U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Economics > Investing
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 07-24-2017, 01:41 PM
 
Location: All Over
4,004 posts, read 5,004,761 times
Reputation: 3104

Advertisements

Beginner Friendly Guide to Buying and Holding Bitcoin & Cryptocurrencies

There seems to be a lot of new interest in here and online in general about Bitcoin and Cryptocurrencies so I thought I would make a brief guide on how a beginner can safely and easily buy Bitcoin as well as "alt coins" or other Cryptocurrencies.

I'm going to assume you know the very basic idea of what Bitcoin is so I won't go too in depth, but Bitcoin is a digital currency based on cryptography. There can only ever be 21 million Bitcoins so no inflation. It's decentralized meaning no central bank, or government or central authority is in charge of it. Unless the internet goes down it can never go down as it's run on nodes all over the world. It's nearly impossible for it to be tricked or hacked since it's based upon proof of work. And no, it's not backed by a central bank or government, but that's actually a good thing as you can't print fake money out of thin air, the value is in the utility and it's become pretty clear people believe in it which gives it it's value as well.

Blockchain technology is essentially what Bitcoin, Ethereum, Litecoin and pretty much all cryptocurrencies or digital currencies are based upon and it's being adopted by banks, Wallstreet, etc. For anyone who still doubts it guys like Bill Gates, Richard Branson, and others have talked about how bullish they are about Bitcoin and blockchain technology in general and recently John Mcafee of Mcafee anti-virus said he would eat his own penis live on tv if Bitcoin is not at $500,000 in 3 years. Basically people smarter than you and I are big believers.

A Couple Points Before We Get Into It

1. Don't invest more than you're willing to lose. Crypocurrencies are still in their infancy and there is a lot of volatility. Personally I have 30% to 40% of my investments in cryptos but in general you probably don't want more than 10% max, probably. Hopefully going in with this mentality will keep you from selling on a dip, and there will be dips but it always rises back up.

2. Decide why your buying in. Do you believe Bitcoin will be worth tens or even hundreds of thousands per coin? If so your a long term holder. Or are you just trying to swing trade and make a few hundred here and there on dips and spikes?

3. Don't sell on dips. Many new Bitcoin holders bought in at $3,000 and then understandably freaked out and sold when it dipped to $1900, they sold and lost a boatload of money. Less than a week later Bitcoin was back up over $2900, happened in less than 48 hours.

4. Learn how to safely store your Bitcoins. Ideally you want to control your private keys yourself and not keep them on an exchange. We'll discuss this in this guide.

Buying Bitcoins

You want to buy your Bitcoins on Coinbase.

Coinbase is going to be the safest and easiest to use, especially for a beginner. With Coinbase you can purchase with an ACH transfer from your bank or by using a credit card for an additional 1%. For larger purchases you can also send a bankwire.

Coinbase is regulated, they are insured, and they are one of the few exchanges, if not the only exchange, which to date has not been hacked. They also offer two factor authentication via either text message or Google authenticator use it. Basically if someone gets your password they can't get into your account without also having your phone.

Coinbase sells Bitcoin, Ethereum, and Litecoin, the three major cryptocurrencies. For other alt currencies you can buy on Bittrex.

They make the process of buying Bitcoins and other cryptos as well as holding them or storing them safely very user friendly and easy.

Coinbase also offers a cold storage as well as a cold storage where you hold your own keys. We'll get into that later.

Overall, Coinbase really makes the entire process simple. They have a user friendly interface and it's really no different than doing something with your online banking or Scottrade or Schwab account. They also offer things like recurring buys for those of you who want to get into Dollar Cost Averaging.



Storing Your Bitcoins Safely

Most of the smartest people in the room will tell you it's stupid to store your Bitcoins on an exchange, and it's a valid point. Ideally you want to control your own Bitcoins and control your own private keys. That said it can be a bit overwhelming when you first get started, and I'm going to go against conventional widsom and say storing your Bitcoins on Coinbase isn't the worst thing in the world.

While it's true many exchanges have been hacked, one of the biggest most memorable stories being MtGox, Bitcoin exchanges have come a long way since then. MtGox was initally setup to trade magic cards, not Bitcoin or financial instraments so when people say don't keep your coins on an exchange I think they are more so referring to unprofessional exchanges like MtGox as opposed to a company like Coinbase who's regulated, insured, and has a high level of security.

Exchanges

Coinbase is probably the only exchange I would recommend storing money on. I still would say it's ideal to hold your coins on a light software wallet like Electrum or a hardware wallet like Bitcoin or Trezor, however I would still sleep safe at night having my coins on Coinbase.

To help secure your coins I'd recommend using Coinbase's 2 factor authentication. This can be done using either text message or Google Authenticator. This basically means even if someone had your Coinbase login they couldn't access your account without also having your phone to receive the second part of the authentication.

Coinbase also offers a vault feature. You can transfer Bitcoin from your regular wallet to the vault. The vault is protected with an additional password and when you want to pull money out of the vault there's a 2 day waiting period, during which, Coinbase will bombard you with e-mails and texts asking you if you did the withdrawl.

Having two part authentication and using the vault would make it literally impossible for someone to steal your Bitcoin.

If your someone who wants to hold or store your own private keys Coinbase also offers a multisignature vault where you control 2 out of 3 of your private keys and Coinbase holds the other so they can sign off on your transactions. Coinbase however even if they wanted to could not do anything without your two keys which you hold.

I would say your first couple weeks on Coinbase keep your coins there while you slowly get comfortable with holding and using Bitcoins. Make a small purchase, make a small transaction or send, just try to slowly get a lay of the land and learn while using small amounts.

If you want to store them on Coinbase forever I honestly don't have any big objections to that but I would suggest learning how to use a software wallet or a hardware wallet.

Software Wallets

There are essentially two types of software wallets. Something like Multibit which downloads every Bitcoin transaction on the blockchain and really bogs down your machine, or a "lite" or "light" wallet like Electrum.

Electrum is probably the most popular, more secure, and safest software wallet to use. It's free to download, it's very userfriendly, and in the case of a coin split or fork they have said they will support both coins.

There are other hardware wallets but I really like Electrum as it's easy to use, it doesn't bog down your computer, they will support offshoots of Bitcoin, and it's compatible with hardware wallets like the Trezor and Ledger.

Sending Bitcoins from an exchange to your software wallet is literally as easy as sending an e-mail. Put in the address of your Electrum wallet and hit send.


Hardware Wallets

Hardware wallets are by most considered to be one of the safest ways to store Bitcoin. While there's a couple different types the two big names are the Trezor and the Ledger. The Ledger is currently backordered until September 1 and costs 58 Euros. The Trezor you can get immediatley and costs 89 Euros.

Both these wallets are excellent and you can't go wrong with either. That said I think the Trezor is a bit more secure and a bit more user friendly, however the Ledger can store more alt coins if you wind up getting into those.

These devices are basically like fancy USB sticks. What they do is store your coins offline so you can do Bitcoin transactions on a computer or phone which is infected with malware or viruses and there is no security risk as the private keys are actually on your device which require an encoded pin to use. Even a keylogger will not be able to steal your Bitcoins.

Sending Bitcoins to your hardware wallet is as easy as sending an e-mail. Just put in the address, put the amount, and hit send.


Investing In Alt Coins


While Bitcoin is kind of the first and main cryptocurrency, there are many others which people often refer to as alt coins or alternative coins. The main ones aside from Bitcoin are Ethereum and Litecoin. Ethereum was up over 5000% from the new year up until the recent dip. The other main altcoin is Litecoin. Coinbase supports Bitcoin, Litecoin and Ethereum.

There are other alt coins, some are great and have seen returns of thousands of percentage points in the past few months, others are more like penny stocks and pump and dump schemes and will go to zero.

I would suggest mainly sticking with Bitcoin, Litecoin and Ethereum for your first few weeks until you get the hang of things. If you want to start dealing with alt coins later down the road you'll do so on Bittrex. Bittrex is the largest marketplace and has the most amount of altcoins. It's fairly easy to use and pretty secure. There are other exchanges like Gemini and Poloniex, however I recommend Bittrex.

You typically cannot buy alt coins with Dollars, you need to first buy Bitcoins on Coinbase and then transfer Bitcoins to your Bittrex account where you can trade Bitcoin for other alt coins.

Where this gets kind of confusing is while some hardware wallets store multiple coins and some software wallets store multiple coins, not every wallet stores every coin so if you start getting a large holding you may need dozens of different wallets to hold all your coins. I don't have huge holdings in alt coins so against a lot of peoples suggestion I typically keep them on Bittrex and have not had any issues.

If you're wondering about some alt coins to look into here are some of mine I really like and hold... Ripple, Monero, New Economy Movement (NEM/XEM), Lisk, ARK, Steem, Dash, Golem, Siacoin, Bitshares, Ethereum Classic, Antshares, VertCoin, Maid, Waves, Burst, Komodo and Ardor.

One last thing I want to mention about alcoins. Origionally most coins were meant to be currencies. As of recently however a new thing is ICO's or initial coin offerings which are sort of like an IPO for a stock. Some will take off, others will flop and go to zero. Conventional wisdom is stay away from them for the first few weeks/months. The reason I bring this up is these are not really cryptocurrencies in the sense they are meant to be a store of value or a way to transfer money.

To get around accredited investor rules where only people with a net worth of over 1 Million can invest, by calling it a coin tech startups are able to get around these rules and sell their coins to investors, as long as the coin has some "utility".

Some of these coins may actually have a bright future, however I do feel the need to specify not all of them are meant to be transfers of value. If the company fails the coin fails.


Wrapping Up


That pretty much sums up the basics to buying Bitcoin and storing it safely. I didn't wanna go in to too much depth as this is a beginner guide and this should be enough to get you started. If you have questions or want anything clarified drop a comment and I'm happy to answer.
Rate this post positively Reply With Quote Quick reply to this message

 
Old 07-24-2017, 09:35 PM
 
Location: Saint Johns, FL
1,433 posts, read 1,137,186 times
Reputation: 1437
As someone who knows NOTHING about this, I appreciate the writeup. I had some questions. (I warn you I know nothing).

How is it limited to 21 million bitcoins?
How many are there now?
I understand the coins are created by some kind of computer work. Can you explain that a touch?

Do you have to be an accredited investor to buy a bitcoin?
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-25-2017, 05:54 AM
 
Location: All Over
4,004 posts, read 5,004,761 times
Reputation: 3104
Quote:
Originally Posted by Newporttom View Post
As someone who knows NOTHING about this, I appreciate the writeup. I had some questions. (I warn you I know nothing).

How is it limited to 21 million bitcoins?
How many are there now?
I understand the coins are created by some kind of computer work. Can you explain that a touch?

Do you have to be an accredited investor to buy a bitcoin?
Hey great questions.

So as far as why 21 Million will exist, I don't think anyone knows why Satoshi, an anonymous character who created Bitcoin chose 21 blocks but people speculate it has something to do with the timeline of how new blocks are discovered is divisible by 21 million. I'm going to do a terrible job explaining this so I'll just link you here...

https://bitcoin.stackexchange.com/qu...-to-be-created

Currently there are about 16.4 Million Bitcoins in existance. I've heard the last Bitcoin will be mined in 2140 however seeing as how were already at 16.4 of 21 Million that seems pretty far off although the dififculty of mining blocks goes up as time goes on so maybe that's why.

As far as how Bitcoins are created, this short 1 minute video explains it very well...


https://www.youtube.com/watch?v=GmOzih6I1zs

Lastly as far as being an accredited investor no you do not need to be an accredited investor, you can go on Coinbase right now and buy Bitcoin. One other thing I'd liketo add, Bitcoin is divisible so you don't need to buy a whole Bitcoin. I know a lot of people want to get involved but don't have or don't want to sink in $2600, but you can buy $20 worth of Bitcoin and get 0.01 bitcoin. YOu could even buy a Satoshi which would give you 0.00000001 BTC
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-25-2017, 07:49 AM
 
4,311 posts, read 3,751,132 times
Reputation: 4252
Cryptocurrencies are snake oil. Caveat emptor.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-25-2017, 08:16 AM
 
Location: All Over
4,004 posts, read 5,004,761 times
Reputation: 3104
Quote:
Originally Posted by Wells5 View Post
Cryptocurrencies are snake oil. Caveat emptor.
Wells common dude, don't be another one of these guys who throws out the incredibly played out it's nake oil, I have tulips to sell you, I have beanie babies to sell you.

It's incredibly unorigional and you havn't made any argument over why it's snake oil? At least come up with an argument otherwise your just someone who's stuck in the past and wants to hate on stuff they have no idea about.

I'm by no means suggesting someone empty out their 401k and throw it into Bitcoin and cryptos. Honestly for the vast majority of people I'd probably suggest buying $100 worth of Bitcoin, storing it away and forgetting about it. If someone wants to take the time to learn more and understand it and make more educated larger purchases if you truly believe in it then do that but honestly for the majority of people I'd say treat it like a lottery ticket.

Not sure if you realize this but Bill Gates, Richard Branson, Warren Buffet, Eric Schmidt former CEO of Google, Al Gore, among others have all essentially said Bitcoin is the future. Now Bitcoin is bigger than just the currency it's the entire blockchain technology as well so the technology could succeed and Bitcoin may not but I think it's kind of stupid to just say it's snake oil with nothing to back it up when people much smarter than you or I are saying it's something worthwhile.

Bitcoin isn't just some made up video game currency we've all decided is worth something. It has utility. Your obviously not involved in business or you would see that. Just for example as someone who imports items for sale, in many countries it's tough if not impossible to get banking, Western Union fees are incredibly high and even they have limits. With Bitcoin I can buy anything I want from anyone in the world with pretty low fees and I don't need the permission or cooperation of any bank, any government, etc. That is the utility of it and that's why it has value among other reasons.

If you'd like to add any thoughtful argument to why it's snake oil rather than essentially name callingn I'd love to hear you out but I doubt we'll get that.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-25-2017, 02:09 PM
 
Location: moved
9,928 posts, read 6,061,898 times
Reputation: 16826
Quote:
Originally Posted by doodlemagic View Post
...If you'd like to add any thoughtful argument to why it's snake oil rather than essentially name callingn I'd love to hear you out but I doubt we'll get that.
Here's my attempt....

A currency is anything that is pronounced to be legal-tender by a sovereign federal or supranational government, backed by a central bank. If tomorrow the government of China declares that orangutan-excrement is legal-tender, so it shall be. Meanwhile, gold or silver or polonium or moronium are NOT currency, because they are not backed by a sovereign or supranational government.

A “currency” devoid of government backing is fundamentally a self-contraction, like married bachelors or square circles. Instead, it is just some talisman or commodity, that is traded as a surrogate. No wonder it fluctuates so wildly. Sure, said talisman can be "valuable", if enough people espouse the belief that it's valuable. But this is an artificial espousal. It is liable to sudden and peremptory collapse, upon changing modes or expectations.

None of this precludes Bitcoin being potentially a lovely source of sudden riches. Such is the nature of gambling. But let's please not call it "currency".
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-25-2017, 03:27 PM
 
1,860 posts, read 1,602,259 times
Reputation: 1353
Quote:
Originally Posted by ohio_peasant View Post
A currency is anything that is pronounced to be legal-tender by a sovereign federal or supranational government, backed by a central bank.
I would add that a currency has the characteristic of having a relatively stable value such that if you left some currency in a bag and found it again ten years later, you could more-or-less still buy the same amount of "stuff" with it as you could when it was put away.

This feature is a characteristic of "currency."

I'll leave it to the reader if they actually WANT TO open that ten-year-old bag of orangutan-excrement. I suppose that it would have mostly composted after ten years.
Quote:
Originally Posted by ohio_peasant View Post
Meanwhile, gold or silver or polonium or moronium are NOT currency, because they are not backed by a sovereign or supranational government.
Gold was never backed by a sovereign or supranational government.

Gold was never a currency. It was and is still held as money/reserves. Gold used to form the backing for currency, not the other way around. With the exception of the "newer" Asian economies, gold is still the majority of the reserves of the largest economies in the world.

I'll say that again, gold is still money. It never was a currency. It's not an investment. It is an asset class, however. So is "cash (*)" or currency.

(*) cash = dollars, euro. reminbi, yen, et al.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-26-2017, 02:47 AM
 
Location: Los Angeles
2,918 posts, read 2,176,650 times
Reputation: 2450
Quote:
Originally Posted by Wells5 View Post
Cryptocurrencies are snake oil. Caveat emptor.
I've read up and watched videos on how bitcoins work and I still don't understand them. Never invest in something you don't understand. And I worry about a currency that has not customer service department. What happens if my computer crashes? Ooops! There goes my wallet! And one day someone is going to figure out somehow someway to hack or screw up this whole bit coin thing.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-26-2017, 05:41 AM
 
Location: All Over
4,004 posts, read 5,004,761 times
Reputation: 3104
Quote:
Originally Posted by ohio_peasant View Post
Here's my attempt....

A currency is anything that is pronounced to be legal-tender by a sovereign federal or supranational government, backed by a central bank. If tomorrow the government of China declares that orangutan-excrement is legal-tender, so it shall be. Meanwhile, gold or silver or polonium or moronium are NOT currency, because they are not backed by a sovereign or supranational government.

A “currency” devoid of government backing is fundamentally a self-contraction, like married bachelors or square circles. Instead, it is just some talisman or commodity, that is traded as a surrogate. No wonder it fluctuates so wildly. Sure, said talisman can be "valuable", if enough people espouse the belief that it's valuable. But this is an artificial espousal. It is liable to sudden and peremptory collapse, upon changing modes or expectations.

None of this precludes Bitcoin being potentially a lovely source of sudden riches. Such is the nature of gambling. But let's please not call it "currency".
Hey thanks for chiming in and you make a good argument why Bitcoin isn't a currency but I think the point we were discussing is if Bitcoin is some tulip/beanie babie pump and dump scheme more so than whether it's a currency.

In the grand scheme of things I don't think it really matters whether it's a currency or a commodity or anything else, it is what it is.

Traditionally a currency or at least a fiat currency has been a currency issued by a central government. Various US governmental bodies seem to disagree on what Bitcoin and cryptos are. The IRS says it's a commodity however individual state regulators are making exchanges and Bitcoin businesses get money transmitter licenses so they seem to be treating it as money. More recently the SEC is looking into some alt currencies saying they might be securities.

I think wells point above wasn't really arguing whether it was a currency or not he was basically alluding to it being made up play money that's not going to go anywhere

I honestly don't know if Bitcoin is technically a currency or not and quite frankly I don't really care, it's sort of it's own category. I view Bitcoin more as gold or a store of value. I have no intentions of paying for my morning coffee with Bitcoin nor do I see thhose types of transactions as even being necessary. I see Bitcoin as a way to transfer large amounts of money in which timeliness isn't an issue and I also see it as a long term store of value which I think is more immune from inflation than the USD

Last edited by doodlemagic; 07-26-2017 at 05:53 AM..
Rate this post positively Reply With Quote Quick reply to this message
 
Old 07-26-2017, 05:45 AM
 
Location: All Over
4,004 posts, read 5,004,761 times
Reputation: 3104
Quote:
Originally Posted by Big-Bucks View Post
I've read up and watched videos on how bitcoins work and I still don't understand them. Never invest in something you don't understand. And I worry about a currency that has not customer service department. What happens if my computer crashes? Ooops! There goes my wallet! And one day someone is going to figure out somehow someway to hack or screw up this whole bit coin thing.
Cryptocurrencies are definately not for everyone. Some people need a bank to hold their money for them because they are not capable of doing it themselves in a secure way. Not everyone however needs that and people who are willing to take a little time to understand how to control their own money will have more freedom and flexibility with their money.

If you're computer crashes your coins are not gone, you have private keys and a "seed" which will allow you to recover your Bitcoin wallet on any computer out there by downloading a new software wallet and re-entering your private keys or your pin. Then you also have devices like the Trezor and Ledger Nano S which are hardware wallets which also allow you to recover your wallet from anywhere.

There is no need for a customer service department, the user is the customer service department, you are your own bank

As far as someone figuring out how to hack it, how many times has your own bank or debit card been hacked? Probably more than Bitcoin. I'm not going to say Bitcoin is unhackable but it's as close to it as possible. Also by using a hardware wallet like the Trezor I can go on a computer super infected with malware and viruses and access my wallet and send and receive Bitcoin and I'll worry about nothing because the way the device works it's immune from keyloggers and/or people watching your screen remotely
Rate this post positively Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics > Investing
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top