I’ve been delving deep into cryptocurrencies lately, and I figure it’s about damn time I write a guide on investing in bitcoin.
Many people believe that it’s already in a bubble, and that it won’t go any higher—they couldn’t be more wrong.
In this article I’m going to break down how bitcoin operates, why it’s so special, and how you can start making money with it…today.
Mark my words, you do not want to miss out on this opportunity. Each and every day, bitcoin is creating a new class of “cryptocurrency millionaires,” like the pizza man who turned a $13 bitcoin transaction into over $82 million dollars.
Here’s everything you need to know about investing in bitcoin, ethereum, and every other cryptocurrency out there.
What is Bitcoin?
“You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust” -John McAfee, Founder of McAfee
Put simply, bitcoin is digital currency for the digital world. It’s completely untraceable, anonymous, and decentralized, which is why governments hate it. Due to the inherent nature of bitcoin, it can’t be taxed, it can’t be printed, and it can’t be traced.
In more complex terms, bitcoin is an algorithm that’s completely self-regulating. It’s a set of code that utilizes Web 3.0 or “blockchain technology,” to facilitate transactions between users. While this may seem strange or complex, it’s actually quite simple.
Bitcoin allows two users, thousands of miles apart, to create a transaction that’s completely anonymous, untraceable, and un-taxable. In short, it eliminates the need for corrupt bankers and elites.
While this is by no means a comprehensive definition of how bitcoin works, you don’t need to understand the ins and outs of it, unless you absolutely want to. The big takeaway here is that it’s literally a digital currency that brings power back to the people, and away from the central banks.
If you’d like a more technie-friendly explanation of what bitcoin is, how it operates, and how to invest in it, I recommend you watch this interview with the leading expert on cryptocurrencies, Andreas Andonopoulos.
Where Does Bitcoin Come From?
“Bitcoin will do to banks what email did to the postal industry” -Rick Falkvinge, Founder of the Swedish pirate party
Bitcoin is created by cracking an algorithm, which grows increasingly complex as more bitcoins are created. This process of cracking the algorithm inherent in bitcoin, and receiving bitcoins in exchange, is known as “mining.”
The algorithm is set to increase in difficulty as more bitcoins are created, effectively making it a self-regulating currency that governments can’t print. Early on, back in 2010 when bitcoin first came out, nerds would build their own rigs and rake in dozens of bitcoins per hour.
Now, because there’s far more bitcoins in circulation, the algorithms have grown difficult to process. In response, tech investors and silicon valley CEO’s have set up super computer processing centers, dedicated solely to mining bitcoin.
This is one of the things which gives bitcoin its value—it’s linked to something tangible, AKA the cost of hardware, processing power, and electricity. Mining bitcoin is just one way that you can profit off of it, however, as I’ll discuss later.
How Do You Store Bitcoin?
Bitcoin is kept in special “bitcoin wallets,” that can be either digital or hardware. I personally recommend that you have one of each, as this will greatly aid you in both day trading and long-term investing in bitcoin.
Digital wallets are exactly what they sound like: they’re digital. You can access them from an app on your phone or from your computer, anywhere in the world, as long as you have a connection. These serve as “transfer hubs,” between your bank account and the trading exchange (which I’ll talk about later).
My favorite digital wallet is Coinbase, because it functions both as a cryptocurrency wallet as well as an exchange. The cryptocurrencies that you can trade are limited, but it’s a phenomenal digital wallet that’s 100% free—plus if you sign up through my link you’ll get $10 of free bitcoin.
I recommend that you keep your “day trading,” money on either Coinbase or an exchange like Poloniex, which I will delve into later. For now I simply recommend you make a Coinbase account since you’ll need one to wire funds from your bank account to the exchange.
In addition to this, I also recommend you have a hardware wallet—these are by far the most secure, and are completely immune from hacking. They come in the form of little USB’s and if you’re going to be investing more than $10,000 into cryptocurrencies for the long term, this is a great way to store them.
I personally use Trezor for all of my cryptocurrency storage needs. It’s small, lightweight, extremely secure, and compatible with Windows, OS X, and Linux. It’s also got a little screen on it so you can actually transfer bitcoin with the device itself, avoiding the need for a third party exchange.
How to Profit From Bitcoin
“I do think Bitcoin is the first [encrypted money] that has the potential to do something like change the world.” – Peter Thiel, Co-Founder of Paypal
As I’ve discussed previously on my blog, there’s a few ways to profit from any market—whether it be the New York Stock Exchange, or from bitcoin markets. There’s day trading, swing trading, and investing.
Day trading is when you trade on a day-by-day basis. I do not recommend this if you’re first starting out, as it has the highest learning curve and can often result in devastating losses.
Swing trading is when you notice a trend in the markets, and jump in for a week or so to take advantage of it. This makes up the majority of my trading, and has netted me some incredible gains ever since I started when I was 18.
Lastly, there’s long term trading, which is by far the most stable. Even though it might seem like slow growth, just $100 of bitcoin in 2010 would be worth over $75 million dollars today. So yes, long term investing in bitcoin is definitely worth your time.
I’m going to break down the methods for long term investing first, since I believe that EVERYONE should be doing this. There’s virtually zero risk if you do it properly, and it could literally turn you into a multi-millionaire within the next five years—so listen REALLY fucking closely.
Long Term Investing in Bitcoin (Method 1)
“I am very intrigued by Bitcoin. It has all the signs. Paradigm shift, hackers love it, yet it’s derided as a toy. Just like microcomputers.” – Paul Graham, Creator of Yahoo Store
Investing in bitcoin for the long term is mainly a waiting game. See, it’s really quite simple—you buy bitcoin, and you wait. That’s all there is to it. HOWEVER, that being said, there’s a few caveats.
First off, if you haven’t made an account with Coinbase, do that right now. Seriously—when all your friends are worth $50 million dollars in a few years you’ll be kicking yourself in the ass for not investing while you still could.
Done? Okay good, now buy some bitcoin. It doesn’t matter how much, because you can buy it in increments of .00000001 which is worth like a fraction of a penny. Just make sure you get some before you click away from this page and go to the gym (like you should be doing).
The second way to invest in bitcoin for the long term is through mining it. “But Jon, don’t miners cost like $15,000 to purchase?” I can hear someone ask. Yes, yes they do—but there’s a new way of doing things that many people aren’t aware of.
Long Term Investing in Bitcoin (Method 2)
It’s called “cloud mining.” See, a bunch of tech investors in Silicon Valley got the fantastic idea of pouring literally $100+ million into supercomputers, entirely dedicated to mining bitcoin…and now, you can rent out processing power for a low, low fee.
Yup, it’s the future alright. I personally have a $1500 contract with Genesis Mining, which means that I’m renting out 10 Th/s of processing power for 24 months. In layman’s terms, they’ll mine bitcoin for me, and deposit into my digital wallet daily, for the next two years.
This $1500 contract earned me $325 the first month—and it will earn me $7800 in two years, NOT including the massive gains in price bitcoin is about to see. So really that $1500 investment will be worth more like $100,000 in a couple of years.
I was skeptical at first, but after seeing the deposits they’ve been putting in my account each day, they’ve earned my trust. If you want to get into mining bitcoin through Genesis Mining, you can choose any number of contracts with the minimum being at $150 for two whole years.
I’ll likely put $2,000 or so into this service each month for as long as possible, to provide a steady stream of revenue. What’s great is that they deposit what I’ve mined into my Coinbase account every single day, like clockwork.
Another reason why I like this service is that you can allocate your processing power to different currencies. So say for example Litecoin, another popular cryptocurrency, shoots up in value one day—okay, that’s fine. You can tell Genesis Mining to simply mine that currency, and change it on a day to day basis.
This effectively allows you to play the “daily profits,” game without having to own 10 different cryptocurrency miners for 10 different cryptocurrencies. I usually just keep it on Bitcoin and Ethereum, but have played around a bit with different allocations.
UPDATE: Genesis Mining has previously experienced growing pains in which some transactions were delayed, but they seem to be back to normal now (as of 9/5/17).
Swing Trading Bitcoin
“Virgin Galactic is a bold entrepreneurial technology. It’s driving a revolution and Bitcoin is doing just the same when it comes to inventing a new currency.” – Sir Richard Branson, Founder of Virgin Records, Virgin Galactic, and 400+ other businesses
When it comes to making money with bitcoin, swing trading is where it’s at. Not surprisingly, it’s more difficult than long term trading, because you can’t just buy and hold—you have to actually time when you think the market is going to go up and down.
For investing in bitcoin like a swing trader, I recommend you use the Poloniex Exchange. It’s widely regarded as one of the best cryptocurrency exchanges, and has dozens of different types of cryptocurrency pairings:
- …and more
This is important if you’re going to be doing day trading—you want as many cryptocurrencies to trade as possible, because it keeps things from getting too stale and stagnant. I primarily trade Bitcoin and Ethereum, although I’ve dabbled in Stratis and Dash among others.
For swing trading bitcoin, the key is to utilize technical analysis. Don’t listen to anyone who tells you otherwise, because they don’t know what the fuck they’re talking about. Forget all of this fancy bullshit about weird formulas and algorithms…just stick to the basics for now, as that will create 90% of your profits.
The Best Technical Analysis Tool
First off, you’re going to need a trading chart. This is a must—no, you can’t just eye ball it like a fucking pleb. If you’re actually serious about investing in bitcoin, you can make an account and start the free 30 day trial.
I personally use Coinigy, for a multitude of reasons. First off, I find it incredibly intuitive, although this may be due to my previous experience trading financial markets. I used to use TDAmeritrade for trading the stock exchange, but I find Coinigy far simpler and equally as powerful.
Second off, it aggregates tons of data from multiple exchanges into one convenient tool, which allows for incredibly fast cross-referencing and live time analysis. Just this alone saves me HOURS of time!
Previously, you’d have to use slow and lagging charts from different places, and there could be as much as a 20% difference between the prices. Now with Coinigy you can have it all in once place, which takes all of the clutter out of things.
Coinigy also lets you save multiple charts for different cryptocurrencies, it has a ton of different features, allows you to get text message alerts when bitcoin hits a certain price, and even gives you live news feed. This is INCREDIBLY valuable, as news often determines how the market will fluctuate on a day by day basis.
Okay, once you’ve got Coinigy all set up you’re going to want to familiarize yourself with the platform. Go ahead and do that…then, we’ll delve deep into some of the common technical analysis indicators.
Supports & Resistances
Okay, you see that chart above? Your Uncle Jon took the trouble to make it, just for you—so please pay attention. There’s two big concepts that you want to understand when trading cryptocurrencies, or anything for that matter.
There’s areas of support, and there’s areas of resistance. What does this mean? It’s simple. Some areas are going to be tricky to break through, for whatever reason. Maybe there’s a lot of sellers at that point, or maybe it’s a psychological block like the DOW breaking 22,000 for the first time. These are called resistances.
Then, there’s supports. These are points where it’s difficult for the market to pass below, usually because there’s a lot of buyers at that level, and people have a lot of faith that at that price, the stock is undervalued.
Here’s the master key, though—supports can be resistances, and resistances can be supports. Look above, and tell me what you see. You see an area of support on the bottom, and an area of resistance on the top, right?
Notice how the price of bitcoin keeps bouncing down to test the support, and then bouncing back up? This is a very common pattern. Understanding this will allow you to buy bitcoin when it bounces off a support, and sell it when it hits a resistance.
Look at the following chart, however. This is what happens when the price of something gathers enough momentum to pass through a resistance—it becomes a support. The market will usually re-test the previous resistance to see how strong it is, and if it doesn’t drop too far below, that’s a good sign.
See that key breakthrough point, where the market tests the “resistance” one last time and then shoots through? The fact that it shot through is a good sign, and after a market shoots through a resistance, it typically goes on to reach all time highs.
You can see this above. There was a resistance around the 3000 level for bitcoin, but then after breaking through that it shot up nearly 25% in just a week—that’s more than the average stock trader makes in four years.
The second thing you’ll want to understand about bitcoin and any market for that matter is trend lines. When a trend is set, it typically follows a certain line and isn’t uncommon for the stock (or in this case cryptocurrency) to bounce off of it to re-test the trend.
Notice above how the first two points set the trend line—then, weeks later, there was a dip that re-tested it. Again, if you understand technical analysis, you can time these dips and buy off of the rebound.
Sometimes, however, the trend lines can be broken. Look at the chart below, which is an extension of the trend line which I drew above—in it, bitcoin tests the trend line, but there’s too much pressure and it breaks through.
Then, something interesting happens. Rather than shooting down into oblivion as some people might expect, it actually bounces off a previous resistance. Look at the picture below to see what I’m talking about.
By having an accurate chart with previous resistances, supports, and trend lines, you can begin to predict what a stock, or in this case cryptocurrency, will do. For example if you see it hit that support, you can bet that’s a good time to purchase more, because there’s a high likelihood that it will rebound.
Want A Full Bitcoin Trading Course?
I understand that this may be a little bit overwhelming, so I’m going to recommend some further resources. First off, there’s plenty of free content on YouTube—you could spend a lifetime looking through all of the information there on bitcoin and other cryptocurrencies.
While you can certainly use free content to expand your knowledge base, if you’re serious about making money investing in bitcoin, I urge you to take it one step further. I recommend you invest in my course: “Bitcoin Millionaire,” in which I personally coach students 1-on-1.
When you sign up for my course, you’ll immediately get access to over 12 hours of premium video content, in which I lay out everything you need to know about trading cryptocurrencies and how I make over $100,000 a year from doing so. You’ll also be notified EXACTLY when I buy and sell an asset, so you can follow along and make money WITH ME.
It’s certainly not cheap, but the profits that you’ll make in just a month or two will pay back the cost of the program. If you’re interested, you can get more information here, but you’ll have to get in fast because I’m only allowing 30 students to join since it’s so intensive for me to coach.
Another great resource to check out is Andreas Andonopoulos, a very obviously Greek bitcoin activist. He has numerous free talks on YouTube, my favorite being his interview with Joe Rogan. You can also check out his book called The Internet of Money.
Summary: How to Invest in Bitcoin
I understand that this is a lot to take in, so I recommend that you start small. You don’t need to begin with $10,000 or anything like that, you can start with just $100 bucks. Start by making an account with Coinbase as a digital wallet, then buy $15 or $20 worth of bitcoin.
Consider getting into the mining game, by making an account with Genesis Mining. Like I said, I love their service—I get bitcoin deposited into my wallet every single day, and as the price of bitcoin rises, this will only go up.
If you’re serious, I recommend you use a trading platform like Coinigy and check out some of the resources I recommended. My course on trading cryptocurrencies is by far the most extensive, but if you can’t afford it, just start with free YouTube videos.
As of the time of writing this article, bitcoin has just experienced a massive crash in response to China’s new anti-cryptocurrency policy. That means this is the perfect time to buy, when it’s cheap. Don’t wait, don’t hesitate, just pull the trigger and take action—thank me later.
If you guys have any questions, comments, or concerns, feel free to leave them in the Disqus section down below. And, as always, I’ll see you next time.