Bitcoin is a virtual, unregulated currency that has been frequently mentioned in the media lately due to its sky-rocketing value. If you want to find out more about what it is then read our article here..
In the last couple of months Bitcoin’s value has increased tenfold and shows no sign of abating. So how do you get on this potential moneytrain/bubble/disaster? Here is a quick guide on how to by Bitcoin.
Firstly you need a wallet to store your Bitcoins in. Head over to http://blockchain.info/wallet or https://coinbase.com/ and sign up. It’s free, takes about 30 seconds and you simply need to enter an email address.
Some things to bear in mind with these wallets:
- They are a bank account. If you lose access to them you lose the coins
- If the website gets hacked or goes bust you lose the coins
- If your account gets hacked then you lose the coins
- Backup the coins if possible. Share them across multiple sites/wallets
You’ll get a unique address for your wallet that looks like this:
Keep this safe. If you want buy coins you will need this address.
Now comes the slightly harder part. There are two ways of buying coins – the easy and expensive way, or the cheaper and complex way.
Expensive but Easy(ish)
You can buy coins directly from individuals either through a bank transfer or by meeting the person and paying cash. The two best sites for buying coins nearly instantly from individuals are:
Simply head to the site, enter your wallet address, your email address and how many Bitcoins you want to buy. Bittylicious will then give you details of a bank transfer to make, so if you were buying one coin for £800, you would just carry out a BACS transfer from your account to a specified individual with a specified code.
When Bittylicious sees the transfer has taken place it transfers the Bitcoin(s) to the specified wallet. The whole process can take a couple of hours but is usually complete within about 15 minutes.
Localbitcoins, is often a little cheaper than bittylicious. The process is very similar except you have to setup an account (which comes with a wallet). You then choose an individual that you want to buy the coins from and carry out a bank transfer to them.
The process is protected by an escrow, so your money is reasonably safe, but look at buyers/sellers with good feedback.
Cheaper but More Complex
It is much more cost effective to buy coins through a proper exchange likehttps://www.mtgox.com/ and https://btc-e.com/. The best thing to do is open an account on one of these exchange sites and an OKPayhttps://www.okpay.com account. OKPay is a digital wallet where you can store virtual quantities of GBP, USD, EUR etc. You can also move money into the wallet from your bank account but only if OKPay knows who you are and this is why this method is more complex.
You need to verify your address and your identity by sending them a scanned utility bill and passport/drivers licence. The whole process can take a long time. They say 5-10 days, but often they can be fussy about the quality of images and so it can take much longer.
Once you have a verified OKPay account you can complete a bank transfer to it, and from here you can move the currency into virtual wallets on MtGox and BTC-e where you can buy your Bitcoins at lower rates. However, if you’re looking to buy Litecoin, which is often considered the silver to the Bitcoin gold, as well as other less-known virtual coins, then you will need to transfer your money from OKPay to your BTC-e account as MtGox currently only sells Bitcoin.
You can sell your coins through the reverse process by selling your Bitcoins on the MTGox or BTC-e exchange, then moving the virtual currency you receive to your OKPay account and from there into your bank account. Although selling on localbitcoin straight to an individual is always a good option as you might get more money for your coins. But there are increasingly more places you can buy goods and services if you’d rather spend your coins and a full list can be found here:https://www.spendbitcoins.com/places/
Some Important Notes
Bitcoin is a hugely volatile and unregulated currency. The wallets we have mentioned above store your coins/money and if they go, then you will lose everything stored in them.
As I wrote this article the price of Bitcoin fluctuated by 10%, and while a coin is currently worth £702, in a year’s time it could be worth £7,020 or £7.00. So our advice is to be careful. Treat Bitcoin investments as you would with any form of gambling. Basically, don’t put your house on red!