How to get started with Bitcoin

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In my podcast a couple of weeks ago I mentioned Bitcoin just in passing, and I had some listener inquiries about it. Obviously it’s been in the news quite a bit recently, and some people are asking about what it is, how it works, and how someone can actually purchase it. So today I’ll provide on overview, and some resources you might find helpful.

Bitcoin

 

First things first: This post is not being offered as investment advice. I am not an investment or cryptocurrency expert and this article is presented without any legal or financial recommendation or advice. All investments have a certain level of risk, and you can lose money.

As you might imagine, a discussion about Bitcoin and cryptocurrency has the potential to get VERY technical. That’s not what I do here and it’s not my intention. The idea with today’s blog post and podcast is to present the basics and answer the most common questions, then if you want to pursue more in-depth research I’ll provide some resources for that.

Interesting story: If you had purchased $10 worth of Bitcoin back in July 2010, and kept it until today, do you know what it would be worth now? $2.1 million. That’s over two million US dollars that you would have right now, for a $10 investment. You know what they say, hindsight is 20/20.

What is Bitcoin?

In simple terminology, Bitcoin is currency that is digital rather than physical. It is decentralized, so transactions can take place using Bitcoin without the need for a bank, and without the need for a government and politicians to create and regulate the money.

Here’s a video that gives a simple explanation in 3 minutes:

 

How do I get Bitcoin?

That’s the big question. Bitcoin is obviously very popular now, so everyone is asking, “How can I get some?”. Basically there are 3 ways you can get Bitcoin:

  1. You can buy it from a person, or by creating an account with an online exchange. Create your account and connect a credit card or a checking account, and you can purchase Bitcoin using US dollars or whatever your local currency is.
  2. You can earn it. If you’re a business, you could tell your customer base that they can now pay you for your products and services in Bitcoin, rather than your traditional local currency.
  3. You can “mine” it. This means you can set up a computer that’s dedicated to solving complex cryptographic problems and finding bitcoins that way. With lots of people now doing this, and some people or companies set up dozens or hundreds of computers for this purpose, this can still be profitable but requires a little more technical expertise. It is doable though (if you’re interested in mining, I invite you to join my Facebook group “Custom Mining Rigs” here).

There are actually even Bitcoin ATMs located in certain areas. You put in cash, you get Bitcoins in return.

Interesting story: In the early days, Bitcoin had very little value and only a very few people had even heard of it. It was kind of a “geek” thing. So there was this computer programmer named Laszlo Hanyecz who owned some Bitcoins, and on May 22, 2010 he purchased two Papa John’s pizzas from a fellow programmer for 10,000 of them. At the time, that translated into about $25 US dollars. Today, it would be around $110 million – making those two pizzas probably the most expensive pizzas in history. And May 22 is still known as “Bitcoin Pizza Day”.

 

Is it risky?

Yes. It is risky. There are people saying that the Bitcoin bubble is about to burst. And others are saying Bitcoin will continue to increase in value, with the value of a single Bitcoin hitting $50k or $100k within the next year or two (it’s currently around $12,000). The truth is, no one really knows. As with any purchase, don’t risk more than you can afford to lose. But the returns so far have been incredible.

There are people that play the ups and downs and try to time their purchases to buy Bitcoin when it dips slightly, then sell when it skyrockets. To me, that’s a very high-stress method. Those guys spend every minute of the day watching graphs go up and down and hoping they guess correctly.

Then there are others who just buy and hold. Just purchase a certain amount on a regular basis, on the assumption that it will continue to go up over time. This strategy has made some people Bitcoin millionaires. Again, whatever method you choose, understand the risks involved.

Interesting story: James Howells is another name that is significant in the history of Bitcoin. He was one of the people who used his computer to “mine” Bitcoin. Remember, since Bitcoin is digital, you can actually store it on your computer’s hard drive. But if that drive dies or gets destroyed, the Bitcoins are gone. Howells mined about 7500 coins, and eventually stopped because his girlfriend at the time didn’t like the constant sound of the computer running. He pulled the hard drive out of that computer and put it in a drawer and kind of forgot about it. A few years later, he mistakenly threw it into a general waste bin at his local landfill. That was in 2013, so that hard drive is still there, but with more than 4 years of trash that’s been dumped on top of it. If that hard drive ever gets found, it’s currently worth over $100 million.

 

How do I get started?

The easiest way to get started with Bitcoin is to open an account at an exchange called Coinbase (here). This is the service that I use, and it’s the only one I know of that actually has your funds insured. That link is an affiliate/bonus link, which means that when you buy or sell $100 worth of a Bitcoin, you and I each get $10 worth of Bitcoin as a bonus.

Set up your account, and then at least connect a credit card to it to provide the funding. You’ll start with a fairly low daily transactions limit, like $250 or $500 maybe. That’s fine for getting started. If you want to connect your regular checking account with your Coinbase account, your trading limit will be higher from the start.

Once that is in place, buy some Bitcoin. $100, $200 worth, or whatever you’re comfortable with. You’ll see that Coinbase has a couple of other currencies available to purchase – Ethereum and Litecoin. I own some of those too, and they have also had great returns just like Bitcoin has. So you can buy just one or all three if you want, and watch as they change value each day. It’s kind of fun to watch, as long as you aren’t betting your rent money or something stupid like that.

Is Bitcoin really legitimate?

You’ll have to decide that for yourself. But more and more major companies are adopting Bitcoin as one of the payment options to purchase goods and services. Here are some:

  • Wikipedia (donations)
  • Intuit (Quickbooks)
  • Dish Network
  • Subway (some locations)
  • Newegg (online retailer)
  • Etsy (some sellers)
  • Square (point of sale company)
  • Express VPN
  • PureVPN
  • Expedia (travel)
  • CheapAir (travel)
  • Virgin Galactic (space travel)
  • Overstock
  • eGifter (gift cards)
  • Mint.com (online budgeting tool)
  • Harvard and MIT campus stores
  • Evermore Health (health and fitness)
  • Microsoft (you’ve probably heard of them)

And I will also accept Bitcoin as payment for my own computer services.

What are some good resources to learn more?

One thing to keep in mind – there’s a lot of good information out there, and a lot of really bad information. And a lot of scams. It seems like the nature of cryptocurrency just invites in the scammers. Do your research and stay safe.

Coinbase – This is a user-friendly site to purchase Bitcoin using your local currency such as US dollars.

Binance (affiliate link) – This is the site I use to purchase other cryptocurrency besides Bitcoin. If you want to diversify, or you want to try making some quick money by trading, this is a good site to use.

Custom Mining Rigs – this is the Facebook group I just started for people interested in mining for Bitcoin and other cryptocurrencies.

My Crypto Guide – This is a great site for a more in-depth discussion of Bitcoin and other cryptocurrencies and how they work. Starts with an overview, then goes into all of the specific topics. I particularly like chapter 4, where the author describes several of the most popular coins, and the pros and cons of each one.

CoinDesk – This is a pretty good news site, with probably all relevant news you’ll need to keep up with what’s going on in the crypto world. Very visual. Kind of reminds me of MSN but without the overwhelming ads and idiotic celebrity news. I guess I can’t comment about the ads since I use an ad blocker and wouldn’t see them anyway.

Crypto 101 podcast – This podcast just started this past July but has already made a good name for itself as a place to learn the basics. You might want to go back and listen to some of the earlier episodes for some good “starting out” information.

There are lots of other good ones, but these are the ones I like the best.

And one other thing. As you read some of these online sites and maybe join some Bitcoin Facebook groups, you might notice something that doesn’t seem to make sense. In general, there are two types of investors. Those who like to trade a lot and try to grab profits, and those that like to just buy and hold for the long term. But what you’ll see are people saying they are planning to “buy and HODL” (an intentional misspelling).

A few years ago, someone posted a message in a Bitcoin forum and said he was going to “buy and hodl”, then he saw the typo and re-typed it and made the same typo again. So he just left it. For some reason, people found it humorous so now a lot of people in the Bitcoin world type “hodl”. Personally, I think it’s just stupid. I mean, it wasn’t even amusing the first time so how can it be funny when you see it hundreds of times? But everyone’s different and some people still seem to get a kick out of it, so whatever.

So that’s hopefully enough information to get you started down the road to investing in Bitcoin or other coins, if that’s a journey you want to take. Who knows, maybe we’ll be millionaires in cryptocurrency someday!

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