If you haven’t heard about Bitcoin lately, then you haven’t been paying attention! Bitcoin and its rival Ethereum are cryptocurrencies (I’ll explain what a cryptocurrency is later) that are the next big thing in investing, with the potential to grow your investment exponentially over time. In this article I’ll explain:
- What cryptocurrency is.
- The difference between Bitcoin and Ethereum.
- Why cryptocurrencies have the potential for explosive growth.
- How I recently got started investing in Bitcoin and Ethereum with a step by step tutorial.
If you already know a little about cryptocurrencies and want to start investing, just scroll down to Tutorial: How I Invest in Bitcoin and Ethereum Cryptocurrencies Through Coinbase below.
Cryptocurrencies are Complicated
Cryptocurrencies is a huge subject, and I won’t try to explain every detail in this post. I’m only concentrating on the very basics here.
I’m a pretty smart guy, but it took me a few months (and a lot of research) to truly understand how cryptocurrencies work and why they have such huge growth potential.
So, with that in mind I want to give you some recommendations to help you understand how cryptocurrencies work and the potential they have as an investment.
Here are some articles I recommend:
If you already know a little about cryptocurrencies and just want to start investing, scroll down to Tutorial: How I Invest in Bitcoin and Ethereum Cryptocurrencies Through Coinbase below.
What is a Cryptocurrency?
A cryptocurrency is basically a digital form of cash. However, unlike Dollars, Pounds, or Euros, it’s not tied to a government or central bank.
This is an advantage, as the value can’t be manipulated by a government attempting to control the money supply for their own ends. It’s a decentralized currency free from government intrusion.
Cryptocurrencies are Anonymous
Instead of storing money in a bank account using your name and vital information, cryptocurrencies are stored in an anonymous digital wallet identified by a secure code.
Instead of using a middle man like a bank or a government institution, you can exchange money with another person (or business) anywhere in the world with little or no fees or delays. It’s completely anonymous and secure.
Cryptocurrencies Use Blockchain Technology
It’s a system built on seriously complicated math that maintains the security and safety of each transaction.
Even though the blockchain is complicated, it allows you to be able to securely and instantly send cash anywhere in the world as simply as sending an email on your computer or smartphone.
Read the articles I mentioned above if you want all the technical details of how blockchain works.
What is Bitcoin?
Bitcoin is a virtual currency that you can use just like cash. Think of it as electronic cash instead of dollar bills. You purchase Bitcoins through an exchange and store them in a digital wallet that only you control.
Because it uses the blockchain, you can use Bitcoin for direct cash transactions between you and someone else without providing your identity to a middle man such as Facebook, a credit card company, PayPal, or a bank. That means very low fees or no fees at all, unlike your typical middle man.
It’s great for both parties in a transaction because it’s cheaper and faster than using government issued money stored in a traditional bank.
Cryptocurrency transactions are anonymous and untraceable. So if you’re not keen on companies or institutions knowing your business, using cryptocurrency is an advantage.
Many large companies are already accepting Bitcoin as payment for goods and services, and the number is expected to continue growing.
What is Ethereum?
Much like Bitcoin, Ethereum is a virtual currency that is built on blockchain technology. The difference is that it’s built on a different version of the blockchain that allows it to have dozens more uses than just as an electronic form of currency.
The Ethereum blockchain allows for the use of smart contracts.
I won’t attempt to explain what a smart contract is. There are plenty of people who have already done that much better than I could (see the articles below).
The most important thing you need to know about Smart contracts is that they allow Ethereum to have literally hundreds (even thousands!) of uses over and above just being used as digital money.
This increased usability give Ethereum a huge edge when it comes to growth potential for the future, which can profit you greatly if you invest in it.
Why Do Cryptocurrencies Have Such Huge Growth Potential?
Even though some people have already made tons of money on the growth of cryptocurrencies, it’s still extremely early in the game.
At this point, cryptocurrencies aren’t being widely used by most people. In fact, most people don’t even know what Bitcoin is (just ask your friends). But over time, as usage grows, the value of Bitcoin and Ethereum will grow as well. The more usage they get, the more they will grow in value.
As of this writing, there are only about 3 Million cryptocurrency users around the world. That’s only .04% of the world’s population!
Think about it like this: The usage of cryptocurrencies today is equivalent to the number of people using the internet around 1991-1992. Back then, almost no one even knew what the internet was.
If you could have somehow invested money in the growth of internet usage back then, imagine how your investment would have grown! You would have easily turned a few hundred dollars into a few million over the last couple of decades!
An Incredible Investment Opportunity
Of course, no one knows the future. However, after everything I’ve read about how cryptocurrencies work, I believe this is potentially the most incredible investment opportunity of our generation!
I’m already investing in Bitcoin and Ethereum at present. There are several ways you can get started investing in Bitcoin and Ethereum, and I’ll show you how I got started in the tutorial below. It’s not tremendously complicated, but there are several important steps you need to follow.
Tutorial: How I Invest in Bitcoin and Ethereum Cryptocurrencies Through Coinbase
I use Coinbase.com as my platform of choice for purchasing cryptocurrencies. It’s by far the most popular, and I’ve found it to be pretty easy to use. In fact, as of this writing, Coinbase is adding over 50,000 new users per day!
Getting started with Coinbase is kind of like setting up a bank account or a brokerage account. You’ll need to provide plenty of information about yourself, and jump through a few hoops to get everything set up.
Step 1: Go to Coinbase.com
First, go to Coinbase.com, enter your email address and click the Get Started button.
Step 2: Name and Password
Next, you’ll see a screen where you’ll fill out your name and choose a password. Then click what state your from, click the Recaptcha (I am not a robot) box, click the User agreement box, and click “Create Account”
When you click “Create Account” you’ll see this screen:
Step 3: Verify Email Address
You will be sent an email with a link. Go to your email account and open the email from Coinbase. There you will click the Verify Email Address button, which will take you back to Coinbase to proceed further with setting up your Coinbase account.
Step 4: Individual or Business
Next, you’ll be asked whether you are an individual or a business. Click on the appropriate box, then click the “next” button to proceed. For the purposes of this tutorial we will proceed to sign up as an individual.
Step 5: Country and Cell #
Next, you’ll choose your country and enter your cell phone number. It will have to be your cell # so you can receive texts for two factor verification.
Click “next” and Coinbase will text you an authorization code to enter.
Enter the code in the box provided and click “Verify Phone Number”
Step 6: Set Up Payment Methods
Now it’s time to set up your payment methods so you can buy cryptocurrency. You can set it up to draw money from your bank account or to make a purchase with your credit/debit card.
For this tutorial, we will set it up using the “Bank Account” option. Click on “Bank Account”
On the next screen you’ll be asked to choose your bank from the list provided.
If you’re able to find your bank on the list, click on it and you’ll be asked to login to your online bank portal and choose which account you want to use for transactions with Coinbase.
Choose your bank account and click “Next”.
What If Your Bank is Not on the List?
If you can’t find your bank listed, scroll all the way to the bottom and click “Other Bank”.
If you choose “Other Bank”, you’ll be asked to provide the routing number and account number for the bank account you want to make purchases from. You can get these numbers from the bottom of the checks your bank provided with your account.
You may also be asked to prove your identity. Coinbase may ask for you to take a picture of your Driver’s license or Passport to prove who you are.
Don’t let this freak you out! It’s just another layer of security to prevent people from opening fraudulent accounts. It’s the same thing you’d have to do if you were opening a bank account or brokerage account.
Step 7: Purchase Cryptocurrency
Now you’re ready to make a purchase!
Click which cryptocurrency you’d like to buy, then choose the payment method you entered earlier.
Next, enter the dollar amount you’d like to purchase.
If you like, you can even click the “Repeat This Buy Button” to set up an automatic purchase every week, two weeks, or every month.
So there you are- you are now a cryptocurrency investor!
This tutorial only covers the basics of how to open an account on Coinbase and make your first purchase. There is a lot more to learn about cryptocurrency investing, how Bitcoin wallets work, Bitcoin vaults, and how to send/receive Bitcoin to and from your account.
I may write another post covering those in the future, but for now you can go to the Coinbase Support Page to learn more.
Be Careful When Investing in Cryptocurrency
Just like any investment, it’s wise to know what you’re getting into before you invest. If you can’t explain your investment to someone else so they can understand it, then you need to hold off until you understand it better. Continue to educate yourself about cryptocurrency and eventually you'll be able to explain it like a pro!
There will be wild price swings and volatility. If you’re prone to getting your emotions involved in your investments (as most of us are) then cryptocurrencies may not be your bag.
By the way, if you need a handy and powerful tool to manage all your invesments (including crypto) in one place, check out Personal Capital- It's Awesome!
You Could Lose Lots of Money
Investing in Bitcoin, Ethereum, and other cryptocurrencies is very speculative at this stage of the game. It’s nothing like investing in stocks and shouldn’t be viewed that way.
Even though I personally believe it’s potentially one of the best investments in history, I can’t predict the future. There are a lot of things that need to go right over the next couple of decades for crypto to grow in value over time.
So don’t invest on my word alone.
I don’t claim to be an investing professional or an investing expert. I’m just a guy who likes to invest, and I try to do it wisely. Sometimes I win, sometimes I lose my shirt.
Question: Are you interested in investing in cryptocurrency? Have you tried it already? Leave a comment and tell me your experience, or just ask a question if there is anything you’d like to know about cryptocurrency investing.