How to Invest in Bitcoin and other Cryptocurrencies
Becoming your own fund manager.
Primer
Let us, like all philosophers, start with a quote. From the ancient book — The Bible. How then will they call on Him in Whom they have not believed? And how are they to believe in Him of whom they have never heard? And how are they to hear unless someone tells them? — Romans 10:14. For those who have never heard, we begin by looking at what cryptocurrencies are.
What are cryptocurrencies?
Before we can invest in a cryptocurrency (or Bitcoin for that matter), we need to understand what it is. A cryptocurrency (a currency based on the mathematical improbability to break encryption) is a virtual currency used to transfer value. Just like we started with barter trade then objects of value (barley, gold, shekels, shells etc), then coins, then bank notes, then debit/credit cards, we now have cryptocurrencies. All these items are a store of value — which on their own have no value except that which we agree to assign to them.
A cryptocurrency is simply a digital asset that functions as a medium of exchange of value by using cryptography to secure the transactions, to control the creation of more units (more like a self-contained reserve bank), and to verify the transfer of these assets. It does not require banks to work, meaning you can use it even if you don’t have a bank account. Just like mobile money.
How to invest in Bitcoin
There are many apps you can use to buy Bitcoin and other crypto assets. These include (but not limited to) Coinbase, BitGo, Bitfinex (Taiwan), OKCoin (China), BTC China, Bitpay (Canada, the EU, Japan, USA), BTC-e in Bulgaria, Bitstamp in Slovania, BitPagos in South America, Volabit in Mexico, BitPesa in Kenya, and a lot more.
If you are in South Africa, Nigeria, Indonesia, Malasia and Europe, you can download the Luno mobile app for Android and iOS. Luno is a convenient cryptocurrency exchange based in Cape Town. It currently supports only Bitcoin and Ethereum.
You do not need to buy the entire bitcoin ($9,884 at time of writing this post). You can buy with as little as $1. The app is simple to use and gives you instructions on how to add money into your ZAR wallet, which you can then use to purchase Bitcoin or Ethereum.
Why Should you Invest in Bitcoin
You need to invest in Bitcoin, and the other cyrptocurrencies because the returns they offer you are unprecedented, and their growth is not constrained by resistance and support lines like fiat currencies and the usual stocks, and because they do not have an underlying asset value they mimic — which tends to oscillate minimally. Instead their growth is determined by demand, which will keep increasing as more people adopt cryptocurrencies as a money.
Below is a trend for Bitcoin for 2017. It was roughly $1,000 in January, and now (28 November) it is at $9,884, and will be beyond $10,000 by end of year. That is over 1,000% return on investment (roi). With traditional investment houses, you would have made only 12% if lucky, and with banks only 7.25% growth at maximum — which barely beats inflation.
Here is another trend for Ethereum for the same year of 2017. It was only $10 in January, but is sitting at $473 at time of writing this publication (28 November). That is over 4,700% roi. Almost 5 times that of Bitcoin. And this is just only two of many cryptocurrencies that are doing very well. It is an understatement to say that cryptocurrencies have made many millionaires overnight.
If you are not in South Africa, or you wish to invest in other crypto assets other than Bitcoin and Ethereum, that are not available on your exchange, you can use apps like Bitfinex — which has many newer crypto assets that have a great future like Neo, Ripple, Litecoin, Iota etc. All you have to do is to transfer Bitcoin or Ethereum from your Bitcoin/Ethereum wallet by sending whatever amount to the address of the new wallet that has a lot more options. When you want to transfer the money back, you simply convert your money from whatever token/coin into Bitcoin or Ethereum, and then send to your wallet address on your account on your country-specific cryptocurrency exchange. For South African residents, you can find a few more (but limited) coins on Altcointrader (https://www.altcointrader.co.za) like Litecoin, Ripple and a few others. You can find a comprehensive list of cryptocurrencies (and study their trends) on https://www.worldcoinindex.com/coin/
In this age, financial advisors are not necessary if you know just a little more than nothing about money and modern investment vehicles. It is an age where you need to be your own financial advisor: manage your risks, and manage your returns — without paying exorbitant fees to any corporation. It is no secret that banks are slow, expensive, low roi houses, and diminishing in the role they play in finance, and there is no reason why you would want them to manage your funds or be your primary consideration for your future “banking”.
This is my first of a series of posts on cryptocurrencies and Blockchain for beginners. I will be adding more posts, including on request. I am in the process of developing a new cryptocurrency, and will no doubt be talking more on technical issues on blockchain application development in the future. Feel free to reach out to me on mpendulo@elefantel.com to chat more on the subject, or to comment in the comment section below or to clap, I will try to respond to all your comments. I trust you found the post useful. Cheers!
