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How to Invest in Bitcoin and Cryptocurrencies

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You’ve heard the buzz. Bitcoin and other digital currencies—also known as “cryptocurrencies”—have become all the rage lately and investors big and small have sung decidedly varying tunes about them. But what exactly are these currencies, and why should you (or shouldn’t you) take them seriously as an investor?

Let’s start with definitions. Bitcoin is a cryptocurrency—a digital or online currency with the security protection of cryptography. While Bitcoin is, as of this moment, the most popular of the cryptocurrencies, a few have followed since its inception in 2009, including Litecoin and Namecoin.

According to Forbes

You now know more about Bitcoin than approximately 76% of the population. Yet that doesn’t mean Bitcoin is an investment vehicle of zero consequence, quite the opposite, in fact.

bitcoin_book_cover1As Forbes elaborates
The price of a Bitcoin accelerated some 6000% in the year of 2013, even though it had been on the market since 2009. The advantage of Bitcoin has been its minimal transaction fees—allowing people to exchange money online almost as if they were exchanging cash in terms of cost—but some investors aren’t so sure of the ceiling Bitcoin might have in the future.

Naturally, there is a rebellious and youthful element to the cryptocurrencies that is ignored and ridiculed by the more seasoned investor set. With that said, much fun has been made fun of every new technology, investment vehicle and technological invention that went on to change the world.

The concept of Bitcoin first appeared in 2008 in a research paper written by “Satoshi Nakamoto”—a mysterious name, as no one has been able to verify the author’s identity. Since then, Bitcoin’s open-source nature has allowed for the creation of an infrastructure and an investment base that has accelerated to the point of requiring every investor’s attention.

But should you invest in Bitcoin and other cryptocurrencies? That’s the only question of interest to you. Let us try to answer it.

Determining Whether or Not Bitcoin is Right for Your Portfolio

The shrewd investor doesn’t dismiss Bitcoin off hand—nor does he see the explosive growth and mindlessly spend money. The shrewd investor takes the approach to Bitcoin and other cryptocurrencies they take with every other investment: a detached, comprehensive examination of the pros and cons of investment.

Investing in Cryptocurrencies: Pros and Cons

Bitcoin’s exploding value is certainly attractive, but there’s more than meets the eye here. Let’s zoom in and take a look of some positives and some potential drawbacks of investment:

Pro’s

Getting in the ground floor. Yes, Bitcoin has exploded in recent years, but the “online economy” of cryptocurrencies is still in its infancy. Investing now means getting in on the ground floor, even if it might have been better to invest in 2010.

  • The Potential for High Returns. The earliest investors in Bitcoin are sitting pretty right now because they’ve seen some extremely high returns for their initial costs. Not only has Bitcoin accelerated in value in a short amount of time, but there is still more promise ahead as the general population learns about the potential advantages of digital currencies. Digital currencies should be considered a “high-return, high-risk” type of investment.
  • Ease and liquidity. It’s easy to invest in cryptocurrencies, just as it is easy to use them. In fact, that’s been one of the main attractors thus far: online transactions have been cheap, efficient, and reflect our growing Internet economy.
  • Straight-forward supply. In the case of Bitcoin, the number of Bitcoins—and therefore the supply—is fixed at 21 million. For those in favor of supply-based investing, the predictable nature of Bitcoin’s availability is an advantage. If you believe that the market for Bitcoin will only expand, then you have a reasonable sense that it may be a good investment thanks to the fixed supply.

Cons

Volatility. Bitcoin and other cryptocurrencies simply don’t have a record of stability. Bitcoin has gone between several dollars per coin to thousands—and everywhere in between. For this reason alone, these currencies could be considered high-risk commodities. They’re not the type of investment you want to have in your portfolio if you’re looking for more certain long-term, stable growth.

  • An uncertain regulatory environment. Bitcoin and other digital currencies are largely without regulation—but that’s only for now. With some concerns about the ability of these currencies to facilitate money laundering, the regulatory future is not so crystal clear. Even the current unregulated state of Bitcoin means minimal protection for consumers—and investors. Because consumer disclosure requirements are nonexistent here, there is a lot of potential for legal issues surrounding the digital currency world.
  • Digital currencies are not backed. No central banks are backing the values of these currencies, which means they have no tangible value save for what Bitcoin and digital currency users are willing to pay to invest. This has helped aid the volatility of these digital currencies, and should serve as a word of caution to first-time buyers.
  • The concept is new and experimental. For many people, this is an advantage; they believe in the concept and they expect digital currencies to take off to greater heights. For uninitiated investors, new and experimental concepts mean volatility and uncertainty. Yes, they may be a good investment; but the risk of loss is also great.
  • Technology and security issues. Born out of technology, these digital currencies are reliant on technology for their value. Although the cryptographic nature of their online security has helped, the security issues are not without their inherent risks.

Read More in the Bitcoin Glossary
 

For the Believers and for the Skeptics

 

Getting Started in Investing in Bitcoin and Digital Currencies

Newsweek-bitcoinIf you’ve looked over the pros and cons of investing in digital currencies and remain convinced that they’re the right move in your portfolio, it’s time to learn how to take action. The good news is that investing in Bitcoin and other currencies is easy; oftentimes it only requires identifying a good, secure outlet and making the investment.

But as any good investor will tell you, that’s not always the whole story. There’s more than meets the eye here if you really want to optimize your investing experience and really want to make sure that you get the most out of your investment dollar. Let’s take a closer look at the logistics of buying a Bitcoin and what you might do to enhance your chances of success.

How to Buy Bitcoin

The good news here is that buying a Bitcoin, like many other online purchases, is not a very difficult transaction.

The simplest way to go about investing in Bitcoin is to acquire a “digital wallet.” The aforementioned Forbes.com articles lists CoinBase.com as a good place to set up your online Bitcoin presence, as well as Blockchain.info.

bitcoin-transactions
These online “wallets” allow you to spending, accepting, and saving your coins just as a real wallet would serve for spending, accepting, and saving your real cash. CoinBase.com now allows you to make regular investments from your bank account.

Acquiring a Bitcoin

You can acquire bitcoin in a number of ways. You can buy Bitcoins directly from a private owner of a Bitcoin. However, if you don’t know anyone looking to sell you Bitcoins, you can also buy Bitcoins directly from an “exchange.” Here is a website you can use to look up exchanges relevant to you.

Bitcoins can also be “mined.” Mining Bitcoins is a concept that’s been around since the Bitcoin itself—essentially, you purchase hardware on your computer that can acquire new Bitcoins, almost like someone mining for gold. (Keep in mind that although not all of the Bitcoins have been mined, there will always be a fixed amount of Bitcoins; in this case, 21 million). Click here for a guide on mining Bitcoins.

Who-owns-all-the-bitcoins-1-700x1024

How to Use a Bitcoin

Now that you know how to acquire your own Bitcoins—as well as construct your own digital “wallet” for holding, saving, and accepting Bitcoins—let’s take a look at how you can put your Bitcoin to use.

After all, one of the top questions that new Bitcoin investors have is, “so…what can I do with these Bitcoins?”

The truth is, the Bitcoin’s versatility will only expand as far as the amount of businesses willing to trade in Bitcoins. Luckily for investors, that number is growing. Some online retailers, for example, like Overstock.com, allow you to enter Bitcoin codes to spend your money on their site, much like using a service like PayPal.

But if you really want to know the full range of uses you can get out of your existing Bitcoins, you can find it here, at Bitcoin.travel. This website shows you a map of local businesses—and even ATM suppliers—that allow Bitcoin transactions. The search feature allows you to check for companies online that you can trade with as well.


There’s always a third use, however—you can simply save your Bitcoins, trusting that their value against the U.S. dollar will increase over time. This is the main “bet” you are making when you invest in Bitcoins. Many investors have seen the price of their Bitcoins fluctuate from as high as four digits to two digits. As of the writing of this article, the value appears to be healthy, but as is the case for investments of all types, everything hinges upon the future.

How to Invest in Bitcoin

If you’re less interested in owning individual Bitcoins than you are interested in investing in the concept, then this section is for you. Investing in Bitcoin can be done a number of ways—including what you read in the previous sections, such as purchasing coins directly through an exchange—but let’s take the time to explore some alternative ways to invest in this new concept.

ip.bitcointalk.orgFirst, you can purchase Bitcoin-related stocks. Bitcoin Shop was a company that traded as a “penny stock” in February and promptly saw its value rise tremendously—only to have it fade back down again in the subsequent time period. However, if the timing was done right, many investors may have made a good amount of money investing in Bitcoin Shop. If you’re interested in investing in Bitcoin stocks, keep your eye out on the market for new companies that go public.

Second, there are other high-barrier ways to invest in Bitcoin, such as Hedge Funds that utilize Bitcoin, or by investing in a Bitcoin Investment Trust. These require a greater amount of time and money investment, however, so they require investors of adequate resources.

Trends and Projections for Bitcoin’s Future

What’s next for Bitcoin? There are, however, ways of discerning trends and projections as to Bitcoin’s future that can be nearly as valuable as owning a time machine.

bitcoin-transactionsOne of the most interesting developments this year has been the growing interest of hedge funds in Bitcoin. Coin Capitol Management, for example, has made a bit of a splash by focusing on digital currencies. According to the fund manager, the investments they’re making in Bitcoin follow all the same principles that their investments in other fields follow—doing their due diligence and ensuring that they have the most information possible before making their moves.

Last year, a hedge fund even boasted a top-level performance after investing in Bitcoin, lending some legitimacy to the possibility that investing in Bitcoin might not be an online-only enterprise.

Investing in Other Cryptocurrencies

Of course, Bitcoin is not the only cryptocurrency to hit the market in recent days. As we mentioned at the beginning of this article, there are a number of other cryptocurrencies to consider if you’re going to think about investing in digital currencies.

One of the most significant players in this field is Dogecoin. The “Doge” concepts comes from an admittedly goofy Internet meme, but the currency may be a legitimate investment to consider. Dogecoin’s popularity with Internet users has made it an introduction, for many people, to the world of online, cryptocurrencies. Generally, Dogecoin has been used amongst Internet users who want to “tip” each other through their experiences in social media or gaming. However, as with Bitcoin, the ceiling on Dogecoin may not even be in sight yet.

Investing in these other currencies can be a similar experience to investments in Bitcoin. They are easy to acquire if you want to simply indulge in the “buy-and-hold” strategy that many people have employed in recent months.

Some other cryptocurrencies to consider include:

  • Namecoin
  • Litecoin
  • Peercoin
  • Mastercoin

How is Bitcoin Doing Now?

bitcoin-transactions2One of the first things potential investors want to know is: “okay, where is Bitcoin trading now?” In other words, you want to know if the value is ripe for you to make an investment in Bitcoin, or if you might want to consider waiting for a price dip.

Marketwatch has an interesting summary of where Bitcoin has been in recent months—you’ll notice a major spike in November and December of 2013 before the price has settled in the early portions of 2014 somewhere halfway between its previous values.

The volatility is noticeable. According to a source quoted in the article, Bitcoin is some seven or eight times as risky as investing in gold or the stock market. This makes it an attractive investment for those with a high-risk, high-reward strategy; and an absolute “must-stay-away” for those with more conservative investment leanings.

Coinbase is a good site for checking the price of Bitcoin; as of this writing, the price is $449.17.

Exchanges: Buying Bitcoins Today

If you already know that you want to buy Bitcoins, the best place to start looking is on an exchange. HowToBuyBitcoins.info has a list of exchanges that sell Bitcoins; you can simply choose from among these in order to get involved with Bitcoins as soon as you’re done reading this article.

Keep in mind that these individual exchanges are not all tied to the same organization—they are their own exchanges, which means that you put your money at risk by entrusting each exchange with your investment. Some exchanges have a better reputation than others; it will pay to do a bit of research to see who is the most trusted if you want to be sure that your investment will be honored.

Gaining Exposure to Bitcoin (Without Holding Any Yourself)

Are you interested in holding some piece of the Bitcoin empire without actually investing in the highly volatile currency itself? You’re not alone. A lot of investors are interested in finding out exactly how to get involved with Bitcoin in a more “traditional” way. If this suits your individual investor’s style, then you may discover that it’s the best course of action for you as well.

As stated, there is more than one way to invest in Bitcoin. But let’s assume that simply buying individual Bitcoins is a strategy that you’ve considered and overruled. How, then, to best go about exposing your portfolio to the potential of Bitcoin without actually taking on the direct purchasing strategy? In the next few sections, we’ll highlight some great ways to get involved with Bitcoin in a way that you feel safer.

If you don’t want to expose your money to the individual Bitcoin exchanges, these are some great ways to invest in the popularity of Bitcoin:

Invest in Bitcoin Through Public Markets

This is a great option for those of you who want to invest in Bitcoin but don’t trust the online exchanges with your money.

CoinDesk.com has a great guide for you, including companies like BTX Trader. These companies sell stock shares without requiring that you invest in their products—in other words, they’re just like any other stock on the market. Other companies, like Bit Stamp, may warrant your attention as well.

If you ask us, the best way to go about choosing a Bitcoin stock is to handle it like any other investment: run the numbers, do your homework, and check your variables.

Stocks to Watch

Want more stocks to watch? Reference the previous section. Other stocks that have been tossed around are the small market cap stocks found recommended at SeekingAlpha.com: WPCS International (WPCS) is the stock behind BTX Trader that you may want to consider; it’s the same platform that was mentioned over at CoinDesk.com.

You can find some other interesting (and a bit risky) penny stocks worth checking out over at MoneyMorning.com. Look for similar themes across these popular recommendations to see which stock might actually be best for you.

A word of warning: many of these stocks are indeed penny stocks, which means they likely should not constitute a large part of your investment portfolio.
bitcoin-for your wealth

Things to Keep in Mind for 2014

Investing in Bitcoin is not for the faint-hearted investor. If you have no money in stocks, no money in bonds, no money in mutual funds…well, you may want to start investing elsewhere. Bitcoin has been an attractive investment for many a young, Internet-savvy investor, but the problem is that these investors haven’t grounded themselves in good overall investment knowledge yet. Sometimes, they get lucky. And sometimes they get burned.

However, the price of Bitcoins in 2014 has been high, despite a sink from its overall high last winter. There’s no doubt that many people consider Bitcoins to be valuable; in order to understand that, you simply have to look at their prices.

As you look for ways to invest in Bitcoin in 2014, consider that as Bitcoin grows, so too do the potential investment strategies. You can invest in stocks or Bitcoins directly—whichever suits your strengths as an investor.

Conclusion

How do you know whether investing in Bitcoin is right for you? Only you can answer that. But a look at your portfolio might help. If you have a lot of conservative investments and are looking for something a little higher-risk, than Bitcoin stocks and actual Bitcoins might be the right strategy you’ve been looking for to round out your overall investment strategy.

For others, Bitcoin might just be too foreign a concept to understand well enough; it’s high risk and high reward, and if you don’t know what you’re doing, it may be best to stay out of the field entirely. But there’s no doubting there could be a lot of potential in Bitcoin, which is why we encourage you to keep learning, keep reading and keep an open mind.

For the Believers… & For the Skeptics

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US Vows 100% Tariffs on French Champagne, Cheese, Handbags Over Digital tax

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Image via Shutterstock
By David Lawder and Andrea Shalal

The US government on Monday said it may slap punitive duties of up to 100 percent on $2.4 billion in imports from France of Champagne, handbags, cheese and other products, after concluding that France’s new digital services tax would harm US tech companies.

The US Trade Representative’s office said its “Section 301” investigation found that the French tax was “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies,” including Alphabet Inc’s Google, Facebook, Apple and Amazon.com.

US Trade Representative Robert Lighthizer said the government was exploring whether to open similar investigations into the digital services taxes of Austria, Italy and Turkey.

“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies,” Lighthizer said. His statement made no mention of proposed digital taxes in Canada or Britain.

The US trade agency said it would collect public comments through Jan. 14 on its proposed tariff list as well as the option of imposing fees or restrictions on French services, with a public hearing scheduled for January 7.

It did not specify an effective date for the proposed 100% duties.

CHAMPAGNE, ROUGE AND GRUYERE

The list targets some products that were spared from 25 percent tariffs imposed by the United States over disputed European Union aircraft subsidies, including sparkling wines, handbags and make-up preparations – products that would hit French luxury goods giant and cosmetics maker L’Oreal hard.

Gruyere cheese, also spared from the USTR aircraft tariffs levied in October, featured prominently in the list of French products targeted for 100 percent duties, along with numerous other cheeses.

The findings won favor from US lawmakers and US tech industry groups, who have long argued that the tax unfairly targets US firms.

“The French digital services tax is unreasonable, protectionist and discriminatory,” Senators Charles Grassley and Ron Wyden, the top Republican and Democrat, respectively, on the Senate Finance Committee, said in a joint statement.

Spokespeople for the French embassy and the European Union delegation in Washington could not immediately be reached for comment.

But prior to the release of the USTR’s report, a French official said that France would dispute the trade agency’s findings, repeating Paris’ contention that the digital tax is not aimed specifically at US technology companies.

“We will not give up on taxation” of digital firms, the official said.

France’s 3 percent levy applies to revenue from digital services earned by firms with more than €25 million ($27.86 million) in French revenue and €750 million (£644 million) worldwide.

The USTR’s report and proposed tariff list follow months of negotiations between French Finance Minister Bruno Le Maire and US Treasury Secretary Steven Mnuchin over a global overhaul of digital tax rules.

The two struck a compromise in August at a G7 summit in France that would refund US firms the difference between the French tax and a new mechanism being drawn up through the Organization for Economic Cooperation and Development.

But Trump never formally endorsed that deal and declined to say whether his French tariff threat was off the table.

Reuters

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Andrew Yang Wants You to Make Money Off Your Data by Making it Your Personal Property

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Andrew Yang, 2020 Democratic presidential candidate, plans to regulate the tech industry by prioritizing in giving people the right to own their personal data (“data as a property right”), thus allowing them to make money by sharing it with companies. Currently, companies entirely own users’ data – users do not have much control over it.

Yang said, “our data is now worth more than oil” and gave emphasis to the great amount of data people create and how companies make money over it. “By implementing measures to increase transparency in the data collection and monetization process, individuals can begin to reclaim ownership of what’s theirs,” he said.

He also cited a report saying that the collection and use of Americans’ personal data has become a $198 billion industry. Yang believes that people should have more control over their data, such as being able to see how their data is being used and having the freedom to opt out if they choose.

Yang added that we need politicians “who understand technology and a modern way to regulate it,” as reported by Engadget. “In order to regulate technology effectively, our government needs to understand it. It’s embarrassing to see the ignorance some members of Congress display when talking about technology, and anyone who watched Congress question Mark Zuckerberg is well aware of this,” said Yang.

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Never Underestimate the Power of Your “Little Enemies”: Wal-Mart and Whole Foods Learned that lesson Big Time as Their Stocks dropped Last Quarter

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Aldi’s, a successful discount supermarket chain, has been around for a long time and with multiple locations throughout the country. Since they opened their doors in 1910, not too much has changed for the company other than growth and more revenue. The company recently announced their plans to expand their organic food department, by adding more gluten-free foods, organic food brands, and get rid of some artificial ingredients from their products in an attempt to attract more consumers who want shop for healthy alternatives.

Consumers love going to Aldi’s because of their competitive low prices, in direct competition with other big chains like Wal-Mart. According to a recent price check, Aldi’s products are about 30% cheaper than Wal-Mart’s. Another company that Aldi’s may be a threat to is 365 by Whole Foods Market, which is expected to open later this year.

Whole Foods understands that if they are going to make such a change, now is as great of a time as any. The company has already started to get rid of partially dehydrogenated oil, synthetic colors, and MSG’s from all of their private-label products — which accounts for about 90% of their total revenue.

Aldi is also planning on expanding a selection of organic meats, including their “Never Any” brand which has no added hormones, animal by-products, antibiotics, or other additives. Their SimplyNature line, which is completely free of over 125 ingredients, will also see more products, since it’s already so popular. Their dairy section will also see more products, with products such as sour cream, cottage cheese and yogurt.

The company is truly taking the “go big or go home” saying quite seriously since they began to offer “fancier” or higher classed foods like quinoa, coconut oil, and smoked salmon. All of these little yet big changes will enable the company to not only go head to head with Whole Foods, but Kroger’s. They too have started to step up and expand their organic product line, Simple Truth.

Altogether, Aldi’s has over 1,500 stores based in the US, but they plan on increasing it to 2,000 over the next two years as a part of a $3 billion expansion.

Both Aldi’s and their company’s foreign rival discounter, Lidl, has started to seize the grocery market in a similar fashion in the United Kingdom. The pair is forcing a lot of the nation’s biggest supermarkets to reduce their prices dramatically and cut off many employees in an attempt to remain in the game and stay relevant in the competition for customers. Andy Clarke, CEO of Asda, UK’s second biggest grocery chain, called this new game of fresh competition, created by Lidl and Aldi’s, “the worst storm in the history of retail.” It was not too long after Aldo and Lidl joined forces that the Wal-Mart owned company reported its worst drop in sales for the quarter to ever occur.

Aldi’s believes that keeping all their products at an affordable and low price is the best edge they have. They can keep their prices so low by limited inventory to a lean selection of private-label items. They do the opposite from the traditional supermarkets which tend to carry a multitude of brands, even on just a single product. Aldi’s also invests far less in both merchandising and customer service compared to their counterparts. A lot of Aldi’s products are displayed in their shipping cartons as a way to make restocking simpler and more efficient. Doing that translates as fewer workers those companies needed on the sales floor. Aldi’s also asks that their customers bring their own shopping bags with them and bag their own products, further reducing need for more staff.

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