How I Started Investing in Bitcoin the day it went to $30,000

A case of lucky timing and learning-through-doing that helped me make a 3% return in a couple of hours.

Photo by André François McKenzie on Unsplash

As a forty-something guy in the privileged western-world I've lived through more than my share of bubbles, booms and busts. Some of these I've capitalised on, others have completely passed me by.

My first job after university was with Oracle Corporation, then the second-biggest software company in the world behind Microsoft. More by luck than by judgement, the share options I accumulated in that job paid the deposit for my first home - I got lucky.

Over the course of my adulthood I've also missed out on investing in companies like Amazon, Facebook, Tesla and similar corporations whose stocks have increased exponentially in value. Sometimes you live through a moment without knowing it until it's passed you by.

Until recently I also thought I'd missed out on the chance to invest in cryptocurrency. I'd tentatively researched the origins of Bitcoin - the most significant and well-known cryptocurrency - and was inevitably drawn by the tales of it's meteoric increase in value over the years.

For all the appeal though, I was put off by the many tales of its price crashing through the floor. In spite of my best efforts I also couldn't quite understand exactly how it worked - at least not sufficiently well enough to be able to explain it to my kids or my mother-in-law.

And so for many years I've procrastinated and delayed in moving forwards with crypto investment, safe in the knowledge that I wouldn't be losing money but also with a nagging fear in the back of my mind that in years to come I'd regret my inaction.

That was until Saturday 2nd January 2021.

I don't know if I'm still processing the mind-bending events of 2020 or if I was suffering a delayed hangover from new year's celebrations. But on that Saturday morning I took a notion to get into Crypto once and for all.

I'm not a big-time investor, nor am I a financial advisor. I'm a moderately curious and somewhat-capable British male who had £100 of money he'd been gifted for Christmas and didn't want to blow it on Amazon.

I decided instead I'd do what I could to buy some Bitcoin.

I had no idea that-that was the day when Bitcoin would reach its historic high price of $30,000. Nor did I realise it would continue to climb to $34,000.

If I could just work out how to make the purchase my strategy was (and remains) that I would drip in a small amount of money regularly to build up my investment in Bitcoin over the coming year. I want to have at least a little skin in the crypto currency game and to experience a small share of whatever gains and losses might be made in the future. As such I'm a buy-and-hold investor risking a relatively small sum of money that won't destroy my life or that of my family if I lose it all. I've no intention of day-trading or trying to predict fluctuations in price to make money off those.

The context

I work in IT but I'm not particularly technically-minded nor am I an active investor. My modest savings are in managed funds and while I've dabbled with spread-betting on currencies, I realise that I don't have the aptitude, patience or emotional stability to be an active trader.

For all these reasons my goal was merely to find the simplest way of investing in Bitcoin in a risk-free way and with as little up-front expenditure as possible. I wanted all of my £100 to go towards Bitcoin rather than in fees or on specialist hardware.

As a generally impatient person I also wanted the entire process to be completed as quickly as possible.

With the scene set, here's how I did it.

The process

I started where all good research projects begin - on YouTube. I'd heard of Coinbase before as a reputable Cryptocurrency exchange and so sought out a couple of tutorial videos on how Coinbase enables the purchase of Bitcoin, starting with this one.

I've separated learning how to buy Bitcoin from the technical intricacies of what it is and how it works and for the purposes of this experiment I focused solely on turning my £100 into the equivalent value of Bitcoin. It's my intention to learn more about the technical side of things later on.

It seems that to buy Bitcoin (or any widely-known cryptocurrency) you need the following:

1) An account with a (hopefully) reputable crypto intermediary - This enables you to deposit your funds (in my case £GBP) and to receive your Bitcoin once purchased.

2) Access to a Crypto-Exchange - this is essentially an interface to a marketplace where buyers meet sellers and vice-versa to deal in cryptocurrency, like any stock market or currency exchange. I've split this from Point 1 above for the purposes of describing the process I went through, but it's really part and parcel of the same thing.

3) A Crypto-wallet - A secure place or device that is logically and physically separate to the Crypto-Exchange where you can hold your Bitcoin once you've bought it.

I've included links to the specifics of what I used below, for expediency. You are of course free to do your own research and I'm sure there are many alternatives to each of these that may be better in many respects.

The Account

As I've already mentioned, I decided to use Coinbase to make my investment. A little background research gave me reassurance and comfort - Coinbase are well-established having been founded in 2012. The are the leading Crypto-exchange in the USA too, by trading volume.

In a space where my main concern was about security and the prospect of getting ripped-off it seemed like a smart move to go with the biggest player.

I gather that as they're the biggest their fees are also fairly high (relatively) but not to the extent that it put me off - I ended up paying pennies to buy my £100 of Bitcoin via Coinbase, end-to-end.

The sign-up process took minutes and I did most of it while waiting for my morning coffee to brew. This included scanning and uploading ID for age and address verification purposes which were all submitted and validated securely, online.

With the account set up and the app downloaded on my iPhone I was ready to add funds and make my investment.

You have the choice to send funds from a bank account electronically or to fund your Coinbase account via a credit or debit card. In the tutorials I watched there was a suggestion that some financial institutions don't allow the funding of Crypto accounts using their accounts and cards. I assume this is a protective means of preventing some from getting in over their heads?

For my purposes an electronic bank transfer from my checking account to Coinbase (of £2 initially to validate the process and account) was quick, easy and free. With the account set up, and funds added (I sent a further electronic payment for the balance of my £100) I was ready for the next step.

Crypto-Exchange

Without any further steps required, a Coinbase account with funds in it will allow you to buy your Bitcoin. The interface is as simple as any well-designed online shop and most who have shopped online will be able to buy their Bitcoin with ease via Coinbase alone.

Fees are transparently displayed and are of the order of a few pennies for a £100 trade. However, the tutorials I watched pointed to Coinbase Pro as a more involved and intricate Coinbase experience which links seamlessly and uses the same credentials as Coinbase. Through the use of Coinbase Pro fees can be reduced and curious souls like myself are able to be a bit more 'hands-on' with how they execute their trades.

I decided to investigate this and ultimately downloaded Coinbase Pro and used it to complete my Bitcoin trade.

I funded Coinbase Pro by transferring my £100 into it from Coinbase (which is fee-free). It took a couple of goes before I'd put all the information in to enable the purchase (mainly how much of my £100 stake I wanted to use to buy Bitcoin and what price I was willing to pay for the Bitcoin - I set a price of a few dollars beneath the market price at the time).

A couple of seconds after submitting my order it was fulfilled and I was the proud owner of 0.00474128 Bitcoin!

Crypto Wallet

The story could end here since I now owned the Bitcoin. However, recommended best practice is that investors are unwise to leave their Bitcoin to reside on the Crypto Exchange. Instead, it's advised that the coins themselves (essentially a unique and encrypted code that constitutes the coin) are effectively downloaded and stored securely on a Crypto Wallet.

The reason for this is that hackers are more likely to target exchanges rather than individuals' wallets, hence there's no logic in leaving your coins in the exchange account to potentially be lost. Wallets are designed to be ultra-secure and many remain offline and unconnected except for when the owners are accessing them to trade or spend their coins, or want to add more to their wallet.

I did a little more research and in-line with my 'zero-spend' principle opted for a software app-based wallet rather than buying a hardware wallet (think along the lines of a removable hard-drive or USB Memory Key). For simplicity I used the Coinbase Wallet App.

I've done more research since, and if I continue to invest in Crypto I'll likely purchase a hardware wallet like the Trezor One, many of which are priced at less than $100.

The principle is that you store your Bitcoins in a secure, encrypted wallet that places the already secure coins themselves under further protection in much the same way that you'd keep an eye on your wallet if you'd just withdrawn a fistful of cash. It seems to make sense in a world where we're opting out of the banking system providing that protection on our behalf that we would want to ensure we provide our own protection, right?

This begs the question just how you then store and protect the wallet. Mine is accessed via a highly-secure app on my iPhone and as and when I get a hardware wallet I suspect I'll want to keep that in a safe or strongbox. When I have enough Bitcoin on it to warrant such security measures then I'll gladly consider the matter further.

The Coinbase Wallet links seamlessly to the Coinbase Exchange and utilises multiple layers of security. After purchasing my coins on Coinbase Pro I moved them for free onto Coinbase and from there onto my wallet for just a few pennies of 'miners fees' (I'm still to research the concept of Bitcoin mining and the relevance of the network to the currency at which point I'll understand what this means!)

The outcome

At the end of that Saturday I'd achieved my intended goal and converted my £100 into Bitcoin which are now securely stored safely in my online wallet. The entire process took less than an hour cumulatively (including watching the tutorials on YouTube) and I'd spent less than £1 in fees.

My Bitcoin closed at a price reflecting a 3% return. They've since increased further in value.

I'm not so naive as to believe that the price won't drop once again - as an investment vehicle Bitcoin is clearly extremely volatile which is why so many are drawn to the potential for life-changing gains and why many more have no-doubt lost more than they could afford while chasing such riches.

In 2017 Bitcoin climbed to near $20,000 before plummeting to a little over $3,000. It may well have gone through much of the volatility associated with its maturation as a recognised and accepted store of value, or there may be worse to come.

My gut-feel is that when investing luminaries like hedge fund manager Paul Tudor-Jones declare themselves as investors in Bitcoin, it must signal that the time is right for at least a small investment.

I realise too that at least part of my decision has been motivated by the ever-present fear of missing out - a fear that in 20-years' time one Bitcoin will be worth $100,000 and I'll be lamenting that I didn't take the plunge and make at least a small investment when it was beneath $30,000.

Five years ago I might have had the excuse that the cost and technical-mechanics of investing in Bitcoin were prohibitive for a small-time investor like me. Now it seems like those barriers have definitely lifted.

There are undoubtedly many other ways of making an investment other than via Coinbase too - I mention it only to demonstrate that with a little time and a bit of experimentation, anything is possible!

Note: This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.

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