In 2017, Bitcoin made headlines when it reached an all-time high of over $19,000 per coin. Along with its meteoric rise are eager investors and traders who want to gain from the craze.
Just five years ago, the idea of investing in virtual currency was laughable. But despite some crazy ups and downs, Bitcoin remains one of the biggest buzzwords in the world of financial technology that attracts investors in droves.
However, given the covert nature of the crypto market, many still don’t understand how buying and selling Bitcoin works. If you’re planning to put in some money in Bitcoin, be sure to read this quick breakdown of how crypto trading works.
Read on if you’ve already researched and understood what Bitcoin is and what it’s not (and you’re still eager to invest in it).
Set-up your wallet
Before you can start acquiring Bitcoin, you first need to open a Bitcoin wallet. A common misconception is that this virtual wallet stores digital coins. Technically, cryptocurrencies are not stored in wallets or anywhere. Wallets are simply used to secure and safeguard your crypto assets. They serve as your private “keys” to access your digital money.
Setting up a wallet is simple. You need to download the application, fill out the online form, and complete the registration process.
There are many virtual wallets available online and compatible in both mobile gadgets and desktop. Some examples include Coinbase, Copay, Airbitz, Breadwallet, Armory, and Bitcoin Core. Each of these platforms has its pros and cons. Make sure you complete thorough research when choosing which one to use.
Once you have a wallet, you can begin collecting digital coins. There are several ways of acquiring Bitcoins. You can earn it by accepting them as payment for products or services. You can also invest in ‘Bitcoin mining’ that uses specialized hardware that processes blockchain transactions.
However, the easiest way to get digital coins is by buying it. There are several ways you can buy virtual coins. You can purchase directly from a friend, in a local peer-to-peer network, or from one of the many Bitcoin exchanges.
Some examples of Bitcoin exchanges include Coinbase, Bittrex, Binance, Kraken, and Wunderbit. Aside from ensuring a safe way to buy bitcoin, most exchanges also serve as a wallet. It should be emphasized that although exchanges offer wallet capabilities, this is not its primary function. You still need wallets to keep your Bitcoins safe and secure, especially for a long period of storage and for higher amounts.
To purchase Bitcoin, you can use traditional payment methods such as bank transfer, credit card or debit card that is linked to your exchange. You can also use other online payment solutions such as Paypal, LavaPay, and Skrill. Upon payment, Bitcoins will be credited into your wallet. Take note that these payment methods are not available to every exchange or country.
There are several ways to sell Bitcoins. You can sell it using exchanges, trading platforms, or directly to friends or peers.
Selling through an exchange is the most popular way of trading Bitcoins. All of these applications allow you to sell digital currencies. However, you need to choose a platform that will suit the type of holder you are. Some are designed for small-time or novice investors as well as for those institutional or big-time investors and traders. These trading programs automatically calculate the applicable charges, transaction fees, or taxes, so you won’t need to use an online calculator to compute costs separately.
When it comes to direct selling, you can use platforms such as LocalBitcoins, BitBargain, Bittylicious, and BitQuick. Using this service, you can connect with other interested parties who may want to buy Bitcoin for the price you’re asking. Payments are usually done through bank transfer. Upon payment, the Bitcoin is then transferred to the buyer’s wallet. With direct trading, you need to calculate and file for applicable taxes (especially for large values).
Finally, you can sell directly to friends and peers. You can send Bitcoin to the recipient’s wallet and collect payment, either on a cash basis, bank transfer, or any other agreed payment mode.
Before you start investing in Bitcoin, it is highly recommended that you complete a thorough research about the crypto world. Although Bitcoin has been in operation for over eight years now without any major issues, it is still largely experimental. So, you have to be cautious. The good news is that there are numerous sites out there where you can get reliable information about Bitcoin. Be sure to read them first before you dip your hands into actual trading.