There are three ways to get bitcoin: you can break it, you can earn it or buy it. If you do not have access to cheap energy or a specific computer-related skill or interest, I would forget about mining. Gone are the days when you could break it with regular home computers.
Earning it is easy – all you need is a wallet. As long as the buyer of which product or service you sell is happy to pay you in bitcoin, send them your wallet address and they can pay you in bitcoin. In other words, this is just like a physical wallet. Someone sends bitcoin the same way they would give you money. It’s just digital.
An easy place to get your first wallet is blockchain.com (You can also buy and sell bitcoin here). But make sure you set up two-factor authentication (2FA). If you do not protect your wallet, you risk someone stealing it – to continue the above analogy. There is also the option for 3FA – where you can just enter the website with a password and then confirm via email and mobile phone.
However, a wallet with Blockchain is not a long-term storage solution. This is just a starting point (you would not keep gold bars in your wallet). But more on storage solutions later. Here we focus on how to buy bitcoin.
The British Financial Conduct Authority (FCA) has made life very difficult for any UK investor who may be interested in the crypto world. The FCA, in its wisdom, has just banned the sale of cryptocurrencies and exchange-traded banknotes to private investors. The result is that investors lose the comparative security that these products provided.
If private investors want to invest in crypto – which they should, it is the future of financing – then they have to take technical risk as well as the risk of the investment itself. If anyone from the FCA happens to read this, I urge you to reconsider this decision. It makes life more risky, not less, and thus runs counter to the purpose of the body.
However, we are not here to lobby. We are here to tell you how to buy bitcoin, and my first wise wisdom is this: before I put any significant sums into working in crypto, I urge you to research as much as you can. Read about bitcoin. Listen to podcasts. And above all, test the technology.
Buy small amounts of bitcoin, practice transactions in it, practice storing it. Get on top of technology before risking any significant capital. It takes several days, but it’s worth the time.
The best exchanges to buy bitcoin
The major stock exchanges include Coinbase, Bit stamp, Binance, Kraken, Bitpanda, Gemini, SFOX, crypto.com, CoinCorner, Bitfinex and eToro. In general, the more you want to buy, the more paperwork you have to fill out. They each have their little quirks. I recently tried to create some accounts with some of these and my results were as follows.
With Bitstamp and Bitpanda, I thought it was easy to get started and make deposits, ditto Gemini, who is the business child of Winkelvoss twins. (However, my Gemini account was frozen for several days because I pressed the wrong button, just like bitcoin shaved. It took me an age and an email to the boss, which I happen to know a bit from the way back to get it frozen – so there is a small user-friendly black mark against Gemini there).
Binance was also quite simple (but easier on the phone than on the desktop). Its interface is not the nicest, but it and Bitfinex have the widest range of altcoins from the major exchanges, so if the appeal of some famous coins that can go 100 times or lose you all your investment is for you, then Binance and Bitfinex are equal good as everyone. But for some unknown reason, Binance has reduced the amount of sterling it is willing to accept in deposit to £ 4,000, and I can not get answers from them as to why, which again makes it UK-user unfriendly. Meanwhile, Bifinex only accepts deposits in Euros and US Dollars.
Crypto.com was easy to install on my phone, but not on my desktop. But, and more to the point, it has stopped pound deposits, so it’s again a bit useless for UK investors. CEX.io was easy to get started with, but for larger amounts you need extra verification. I sent in the forms weeks ago and have not heard anything back.
When you are done, you will experience the joy of sending money to your exchange through a bank. You may stop having to make a phone call to the bank at this time (and you wait a while; banks’ response times have become very slow in this new Covid era).
Revolut makes it easy to buy bitcoin (and easy to open an account). But you can not move your bitcoins anywhere else. You can only sell back to Revolut, which is something besides the point. But it also means that Revolut solves the storage problem for you.
Advanced users and purists prefer the decentralized exchanges, but we leave them for another day.
Other ways to buy bitcoin
If you still prefer some sort of listed option, you can buy Microstrategy (Nasdaq: MSTR) which has become something of a proxy for bitcoin. That’s because Microstrategy’s CEO Michael Saylor last year, when he saw the Federal Reserve’s massive money pressure response to Covid, converted his company’s cash ($ 500 million) into bitcoin. Later that year, he raised another $ 625 million to buy even more.
In total, he spent $ 1.125 billion to buy 70,470 bitcoins, averaging $ 16,000 per bitcoin. Issuing debt to buy bitcoin is a bold move. But Microstrategy’s stock price ranged from about $ 150 to over $ 1,000. His company is now behaving like a kind of Nasdaq-listed bitcoin proxy, and Saylor has become one of the biggest advocates for the bitcoin space (he undoubtedly inspired Tesla founder Elon Musk to do the same, and no doubt Musk who jumps on the bandwagon will persuade others to follow).
If you can access them, they are listed in Sweden Bitcoin Tracker One (Stockholm: COINXBT) or the US listed Grayscale trust (OTC: GBTC).
London has a listed bitcoin miner, Argo Blockchain (LSE: ARB), even though its share price has gone bananas. Canada has several tinycap bitcoin games if your broker can access the market. It is Venture listed Neptune Digital Assets Corp (Vancouver: DASH), which is a game on altcoin, Dash.
Finally, there is Cypherpunk Holdings (Canada: HODL). I was the manager of this company and even a short CEO but had to resign last year due to an illness in the family. We started the company to invest in privacy technology and it now has the ninth largest bitcoin treasury for any public company, as well as some very interesting other investments in privacy technology. Its CEO is former Lithuanian poker champion Tony Guoga, who also has a large stake in the company. In Moe Adham and Jon Matonis, it has two of the most crypto-savvy directors you can find. This is still just a small business (market value about $ 30 million), but it has potential.
One caveat: in its previous incarnation, this was a mining exploration company in Asia, and there are two outstanding court cases dating back to this time. One is a case brought by the former CEO for an unpaid discretionary bonus and the other is a disputed tax debt in the Netherlands. Covid and other factors have led to delays in these being resolved. It is not believed that both cases will harm the prospects for Cypherpunk Holdings, but a lawsuit is a lawsuit so it is right to flag it up. Hopefully, both cases will be completed by 2021.
To learn more, Dominic has compiled a downloadable beginner’s guide to Bitcoin for MoneyWeek subscribers, which includes a bonus section on other cryptocurrencies. If you are not already a subscriber, sign up now to get the report plus your first six issues for free.