What are Bitcoin, Ethereum, Ripple etc ?
All of these are new exciting asset classes that are broadly termed as Cryptocurrencies. While it may sound completely new to most people, they are in fact quiet similar to the usual currencies everyone is familiar such as US Dollar, Rupee, Euro, Yen etc. But the key difference is these are not tied to any specific country. Cryptocurrencies also do not have a traditional paper central bank note which you would keep in your wallet or withdraw from an ATM. Bitcoins, Ethereum etc live in the online world, in other words, they are virtual, just like your online bank account. They are stored online in a digital wallet.
- Cryptocurrencies live online, they cannot be withdrawn as a bank note from a ATM.
- They are global, they do not belong to any country.
If I cannot withdraw Bitcoin in an ATM, how can I use bitcoins ?
It is very similar to how someone with US dollars can use it India to shop. The first step would be to exchange it to the local currency which is Indian Rupee. For that you go to an currency exchange. Bitcoins can be converted to fiat currency (Real currency like US Dollar, Euro, Rupee etc) in a crypto exchange. We will list down where to find these crypto exchanges later on.
Why is the whole world talking about Bitcoin ?
Not to give any investment advise, but consider these numbers –
- In 2012 1 Bitcoin was equal to 2 US Dollars.
- In Sep 2017: 1 Bitcoin was equal to 5000 US Dollars
- So if you converted 150 rupees (2 US Dollars) in 2012 into Bitcoin, in Sep 2017 this would be 3.7 Lakh rupees.
- In five years 150 rupees would be become 3.7L
So is it risky ?
In a way yes, Bitcoin is just like any other stock / gold / etc. It’s price can also go down. There have been many times in the past 5 years where bitcoin prices have fallen very sharply.
Bitcoin exchanges are entirely digital and therefore naturally comes in the risk of hackers,malwares and operational glitches.
Where to buy and sell Cryptocurrencies ?
First step is to find a reputable exchange that operates in your country. In the US, GDAX and Kraken are among the top exchanges for buying and selling bitcoin. Typical process is to wire transfer fiat currency (like US Dollar) to the exchange, and then buy the crypto currency using the exchange website. When you want to sell the cryptocurrency, you again go to the exchange website and initiate a sell order. Once that is done, you should be able to wire transfer the fiat currency to your bank account.
This article is meant to educate and provide information about Cryptocurrencies. It should not be taken as investment advice to buy or sell Cryptocurrencies.