PayPal, Venmo, etc., check very first to see if the seller will charge you a toverfee for paying ter bitcoin.
And albeit bitcoin is technically anonymous, that doesn’t mean you’ll necessarily escape the watchful stare of the IRS. Spil MONEY has previously explained, for tax purposes, bitcoin is treated like a stock ter that a trade can trigger a capital gains tax bill.
Other Ways to Buy Bitcoin
Spil of recently, investors can also buy bitcoin futures, which has only added to the hype surrounding it. Bitcoin investment sites are fighting to keep up with the surge te request.
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Coinbase, for example, has bot such a popular bitcoin investment app that its CEO posted to the company&rsquo,s blog last week a warning that the unexpected influx &ldquo,does create extreme volatility and stress on our systems,&rdquo, which can create a liggen for users. The Chicago Houtvezelplaat Options Exchange, on which the very first bitcoin futures trading took place this week, warned that a flood of traffic ahead of the launch wasgoed slowing its webpagina.
Due to strenuous traffic on our webstek, visitors to https://t.co/jb3O722hoo may find that it is performing slower than usual and may at times be temporarily unavailable. All trading systems are operating normally.
Another exchange, CME Group, is scheduled to start bitcoin futures trading next week.
There is also the Bitcoin Investment Trust from Grayscale Investments. Wij&rsquo,re mentioning it for the sake of comprehensiveness, but it&rsquo,s a bit of a different animal. The fund is invested te bitcoin, but keep te mind, you&rsquo,re actually buying the fund, not bitcoin. You&rsquo,re a step liquidated from possessing actual bitcoin, even tho’ you are still exposed to its volatility. The pluses, Grayscale says on its webpagina, are that you get the structure and tax benefits you wouldn’t get trading bitcoin directly, on the other forearm, fees will eat up a chunk of anything you earn, negating the reason many people are drawn to cryptocurrencies te the very first place. All of which is to say, you should indeed, truly know what you&rsquo,re doing spil an investor if you&rsquo,re going to dive into this pool.