What is Bitcoin?
Bitcoin is a decentralized, peer-to-peer, digital currency system, designed to provide online users with the ability 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 developer. Since then, Bitcoin has attracted enormous attention and controversy as an alternative to the US dollar, euros and commodity currencies such as gold and silver.
Rise to popularity
Bitcoin did not attract 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 attach importance to cryptocurrencies.
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 last year’s total of $88 million . This is a stark contrast to the scenario of 2012 when Bitcoin firms raised a relatively modest sum of $2.2 million.
These statistics undoubtedly prove that Bitcoin is worth your investment, which begs the question, how can you buy and invest in Bitcoin?
A Guide for Beginner Bitcoin Investors
The easiest and least complicated way to invest in Bitcoin is to buy Bitcoins. There are many established firms, mostly in the US as well as abroad, that are engaged in the business of buying and selling bitcoins, abbreviated as BTC.
If you live in the US then Coinbase is the place you are looking for. Coinbase provides BTC to its clients at an estimated markup of 1% to the prevailing 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 ability to automatically buy bitcoins from time to time. For example, if you’re interested in buying $50 in bitcoins at the beginning of each month, Coinbase lets you set up an automatic purchase for that amount.
Please note the terms and conditions before 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 is purchased each month. Note that Coinbase does not function as a Bitcoin exchange, ie. you buy and sell coins directly from the company. Because the firm must source coins from other buyers, you may experience delays or interruptions 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, not 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 from $150,000 in a 30 day period.
Alternative ways to buy Bitcoin
Exchange is not the only way to invest in bitcoins. Local Bitcoins are often used to buy BTC offline. The website is designed to connect potential buyers and sellers. Bitcoins are held in a locker by the seller in escrow and can only be released to buyers.
Buying bitcoins offline is not always very reliable or secure. That’s why it’s better to meet the sellers during the day and have a friend tag you just in case.
Bitcoin is not just a modern trend. Venture capital firms see Bitcoin as 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 bitcoin in the United States. Do your homework and find out which path ticks all your boxes.