This guide was created to help those interested in learning more about investing in Bitcoin & Cryptocurrency. I am imparting on you the knowledge and resources I’ve accumulated from being a student and investor of the crypto space for the past couple of years.
You know that Bitcoin has surpassed $8,000 recently and you’ve missed out on profits. But what do you do next? Is it too late in the game?
Let’s clear up some common misconceptions, then arm you with the knowledge and tools to jump into investing in crypto.
What is Bitcoin?Bitcoin’s whitepaper from November 2008 describes Bitcoin as “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution”.
There will never exceed more than 21 million bitcoins, making it a “scarce commodity”Bitcoin is not controlled by any one central party. Rather transactions are recorded on an immutable ledger, known as a blockchain. Every computer in the Bitcoin network records and verifies all transactions on the blockchain, making the network’s power decentralized, out of the hands of control of a single person or entity.
At the moment, I like to think of Bitcoin as digital gold. Gold in nature is valued around the world and the scarcity element has kept gold valuable for thousands of years. Bitcoin likewise is a truly global currency that will appreciate in value with increasing demand.
What is Cryptocurrency?
Cryptocurrency refers to a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
So You Want to Invest Now What?
You’ve now recognized the massive opportunity and want to get in on the action. Here are the tools I use to purchase, trade and analyze cryptocurrencies.
Coinbase
The easiest way to purchase Bitcoin is through the Coinbase app, on iOS or Android.Coinbase allows users the ability to purchase Bitcoin (“BTC”), Ether (“ETH”) and Litecoin (“LTC”). Transactions can be funded either via a credit card or by linking your bank account.
If you decide to sell any of your investments, it is quite simple and you can send you money back to your bank account in a matter of days (would be quicker but banks are awful).
Bittrex
You’ve now become a bit more experienced in the crypto space. You own some Bitcoin, Ether and Litecoin but are looking to invest in some of the other cryptocurrencies on the market.
In order to purchase cryptocurrency on Bittrex, you will first need to open an account and fund it with either Bitcoin or Ether. Once your account is credited with the deposit, you can then use that Bitcoin or Ether to purchase any of the other cryptocurrencies listed on the exchange (below I’ve reviewed some of the other notable “altcoins”).
BitWorth
BitWorth is an amazing free app that allows you to enter each of your token holdings into your portfolio and the app streams real-time pricing. Best tool to track your investments on a day to day basis, it is also useful to account for where each of your tokens are held.
Storing Your Cryptocurrency
Cryptocurrency can be very vulnerable to hackers, if not stored in the correct manner.The worst way to store your tokens is to leave them on an exchange. Leaving tokens on an exchange is like inviting hackers to come steal your money (see: Mt. Gox).
The best way to store your tokens, is to use an offline cold-storage wallet. Fortunately, there are two hardware wallets which will cost you less than $100, which are easy to use and will keep your cryptocurrency safe (Ledger Nano S & Trezor).
I’ve provided a brief breakdown of the two below, for more in depth discussion you can refer to the link in the footnote (no I am not connected with either company, nor do I receive affiliate fees).
Ledger Nano S
I own several Ledger products and the Nano S is a great product at a reasonable price point (~$65 as of November). This product will allow you to store nearly every crypto token and the interface and supporting software is not only safe but easy to use.
Trezor
Much like the Ledger Nano S, Trezor is a safe cold-storage wallet which will keep your crypto safe. Personally, I prefer the Nano S because of the versatility and their all-star support team. Once considerably cheaper than the Nano S, the Trezor costs ~$80.
Investing in ICOs and Altcoins
I would strongly recommend you become a seasoned expert in cryptocurrency before jumping into the non-major tokens.
That being said, some of my personal favorites in the altcoin market include:
Ethereum (ETH) — If Bitcoin is digital gold, Ethereum is a super-computer enabling complex platforms to be built on top of the Ethereum blockchain. The ability to input code for smart contracts, means you can design trust-less “If / Then” transactions that are programmed to take certain actions under certain circumstances. For example, I decide to wager 1 Bitcoin against a friend that the Yankees will beat the Mets. The smart contract is designed to pay out the 1 BTC each of us contributed contributed based on the outcome of the game. So the smart contract takes the place of a legal document, escrow account and in some cases a bookie.
Ripple (XRP) — Ripple is a distributed, real-time payment protocol for anything of value. Ripple has the opportunity to be one of the most widely adopted cryptocurrencies, as it solves the enormous pain point of capital flows within and between financial institutions.
Civic (CVC) — Civic is building an ecosystem that is designed to facilitate on-demand, secure and low-cost access to identity verification (IDV) services via the blockchain, such that background and personal information verification checks will no longer need to be undertaken from the ground up every time. Great founder (Vinny Langham) and an enormous market size, two key characteristics in making an early-stage investment.
Learning Materials on Cryptocurrency & Blockchain
Bitcoin Whitepaper — This is where it all began, the vision of Satoshi Nakamoto.
The Quiet Master of Cryptocurrency — Nick Szabo (Founder of Bitgold, predecessor to Bitcoin) & Naval Ravikant (Founder of AngelList) on “The Tim Ferris Show”.
This VC Is Sure Venture Capital Is About To Be Disrupted — Brock Pierce from Blockchain Capital on “Unchained”.
Disclaimer
I am not a financial advisor, nor should this be taken as investment advice. Regardless of the recent bullishness in the market, it is unwise to invest capital in the cryptocurrency market that you would not feel comfortable losing. Although the volatility has tapered off significantly as the market continues to grow, cryptocurrency is an extremely risky asset class and should be approached as such.
Thomas McLaughlin is a co-founder of SportsCoin, a cryptocurrency investment fund focused on the sports blockchain industry.