I’ve talked a lot about how I think everyone should buy a little bitcoin.
And if you haven’t yet, there’s still time.
So below, I’m sharing three tips to get your started buying bitcoin…
Speaking from personal experience, I highly recommend that folks buying bitcoin start with an extremely small amount… that is, just a small fraction of a bitcoin. Just please make sure not to invest more than you can afford to lose.
The process of buying bitcoin, moving and storing it is not like traditional online banking or investing. If you send bitcoin to the wrong bitcoin address, for example, you can’t just call up your bank and cancel your transaction. So it’s critical to familiarise yourself with the mechanics of buying bitcoin and moving it around first with a relatively small sum, before moving on to larger dollar amounts.
Write Everything Down
It’s ironic that whilst bitcoin is a highly modern technology, you must make sure you keep “offline” records of all your bitcoin information. That means a pen and paper, or at least using a Microsoft Word document and printing it out as a backup.
Storing and sending/receiving bitcoin involves setting up a digital wallet. This is a where you “keep” your bitcoin.
Your wallet has a public key (which might look a bit like this: 1GwV7fPX97hmavc6iNrUZUogmjpLPrPFoE) which is where the bitcoin gets sent to. This is like an account name.
Your wallet also has a private key. This will either be an alpha-numeric sequence that looks like the public key above, or a long sequence of random words generated by the wallet. This is the “password” you use to access your wallet.
(Note: many wallets keep the private key for you, and instead simply require you to set up a password or pin number to open the wallet on your desktop or mobile. They also often provider you with a “seed” or recovery phrase when you set up the wallet – this is a string of between 12 and 24 random English words that will allow you to restore your wallet if needed. You must not share/lose your seed or password.)
Either way, secure wallets do not have an “I forgot my password” option.
If you lose or forget your private key (or seed), you lose access to your wallet. And you lose your investment. Period.
I write everything down, and I print out screen grabs (that is, printouts of what is shown on the screen). And I keep them someplace safe.
Don’t Leave Money at the Exchange
In order to convert your cash into bitcoin, you need to open an account with an exchange.
This process will typically take a few days as the exchange will need to conduct KYC (know your customer) diligence on you. This means they’ll do a standard identity verification so that the exchange knows who you are, and that you’re not a wanted criminal.
Once you’ve opened the account, you’ll be able to fund it with a bank transfer – or by credit card in some cases – before you buy bitcoin.
If the exchange where you bought bitcoin (and left it there) gets hacked, then you can lose your money. This has happened in a couple of high-profile cases.
For example, in 2014 bitcoin exchange Mt. Gox, which at the tie was handling up to 70 percent of all bitcoin volume, filed for bankruptcy, saying that 750,000 of customer bitcoin was missing.
The safest place to store your bitcoin is in a bitcoin wallet.
Again, if you’re just starting out investing in bitcoin – or if you’ve been investing for a while – following these tips will help you avoid big mistakes – and losses.
*This has been a guest post by Stansberry Churchouse Research*