Bitcoin is arguably the buzziest investment the marketplace has seen in years. The digital currency continues to soar in price even as large bouts of downside volatility has shaken it along the way. With rising prices and the potential for even bigger gains ahead, many investors are wondering if and how they should get involved.
But before discussing the basics of investing in bitcoin, there is one thing I should make clear: this is not a recommendation to buy bitcoin. Doing so involves the risk of a total loss, and investors should perform thorough due diligence on their own before deciding to invest. There could be a great deal of opportunity in bitcoin in the future if it continues to gain popularity and to grow, but ultimately it is for the individual investor to decide if the investment makes sense for him/her. This post is simply meant to offer readers a few of the basic “ins-and-outs” of bitcoin.
One of the first steps for new bitcoin investors is to procure a bitcoin ‘wallet,’ which you might think of as a digital bank account of sorts for storing your bitcoin. Depending on the security levels you want, different types of wallets are available. Some act like everyday spending accounts and have functionalities you’re probably familiar with, while others offer much more sophisticated protections.
There are essentially three wallet options from which to choose: 1) a software wallet stored on the hard drive of your computer; 2) an online, web-based service or 3) a 'vault' service that keeps your bitcoins protected offline and/or has sophisticated keys for opening. At the end of the day, many wallet choices have vulnerabilities and the system is far from perfect. There are multiple wallet providers from which to consider. Coinbase is one of the more popular wallets and exchange services that will trade US dollars and euros for bitcoins. The company has web and mobile apps.
Once you have your wallet and bitcoin you may consider one of the many exchanges if you want to engage in active trading. At this time, the largest full trading exchanges by volume are Bitfinex (Hong Kong), Bitstamp (US), BTC-e (unknown), Kraken (US), Huobi (China and Hong Kong), OKCoin (China), and BTCC (China). To enter the exchange, you generally need to provide proof of identity and contact information. This is the law in most countries and no regulated exchange can get around it, as any company interfacing with the current financial system must meet 'know your customer (KYC) and anti-money laundering (AML) requirements.
In terms of how to trade bitcoin, one strategy to consider is trading with the trend, assuming you have the tools needed to identify trends in the market. The founders at Tickeron have developed Artificial Intelligence (AI) for Trend Prediction Engine, (TPE). If you are interested in testing out the AI to see how it works for stocks, just visit www.tickeron.com and sign up for a free trial.
Finally, if you are strongly considering trading and investing in bitcoin, consider these three things: