Lesson

Buying and Selling Bitcoin

Bitcoin is interesting in its own right, but a lot of its value comes from the fact that people are willing to exchange it for dollars, yen, euros, and other national currencies. The most direct way to buy and sell bitcoins is person-to-person, but although it’s technically easy, in practice, this is the most complicated method. The first hard part is finding someone who wants to make the exchange. If you happen to know someone, that job is done, but there are also online directories that serve as match makers, such as localbitcoins.com where you can find a list of people near you who are willing to make the exchange in person or online.

Many areas also have events where bitcoin enthusiasts meet. Meetup.com is one good place to find them. When you sell or buy directly, only accept cash or a valuable, physical object as payment. Checks do bounce and then you’re left with nothing. Security is crucial. The person you’re meeting knows that you’re carrying something of value and may simply rob you. Some police departments will let you execute transactions in the station. Just go in and ask.

Always use a familiar system. If they suggest some kind of escrow or other unusual setup, it may be a trick. Finally, wait until the transaction is confirmed by the bitcoin network before considering it done. A second way to buy bitcoin is through exchanges. Like the stock market, exchanges are places that not only match sellers with buyers, but also manage the transfer. You deposit your money or bitcoin, then set an offer to buy or sell at a certain price.

Exchanges typically have a dashboard that show bitcoin’s price over time, information about bids that individual buyers have offered, and the asking prices that sellers want, and a chart of them meeting in the middle. Exchanges are a great place to set future orders, like buy when the price reaches this level and then sell it when it reaches this level, but that means you have to leave either money or bitcoin in the exchange and some exchanges have a bad record of just taking people’s money and disappearing.

There is also a list of exchanges is at coinmarketcap.com, Just go over and click exchanges and there’s your list. The last way to buy and sell bitcoin is through institutions that simply sell their own holdings. One of the biggest is coinbase.com. It’s very straight-forward. You load your bitcoin or money from a bank account or you use a credit card. Then, you say how much you want to buy or sell, and then you check the fees and terms, and then simply click to make it happen.

Institutional sellers are great for buy it or sell it now orders, because the prices and fees are clear. But the same caveats apply as for exchanges. You’ll have to setup a payment system. If it’s a bank account, expect it to take a few days to get confirmed by the institution.

Some exchanges also accept credit cards. The fees can be high on the order of a few percent, so familiarize yourself with all the terms ahead of time and, as with exchanges, don’t leave too much money or bitcoin in the accounts when you’re not actively trading. Your bank account or paper wallet is safer. Finally, whenever you deal in bitcoin, remember that you’re effectively dealing in money. Use the same precautions, trust others selectively, and consider your recourse in every situation.