What's the first thing that pops into your mind when you think about crypto? I bet it's Bitcoin.
Of the more than 19,000 cryptocurrencies out in the ether, Bitcoin is the first and most recognized cryptographic digital currency. Despite recent declines in price, at just below $36,000 per coin, it's still the largest cryptocurrency by market capitalization, at $683.6 billion as of May 6. And notwithstanding declining market values, Bitcoin remains the most reliable blockchain cryptocurrency, providing stability and security.
What is Bitcoin?
In the simplest definition, Bitcoin is a virtual, digital currency that runs on a peer-to-peer network that has no central authority; no oversight from banks or government entities such as the Federal Reserve of the European Central Bank. Instead of a regulated bank, a decentralized ledger system known as a blockchain records all Bitcoin transactions, and copies of that ledger are held on computer servers in the Bitcoin blockchain network studded throughout the world. Originally intended as an alternative payment system for goods and services -- that is, until high transaction fees made it too costly to do so -- it has morphed more into a store of value for many users, just like precious metals. Some equate it to digital gold.
The creator of Bitcoin is allegedly a computer programmer named Satoshi Nakamoto, whose true identity has yet to be revealed. Nobody truly knows who he, or she, is or if Nakamoto is a nom de plume for a group of programmers who invented Bitcoin.
The nine-page Satoshi Nakamoto whitepaper, which lays out the concept of Bitcoin, was published on October 31, 2008. Just a couple of months later, on January 3, 2009, Bitcoin went live. Since then, it has been one heck of a rollercoaster ride, especially for those who invested in its early days for fractions of a penny and have since become millionaires. In 2010, one Bitcoin cost nine cents. A year later, it was up to $30 and by 2017, it vaulted to $20,000 a coin. On November 10, 2021, Bitcoin reached its highest price to date at $68,991, according to CoinDesk.com. Since then, the price has dropped erratically -- losing nearly half its value -- as a result of investor fears over rising inflation and the COVID-19 pandemic, among other market factors.
Today, one Bitcoin sits at less than $36,000.
How do you buy Bitcoin?
Fortunately, you don't have to purchase an entire Bitcoin to get in on the action, but rather you can purchase a fraction of a coin. For example, you can buy as little as $5 worth of Bitcoin weekly and build up your holding over time.
Many of you want to learn how to purchase Bitcoin and hold it in a hot wallet. In this post, I'll show you how to purchase Bitcoin, or $BTC, using Cash App which is the easiest way to purchase Bitcoin.
I use it whenever I need to make a quick $BTC purchase. Bitcoin is the only cryptocurrency Cash App supports, but once you own Bitcoin, you can hold it or exchange it for any other cryptocurrency available. All major exchanges support conversion from $BTC to another coin because $BTC is the gold standard of cryptos. Once you sign up for Cash App on the iOS or Android platform, you can easily purchase Bitcoin. Cash App is also a hot wallet so you can purchase and hold your crypto assets online without moving them, and to buy and sell them as you see fit.
First, tap the Bitcoin icon at the bottom right.
Tap "Buy" to choose how much Bitcoin you want to purchase.
In this example, I am purchasing $25 worth of Bitcoin.
Tap "Next" to continue and confirm your purchase amount.
Tap Confirm and, congratulations, you have successfully purchased your first Bitcoin.
Tap "Done" and you can now see that you have a balance of $24.44.
How do you sell Bitcoin?
Now that you own Bitcoin, you have the following options: Buy, Sell or Transfer.
Because Cash App provides you with a hot wallet, you can simply store your Bitcoin online securely. You can view your Bitcoin address below by tapping "View Bitcoin Address." This will show you your $BTC address and a QR code if you ever want to receive $BTC from someone else.
If you want to sell, simply tap "Sell," choose the amount and it will show up as cash in your Cash App account. Cash App will also store all your purchases and sales for tax purposes. You can download your statements monthly or wait for a year-end statement.
If you're like me and you want to store your Bitcoin in a more secure fashion such as a cold wallet, you can tap the arrow icon and send the $BTC to a cold wallet. In this example, I am going to send it to my Arculus Cold Wallet.
Tap the transfer icon and choose the amount of Bitcoin you want to send.
Tap Send and enter the $BTC deposit address of your cold wallet.
You have successfully transferred your Bitcoin to Cold Storage.
Let's now look at the taxes for this transaction. I track my transaction using the tax software Koinly.
As you can see above, I have tracked the initial deposit or purchase of Bitcoin all the way to the deposit of it in my Arculus cold wallet.
Koinly does a great job of monitoring my tax calculations and providing the proper tax documents at the end of the year.
Now that you've purchased Bitcoin, let me know what you think of it. Share your thoughts about Bitcoin in the comment box below or if you have questions about purchasing other cryptocurrencies.
- Cold Wallet -- A hardware wallet or offline wallet that is not connected to the Internet and requires physical confirmation on the device to send funds.
- Hot Wallet -- A virtual wallet that's connected to the internet at all times.
The information presented by the Crypto Coach and ZDNet is not intended to be individual investment advice and is not tailored to your personal financial situation. It does not constitute legal, accounting, or tax advice, nor a recommendation to buy, sell or hold any investment. We encourage you to discuss investment options with your financial adviser prior to making any investments.