Bitcoin took the world by storm in late 2017 when it shot up to nearly $20,000. While BTC has fallen quite a ways down since, and has been sitting in price doldrums for months, some experts argue that this lull is the perfect time to stock up on BTC before their value rises back up. Here’s everything you need to know if you’re considering buying Bitcoin.
Before You Buy: Basic Storage Techniques
Before you even think about whether or not you should buy any kind of cryptocurrency, it’s extremely important to know how to effectively store your coins.
There are numerous things to consider when deciding how your cryptocurrency should be stored–most importantly, however, is deciding which kind of wallet that you’d like to store your currency in. Generally speaking, there are six categories of crypto wallets: Electronic Wallets, Online Wallets, Mobile Wallets, Hardware Wallets, and Paper Wallets. Let’s take a look at the unique features of each:
Online Wallets: These provide the most convenient options for a given trader, and are great for those that wish to access their funds on the go and anywhere under any scenario. They’re relatively easy to get going and often come with applications which allow for access both desktop and mobile devices.
The trade-off here comes at the expense of security. Your private keys will be stored online, and require you to trust the company that you’re storing the keys with. It also means that if hacked, your wallet can be accessed by anyone. Your funds can also be shutdown, if the website were to close.
Electronic Wallets: These wallets are a little simpler in terms of usability. They are downloaded, and store your coins n the cloud or on the hard drive of your computer.
Cloud-based options have similar problems to online wallets in the sense that you will be providing your private keys to a third party who once again can access your funds at any time. The hardware aspect is better, but still can be problematic should your computer be hacked or if you use a network that’s not secure to download.
Mobile Wallets: These wallets are usually fairly easy to understand as they are stored on your mobile devices. They are in effect applications which can be stored on a given device and are highly helpful if you would like to access your funds whilst moving around or indeed if you desire to buy something from a shop using Bitcoin.
These wallets ultimately tend to store funds online, so they all of the security pitfalls associated with online wallets. Private Keys are ultimately stored by a third party which could leave you somewhat exposed.
Hardware Wallets: These wallets provide a different level of security in a way which online wallets don’t in the sense that they do not require you to provide private keys to a third party and in fact, you are in full control of the information that you’re provided with.
These devices are mostly offline, and very difficult to hack though a problem with them is the fact that they can be lost or stolen where the thief would gain access to the person’s funds. Thus, it is vital to keep these devices as secure as possible in an appropriate location.
Paper Wallets: These wallets just like the hardware ones in the sense that they’re completely offline and difficult to hack (in fact impossible). These wallets are extremely simple and are stored on a piece of paper, hence the name.
To be secure, a user has to ensure that they’re protected from disasters and theft and kept in a secure location. These are the easiest to lose, and as anyone with a private key can access your funds, it is best to look to keep these in a very secure place and ensure there is no damage to them. All you need to create this wallet is a paper and printer.
Should I Buy Bitcoin?
There are two sides two this argument to consider and both have their valid points. Thus we’ll take a look at whether these are appropriate for the right situation in the given context.
Let’s look at the arguments against first:
First off, the price of Bitcoin fluctuates regularly during the day and often rises and falls inconsistently. This instability means that you may be liable to lose your money in the quickest of times which is extremely problematic for those looking to properly invest in the currency.
Bitcoin’s actual value is still something to be determined as well. In fact, the thing that makes it stand out the most is the technology which it is based on: blockchain. The token itself is something which is not actually that valuable. In actual fact, there are other cryptos which offer far more complex technologies which would provide far more valuable aspects for the individual. Thus, an investment in Bitcoin isn’t one that is consistent with investing in the tech, but rather looking to buy into the wave of popularity behind the coin, rather the hype. This is extremely risky investment at best.
Finally, there is the issue of security to consider. Crypto exchanges are victims of regular hacks which occur too often for the coin to be seen as secure, There are no regulatory bodies or central systems which would help you secure Bitcoin so if you’re hacked or lose your money, it’s very unlikely that you will ever see it again. Also, if an exchange is hacked, normally the users also lose out a fraction of their earnings which can be perceived as unfair for some, and large amounts of precautions must be taken to store the cryptos securely.
There is a flipside of the argument to consider as well in the positives associated with the Bitcoin investment. For example, the technology aspect is something which can be considered positively as Bitcoin is the most successful implementation of blockchain technology, and as such, investing in the coin is in effect what can be seen as an investment in the ‘future of money’. There is still vast amount for potential to be unlocked in this technology which can continue to grow and expand. Many consider Bitcoin to be the beacon for this movement.
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Still, the investment is not something which is going to be a reliable store of value, so one needs to take every precaution possible as the price of the coin can potentially crash at some point.
BITCOIN: Warren Buffett is rat poison squared
Given that Berkshire Hathaway asnt been able to beat the s&p 500.
If he considered tech stocks and crypto seriously, his rat poison investment firm wouldn’t be losing money.https://t.co/tNwbrX85XI
— Joseph Young (@iamjosephyoung) May 6, 2018
That being said, there is the factor of the banks being threatened by this technology and it is possible that the currency can actually thrive and continue to grow. It seems that in the short-term the price of Bitcoin may continue to rise so it can be particularly effective in this manner.
The price of Bitcoin is extremely reactionary to the news which come out about the currency so this means that every time there is a hack or something negative coming out in relation to the coin the price is likely to plummet. As such, investing in Bitcoin now can be a positive idea given the fact the coin has rapidly declined in price given the crackdown of governments and certain large hacks. However, it is likely that this will change and the coin will make a recovery creating more profits for investors who place money in now.
Where to Buy Bitcoin
There are numerous methods and places where one can purchase bitcoins and the key is to keep up the best practices possible in order to make sure you stay safe when buying the currency.
As mentioned previously, the best practice is to set up a secure wallet first, so that you have somewhere to store your currency as storing money on an exchange is extremely problematic given that they’re prone to hacking. Once you’ve set up the wallet, you go on to the more complex step of buying the coins.
In order to buy Bitcoin, you will need to set up an account on an exchange. For example, Bitfinex is the largest exchange for cryptocurrencies in the world and can be a useful place to start. These exchanges require rather complex forms of verification to ensure that no fraudulent activity can take place. You would be required to show several forms of ID as well as taking a picture with the ID in hand.
The payments on the exchanges can be made with several methods such as bank transfer, paypal transactions or indeed credit cards, all depending on the exchange. It is also worth noting that exchanges do charge fees per transactions so you’re never fully transferring the money back that you originally had. There are also numerous measures in place to ensure that no fraud is committed on the exchanges and to ensure that the safety and integrity of every exchange comes first.
My short term price predictions: in a major dip, with nearly everything dropping, the price of Docademic doubled since my prediction. The market will turn before June 12th and my predictions will hit. My algorithms predicted Trump’s June 12th date. They have never been wrong. pic.twitter.com/IGAzWPtOV4
— John McAfee (@officialmcafee) May 24, 2018
The Know-Your Customer (KYC) and Anti-Money Laundering (AML) Regulations are thee reasons that the current state of the exchanges is the way it is. Every exchange ones to keep up to track with the latest regulations in order to provide the most secure service to clients and to ensure that the interest of the exchange are protected.
There is another opportunity for purchasing crypto when one looks towards looking to buy Bitcoin with cash. This option is a little less straightforward but still offers a viable alternative to the more common methods. There are certain local platforms which can be used where an individual can trade coins directly with other people.
Obviously, security precautions would need to be taken here but beyond that the process is straightforward, though at times time consuming. There is also the option of ATMS which function in the same way as those in banks which send you Bitcoin when you scan QR codes to be able to withdraw Bitcoin.
Finding a secure place to utilise this function may be trickier in some instances due to the fact that this method is ultimately less popular than the previous ones, but it still provides a more interesting option than other ones.
Ultimately, choosing the right option for the purchase of Bitcoin is as important as where to store it as it is extremely personal and needs a certain amount of awareness of the security issues which are surrounding this practice. If implementing the correct security procedures and knowing how to stay safe, you can quite easily make your Bitcoin involvement far richer and easier by simply following certain steps which will be covered in the next section.
Best Practices: Staying Safe
Here we will take a look a the tips to ensure that you can stay as secure as possible when purchasing Bitcoin as well as which methods are most effective to maximise your own personal security in regards to using the coin.
The first point to consider is the notion of private keys. These are ultimately what allow you for access to your account and your funds. Anyone who has your private keys is able to access your Bitcoin and cryptocurrency in any shape possible and as such you’re liable to have your funds stolen if you do not need the right security precautions. Guard these keys with your life and make sure no one but you is able to access them! Keep your offline wallets in the safest location possible, such as a safe, and whilst using online wallets make sure to check a website’s SSN certificate before proceeding.
Private Keys can be secured in different ways and whilst offline wallets such as hardware and paper wallets can be the most effective, multiple complex passwords or passphrases which can be particularly secure.
Another take on security can be the usage of multi-signature addresses which work incredibly well in increasing the security levels. In effect, multiple verification by several devices would be required to access funds and as such this method would be highly effective in keeping the levels of security rather high. It minimise the risk of being hacked significantly as one would need to gain access to several devices rather than just the one to access your cryptocurrency. Every device would be unique and controlled in a way that is not related to the others.
Using hardware wallets or paper wallets reduces the chances of your account being hacked, and also mean that you have a complex unique seed which will keep your private keys secure in the most complex of circumstances.
However, as taking the currency out of the wallet can be time consuming it is normally recommended to keep a small amount in an online wallet in order to be able have the quickest access to your funds in the simplest manner possible. As long as you take certain precautions in terms of connectivity, your issues with online wallets should be fine though you’re still under a small risk of being hacked.