How to Buy, Sell and Keep Track of Bitcoin
Here's your step-by-step guide to using exchanges and wallet apps such as Coinbase to manage your bitcoin, as well as other cryptocurrencies such as Ether or Litecoin.
We're deep in the heart of bitcoin madness.
The original cryptocurrency's more than tenfold increase over the past year has thrust the blockchain-based digital currency into Wall Street's face. Notable investors like the Winklevii have been cashing in, as the finance sector wades into bitcoin futures trading. At the same time, consumers and everyday investors are trying to figure out what bitcoin actually is and how they can get in on the frenzied action.
Bitcoin isn't the only digital currency garnering mainstream attention. As the volatile but lucrative cryptocurrency has risen from hundreds to thousands to tens of thousands of dollars per digital coin, the rest of the landscape is riding its coattails. The Ethereum blockchain -- long viewed as a more viable mainstream platform -- and its Ether cryptocurrency have risen in value along with coins like Litecoin, Ripple and the forked Bitcoin Cash.
So how can you get some? You'll need to use an exchange to buy and sell the cryptocurrency, and a wallet app to store it securely. If you're in the U.S. and want to quickly buy some bitcoin, Ether or Litecoin, Coinbase is the most popular and easiest-to-use option. Here's how you get started.
Choose an exchange
Coinbase only supports bitcoin, Ethereum and Litecoin for the moment, so if you want to stick with those three cryptocurrencies you can simply download the Coinbase app.
However, there are plenty of other exchanges. Bitfinex and Kraken are popular options that support not only those primary three, but dozens of other cryptocurrencies including Bitcoin Cash, Dash, Iota, Zcash and more. Other options include Gemini, Bitstamp, Bitwage, to name just a few.
Download a wallet app
You'll also need a wallet app for each type of cryptocurrency you're looking to hold. Coinbase makes it easy. The app stores your coins in its private servers in individual wallets for bitcoin, Ether and Litecoin. So if you're using Coinbase, all you need to download is the single app.
Here's how it looks. Yes, I compulsively organize my apps into folders and name said folders with corresponding emoji. Don't @ me.
However, going with Coinbase puts you at the mercy of their system. If you want to mix and match your own exchange and wallet apps, there are countless options for bitcoin wallets using desktop and mobile apps, Ethereum wallets, and so on. From here on out we're walking you through the Coinbase experience, which all happens in the mobile app and can have you buying and selling coins in a matter of minutes.
Coinbase sign-upFirst, enter your name, email address and password.
Select stateCertain states require those trading cryptocurrency to verify their state of residence, so enter the state in which you currently reside.
Verify your identityCoinbase requires you to add a number of other personal details and identifiers including date of birth, address and the last four digits of your Social Security number. The app also surveys some details about your income and profession.
Complete account setupAt this point, you'll be taken into the main Coinbase app, where you can see current bitcoin, Ethereum and Litecoin prices. However, you're not yet ready to buy and sell.
Verify phoneBefore you start trading, you'll need to verify your phone number and link your Coinbase account to your bank in order to deposit and withdraw funds. The phone verification is easy: simply enter your number and you'll receive a test with a seven-digit code to enter.
Add your bank accountWhen adding payment details, you can choose either a bank account or a credit/debit card. Bank accounts take a few days to process transactions, but you can invest larger amounts and the price at which you buy is locked in that day even if the sale doesn't clear for a few days. When you choose the bank option, Coinbase will open a searchable list of banks to choose from. If you want to use a credit or debit card to buy coins, you'll need to add a bank account or a wallet app to sell.
You're ready to buy some cryptoYou did it! Bitcoin, here you come. Now that your account and bank details are set up, you're ready to start buying and selling cryptocurrency.
Check current pricesThe first icon on the left of the menu at the bottom of your Coinbase app is the Prices tab. Here, you can see current bitcoin, Ether and Litecoin prices. If you click into one of the graphs, you can toggle the price index by hour, day, week, month, year or all-time to see how the price has changed and whether you want to buy now or wait out a better price.
Buy BitcoinIf you're ready to buy, you can hit the Buy icon in the menu or click into it directly from the Prices tab. First, let's buy some bitcoin. Enter either a U.S. dollar (USD) or bitcoin (BTC) amount you want to buy, and the calculator will let you know what the value translates to. Then choose your wallet (the default Coinbase BTC wallet unless you've added an outside wallet app), and hit the buy button to go to the confirmation page and complete your transaction.
Congratulations, you're officially a cryptocurrency owner. We only bought a fraction of an amount for the purposes of this story (bitcoin is expensive, man) but you're eligible to buy as much as your bank will allow per week.
Same goes for selling: choose a coin in the Prices tab, and hit the Sell button instead. The limit differs depending on whether you're buying or selling, with Coinbase imposing a buying limit of $5,000 but a selling limit of $10,000 USD.
Buy some Ether, tooDon't stop now, you're on a roll. Once you're on the Buy or Sell screens, you can tab between bitcoin, Ether and Litecoin to check the exchange rates and quickly complete a transaction with a few taps. Coinbase makes it easy to strike when the price is just right.
Don't forget the exchange feeDon't forget about Coinbase's cut. Exchanges need to make money, too. On the confirmation page before you buy, you'll see the flat $1.99 Coinbase conversion fee for any purchase of less than $200. For larger purchases, the company takes a variable percentage depending on the country.
Diversify! Snag some LitecoinCoinbase supports all three cryptocurrencies, so you may as well take advantage. Litecoin has been on the rise, but is a cheaper buy than Ether or the exorbitant current bitcoin prices. Get some more for your money and pick up some LTC. In the U.S., it's 1.49 percent with a $0.15 minimum for a bank account or a Coinbase USD wallet, and 3.99 percent for a credit or debit card.
Wow, look at all your virtual moneyLook at you go! You're rolling in the cryptocurrency now. Just tap over to the Accounts tab and check out the balances in your respective wallets.
Exchanges take a few days to processDo not fear if your wallets haven't reflected your bought or sold cryptocurrency. Don't forget that exchanges take a few days to process transactions through your bank. However, upon tapping into my bitcoin, Ethereum and Litecoin wallets, I saw the transaction had posted and was currently pending. Your purchase or sale is locked into the coin price at the time of your transaction, even if it takes a couple days to clear.
Email confirmationCoinbase also sends you a confirmation email every time you complete a transaction, so check your inbox to confirm your purchase or sale went through.
Tracking pricesCoinbase also helps you proactively track coin prices. Sites like CoinMarketCap track the real-time price changes of every cryptocurrency out there, but in the Coinbase app itself you can check the Prices tab for at-a-glance values or tab over to the Alerts icon to set a price alert.
Create a price alertWhen you create a new price alert, you'll see a slider appear that lets you toggle the alert to a specific USD dollar value for bitcoin, Ether or Litecoin. If the cryptocurrency hits your target price, Coinbase will send you a push notification to hop onto the app and buy or sell. You can create as many alerts as you want, toggling them on and off on the Alerts page to determine which are active as you track your investments.
There is plenty of inherent risk with investing in cryptocurrency. Coinbase will even tell you so. Price surges may incapacitate the exchange temporarily, transactions take time to process and if you're using the default Coinbase wallets, your encrypted coins are not under your control. Exchanges are also prime targets for hacking, and there are plenty of cautionary tales to prove it.
All the more reason for you to take advantage of as many built-in security and verification features as your exchange and wallet apps offer. The Settings tab in the Coinbase app lets you set advanced passcode settings or add additional identity documents.
There will always be a risk in using online cryptocurency exchanges and wallet apps. Unless you're using cold storage and holding your own private keys, that's simply the reality of dabbling in cryptocurrency. Whether you're serious about investing or simply want to have some fun and stash some bitcoin as a long-term holding, apps like Coinbase make it easy to get started. In minutes, you can begin wheeling and dealing bitcoin, Ether and Litecoin from the comfort of your smartphone.