Let’s look at the investment cycle of Bitcoin – including buying, selling and trading the cryptocurrency
By now you’ve probably heard the news: Bitcoin is a virtual currency that has created some serious buzz in the investment world. It’s certainly not for the risk averse, but if you’re willing to put some money behind this tradeable currency you might see some big gains in a short amount of time. It’s all about knowing how Bitcoin works – how you buy bitcoin, how you sell it and how it’s traded. Let’s look at what you need to know.
How to Buy Bitcoin
To begin with, you’re going to need some sort of trading platform to facilitate the actual buying, selling and trading of Bitcoins in your portfolio. Since there is no real governing body involved with Bitcoin (it is a true peer-to-peer network), you’ll want to download your digital Bitcoin wallet. These wallets offer an easy-to-use interface that looks a lot like traditional online banking platforms.
Once you download the software to your desktop or install the mobile app on your preferred device, you’ll need to use your real money to buy virtual Bitcoin currency. You can fund your account using an ACH bank transfer or a debit or credit card, but take note that your funds transfer might not be available immediately – even when conducted electronically. Each interface will vary to some degree, but the platform will generally ask you to simply click “buy” or “sell,” then select the type of cryptocurrency you’re looking to manage – i.e., Ethereum, Bitcoin, Litecoin or others. You can set up repeat buys using the software package, and there are generally no limits on the amount of currency you can purchase, with the exception of any limitations imposed by your banking institution.
How to Sell Bitcoin
Once you’ve established the trading platform you’re comfortable using, selling Bitcoins or other cryptocurrencies takes just minutes. You should already have a bank account linked to the program, so selling Bitcoins is as simple as navigating to the “sell” page, typing in the amount you wish to sell, selecting the wallet you wish to use for the transaction, and choosing the account you’d like the funds to be deposited into. Ensure all entries are correct and click “sell.”
Keep in mind that there are a couple of ways to sell Bitcoin. The first is directly with another person, who acts as the intermediary or market maker. Coinbase is an example of direct trading, eliminating the need for a virtual middleman in the process.
The other way is via an online exchange, where you trade the actual Bitcoins within the exchange, instead of with a peer. In this method, you’ll place a sell order – including the type of cryptocurrency and the volume you have ready to sell – and then wait until someone comes along with a matching buy order. This normally doesn’t take very long at all, but it isn’t an instantaneous process. In fact, one real complaint about Bitcoin is that it isn’t easy liquidated if you absolutely need access to the money right away. If the exchange is suffering from liquidity concerns at the moment or your bank is holding onto your funds for an extended period of time, you might have to wait to receive your funds.
How to Trade Bitcoin
Trading or exchanging Bitcoin for another cryptocurrency is a far less common activity than simply buying and selling it, but there might be compelling reasons to do so. First, you may have to exchange one type of currency for another if a retailer only accepts certain ones. For instance, you could trade a quantity of Ethereum coins for Bitcoins if a particular vendor only accepts Bitcoin. You could also conduct arbitrage, or the simultaneous buying and selling of cryptocurrencies (or other securities or commodities) in various markets in order to profit from different prices in each market. Your trading platform will enable you to complete trades, but you’ll rarely find the need to do so.
The investment cycle of Bitcoin is a little different than you’d find with traditional equities or commodities, but it’s gotten easier due to the proliferation of apps and simple trading platforms. While Bitcoin certainly represents a high-risk/high-reward option, it should represent just a small part of your balanced investment portfolio. Traditional investments, like equities or precious metals, tend to deliver a proven track record of stable, consistent returns when managed appropriately. In addition, it’s important to work with an investment company that has a history of servicing customers’ financial needs, rather than an online marketplace. This sense of security can be found at reputable companies like American Bullion.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.