Wondering what all the fuss is about bitcoins and whether you could be making some money if you were to buy some? We will explain what you need to know about bitcoins before you attempt to get your hands on some - and the various ways in which you can buy bitcoins, earn bitcoins, or make your own bitcoins, and how you can sell them in an attempt to make a profit.
Some people will tell you that bitcoins - which are a type of cryptocurrency (a digital currency, of which there are a number of examples, but bitcoin is probably the best known) - are the future and that eventually they will be a world currency. Others will point out that the people benefiting most from bitcoins right now are criminals. As for ordinary people, bitcoins offer a way to pay for a few things such as hotels on Expedia, buy Dell hardware and Microsoft software, and Paypal customers can spend Bitcoins. But that’s about it.
Why buy bitcoins?
Right now the only reason people are investing in bitcoins is because it is seen as a way to make money. The value of Bitcoins has soared over the past few months. Right now (8 December 2017), one bitcoin is equal to £11,410.56 or US$15,327.70. Less than a week earlier one coin was worth $12,000. It’s gone up 1,300% in 2017.
Back in 2009 when Bitcoin first appeared, $27 might have bought you 5,000 Bitcoins. If you’d have bought back then you’d be sitting on a nice little nest egg.
But even if you had bought bitcoin more recently you could have seen a nice little boost to your investment. Over the past few month (even over the past week) the value of bitcoin has rocketed, from $5,716 on 12 November 2017 to $16,502 on 7 December. Just how high will it go!
Billionaire investor and hedge fund manager Mike Novogratz has predicted an astonishing $40,000 per coin by the end of 2018.
Why you shouldn’t buy bitcoins
But if the old adage is true, what goes up must come down. On of the biggest red lights when it comes to considering whether or not to buy bitcoins is that it is an extremely volatile currency and while it might look like the only way is up, the value is very likely to plummet - at least that is what financial experts are predicting.
Many are likening bitcoin to the dot.com bubble of the late 1990s - after which Amazon shares fell, or the housing bubble of 2007 which caused a world recession.
The other factor affecting whether you might consider bitcoins to be a safe investment is the fact that they are known to be used by criminal types. As we’ll explain later, it’s possible to mine bitcoins but the cost of doing so is prohibitively expensive, unless you are a criminal with access to vast numbers of consumer machines that you have infected with malware. It’s also easy to steal bitcoins because all a criminal needs to do is get hold of your ‘wallet’ where you keep them and ownership is instantly transferred to them. Also, because bitcoins are anonymous, it means that they are particularly attractive to anyone who wants to launder money, evade tax, avoid the rules and regulations that govern normal currencies, or buy weapons.
How to buy bitcoins
As we said above, right now, one bitcoin is equal to £11,410.56 or $15,327.70. So we very much doubt you will be looking to buy one bitcoin. You can however buy chunks of bitcoin. You can essentially spend whatever you like on bitcoin.
There are a number of ways to get your hands on bitcoin. You can sign up for a service that will provide you with a wallet for them and let you buy and sell, you could charge people in bitcoin for a service you provide, you can buy bitcoins from certain cash machines, or you can mine bitcoin.
The latter might sound like a way to print your own money, but the price of mining bitcoin is prohibitively high because you’d need a collection of very powerful super computers and you can expect a very high electricity bill. This is why you’ve probably heard of people’s computers being hijacked by criminals and used to mine cryptocurrency.
So unless you are a criminal we doubt you will be looking for advice about how to mine bitcoins, so we won’t go into that here. That and the fact that as of 7 December 2017 there were already 16,726,863 bitcoins available (check the current status here). Only 21 million bitcoins can be mined in total and as we get closer to that number mining bitcoins gets more and more difficult.
How to get a bitcoin wallet
If you want to buy bitcoins you need a Bitcoin Wallet. There are various websites that offer wallets, there are links to them here, or you can use one that comes with the apps from Mycellium, Coinbase, or Blockchain.
It's really important to make sure your wallet is secure - some online wallets have suffered security breaches. For this reason you should insure that two factor authentication is available.
You should also back up your wallet - and encrypt that back up.
How to buy bitcoins at an ATM
The easiest way to buy bitcoin may be to use one of the kiosks that are placed around London. You can purchase bitcoins by depositing cash into the machine. You can also sell your bitcoin at some of these machines. Find your closest Bitcom ATM by visiting this site.
There are lots of these ATMs around London, with a number are able to sell as well as allow you to buy bitcoin.
You'll need to provide a bitcoin address for deposit, you might need to scan a fingerprint, of you might have to enter your mobile number and then enter a code that is sent to you.
Beware transaction charges when you use one of these machines.
How to buy bitcoins on your iPhone
Coinbase is proving to be a popular app on the iOS App Store currently so we decided to take a look at how to use that. Note that there are fees for buying and selling, the standard Buy and sell is 1.49% and a Credit/Debit card buy is 3.99%.
- Once you have downloaded the app, open it and you’ll see a page that shows you the current bitcoin price and what the current all time high is.
- Tap on Sign Up to start
- Enter your details, including an email and a password. That password needs a minimum of 8 characters and you need to make it really secure, with letters, numbers and other characters.
- You will receive an email which you need to open to verify the email address.
- Next you will see the User Agreement, one thing to note here is that “Coinbase is not a regulated financial services provider and does not operate outside the UK.”
- The next page tells you you are almost ready to invest. You’ll see details of the performance over the past day of Bitcoin, as well as Ethereum and Litecoin, which are alternative forms of cryptocurrency. You’ll notice how volatile it is.
- Tap on the green Complete account setup button.
- The next page asks you to Verify your Phone number, add a payment method and verify your identity.
- Verifying a Phone number will increase account security, according to Coinbase. Tap in your phone number and tap on Next. You’ll be sent a verification code as a text message. Next time you log on, or if you log on via the web at coinbase.com, you’ll be asked to complete a two step verification by entering a verification code sent to your mobile.
- Next option is to Add a payment method. Here you different options depending on whether you have a lot or a little to invest. If you have a lot to invest you will have the benefit of being able to buy and sell. However, you'll need to connect your bank account and it can take a couple of days for Coinbase to complete that process.
- We’ll assume you aren’t investing a lot (in fact we’d dissuade you from doing so if you were considering that right now). If you want to buy a Bitcoins instantly, you can try using your Credit card or Debit card - you won't be able to buy as many, but you will have instant access (in theory).
- We opted for the Credit/Debit card option, which lets you invest small amounts. If that sounds like you, tap that option.
- The next page states that to add a card Coinbase needs additional information. They will need to verify your ID before you can buy with a card. You have the option of uploading an Identity Card, a Drivers License or a Passport. Here we hit a snag as Coinbase’s identity verification is currently under heavy land. Apparently, as of 7/8 December 2017, Coinbase ID verification is failing to complete due to high traffic. For the latest: click here.
- Once you are in it’s possible to purchase bitcoin. You complete your transaction through the wallet service that Coinbase provides.
Buying bitcoin is about to get easier - at least for some. The Nasdaq is set to start dealing with bitcoin futures on its commodities trading platform in 2018. But you don’t even have to wait that long - the CME Group and the Chicago Board Options Exchange will begin trading bitcoin futures any day now. This is why there interest in Bitcoin surged after the end of October 2017. These platforms are really targeted at hedge funds and banks, or individuals with millions in net worth, rather than a number of the public with £30 to invest.
How to sell bitcoin
If you are looking for a quick money spinner, then you’ll be wanting to sell your Bitcoin after you have made your money (assuming you do make some money).
Note, it is not currently possible to sell digital currency and have the proceeds sent to a linked debit or credit card.
If you set up an account with Coinbase and linked it to your bank account you will be able to use that app to sell or “cash out” your Bitcoin.
- If you use the Coinbase app you can set alerts that tell you if the value of bitcoin drops below or climbs above certain values. Either of which could be your warning to sell.
- When you want to sell tap on the menu icon in the Coinbase app.
- Select Sell.
- Enter the amount in bitcoin, or in your local currently, that you want to sell.
- Select the wallet you want to sell from.
- Select your bank account or wallet that you want to deposit into,.
- The tap the Sell Bitcoin button.
- You proceeds will then be deposited in your linked bank account or local currency wallet.