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Learning Bitcoin
Learning Bitcoin

Learning Bitcoin: Embrace the new world of fiance by leveraging the power of crypto-currencies using Bitcoin and the Blockchain

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Learning Bitcoin

Chapter 2. Buying and Selling Bitcoins

 

"I really like Bitcoin. I own Bitcoins. It's a store of value, a distributed ledger. It's a great place to put assets, especially in places like Argentina with 40 percent inflation, where $1 today is worth 60 cents in a year, and a government's currency does not hold value. It's also a good investment vehicle if you have an appetite for risk. But it won't be a currency until volatility slows down."

 
 --David Marcus, CEO of Paypal

Building on the basics that were introduced in Chapter 1, Setting up a Wallet we're going to set up a trading account with an online Bitcoin exchange. In this chapter, we're going to cover the following topics:

  • Understanding Bitcoin's price volatility
  • Following exchange rates and news
  • Comparing Bitcoin exchanges
  • Trading Bitcoins on an exchange
  • Physical Bitcoins

Understanding Bitcoin's price volatility

In May of 2010, the first significant Bitcoin transaction was exchanged. A pizza worth roughly $25 was purchased for 10,000 bitcoin. At today's pricing, where a single bitcoin is worth about $250, the same amount of bitcoin would be worth approximately $2,500,00. In retrospect, it was a "worthy" pizza!

Since then, Bitcoin's volatile price movements took the exchange rate, in US dollars, up to $1200 in 2013 and back down to $180 in 2015. It's quite an impressive history for a currency that's only six years old.

Before investing your own money in Bitcoin, it's advisable to become familiar with the reputable services available, as well as its price history. Linking significant events and stories to the price is a fundamental approach to trading bitcoin.

Compared to most other global markets, Bitcoin has an overall low volume. Thus, a large move by a big player can alter the price very quickly. Make sure to assess...

Following exchange rates and news

To help track what's going on in the Bitcoin space, we'll look at some products and services to track exchange rates and related news events.

Price tickers

There are many services that track and display Bitcoin exchange rates. One of the easiest apps to use is btcReport (available for iOS on the App Store):

Price tickers

Figure 2.2 - btcReport, a Bitcoin price ticker for the iPhone

The main display of btcReport, as shown in Figure 2.2, shows the latest trading price and news. Daily metrics are shown as changes in today's price (shown on the top), a ticker chart, and the trailing 3-day average (shown under the chart). Displayed along the bottom is a selection of currencies, and on the top right there is an option to change the exchange. btcReport functions nicely as an app in your pocket for a quick glance at the exchange price and recent movements.

For most users who wish to casually buy and sell bitcoin, btcReport offers a clean and uncluttered view into the...

Comparing Bitcoin exchanges

Shortly after Bitcoin's beginning in 2009, online exchanges were created to facilitate buying and selling of Bitcoin. In 2010, MtGox was the first exchange to bring Bitcoin to the market. MtGox was originally a site for trading Magic the Gathering cards but was adapted for trading bitcoin. They grew quickly, both in user base and trade volume, and brought Bitcoin to many thousands of people. However, they were unable to sustain the pace of growth and met difficulty in meeting government compliance. Ultimately, they experienced a significant bitcoin theft that left them insolvent. In early 2014, they publicly announced their insolvency and filed bankruptcy.

Thus, when choosing a Bitcoin exchange, it's most important to do some research on the company and its operations. Let's cover some important aspects used to make a worthy comparison.

Volume and liquidity

Consider an exchange with a light trading volume. If a large order is placed that exceeds the...

Trading Bitcoins on an exchange

Aside from the risks involved, trading Bitcoin can be rewarding. For our introduction into trading Bitcoins, we will setup an account with Coinbase Exchange. Coinbase is a Bitcoin wallet service. They offer the option to buy and sell bitcoin from your wallet similar to Circle. In addition, they offer a full service platform for trading Bitcoin in real time.

Coinbase, founded in 2012, is funded by top-tier investors, including the New York Stock Exchange. They have a license to operate as a money transmitter in more than 15 states in the United States. Users who are living in the US and Europe can fund their accounts with US dollars or Euros.

Setting up an account

To start trading on Coinbase Exchange, you will need to sign up with Coinbase for the wallet and verify your account. From your account you will be able to link your bank account to transfer funds. Similar to Circle's requirements, Coinbase will prompt you for a valid identification as well as...

Physical Bitcoins

So far we've been discussing about buying and selling bitcoins that are stored electronically in your wallet. They are secured by a digital private key which is encrypted by wallet software. Being completely digital, these coins are only available and managed online.

Physical Bitcoins is a concept that allows us to hold a bitcoin in our hand by embedding the private key into a precious object. The objects openly display the public address that can be used to verify that the funds are in fact available. This makes it convenient to exchange Bitcoin, hand to hand, by not having to involve a software wallet. In addition, since the private key is never stored online, it makes hacking very difficult.

As a collector's item, physical Bitcoins often have a numismatic value placed above the actual value of the electronic Bitcoin. In addition, the physical object is often a precious metal, such as gold or silver. The combined values of all these aspects are used in estimating...

Understanding Bitcoin's price volatility


In May of 2010, the first significant Bitcoin transaction was exchanged. A pizza worth roughly $25 was purchased for 10,000 bitcoin. At today's pricing, where a single bitcoin is worth about $250, the same amount of bitcoin would be worth approximately $2,500,00. In retrospect, it was a "worthy" pizza!

Since then, Bitcoin's volatile price movements took the exchange rate, in US dollars, up to $1200 in 2013 and back down to $180 in 2015. It's quite an impressive history for a currency that's only six years old.

Before investing your own money in Bitcoin, it's advisable to become familiar with the reputable services available, as well as its price history. Linking significant events and stories to the price is a fundamental approach to trading bitcoin.

Compared to most other global markets, Bitcoin has an overall low volume. Thus, a large move by a big player can alter the price very quickly. Make sure to assess your personal financial risk level before...

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Description

The financial crisis of 2008 raised attention to the need for transparency and accountability in the financial world. As banks and governments were scrambling to stay solvent while seeking a sustainable plan, a powerfully new and resilient technology emerged. Bitcoin, built on a fundamentally new technology called “The Blockchain,” offered the promise of a new financial system where transactions are sent directly between two parties without the need for central control. Bitcoin exists as an open and transparent financial system without banks, governments, or corporate support. Simply put, Bitcoin is “programmable money” that has the potential to change the world on the same scale as the Internet itself. This book arms you with immense knowledge of Bitcoin and helps you implement the technology in your money matters, enabling secure transactions. We first walk through the fundamentals of Bitcoin, illustrate how the technology works, and exemplify how to interact with this powerful and new financial technology. You will learn how to set up your online Bitcoin wallet, indulge in buying and selling of bitcoins, and manage their storage. We then get to grips with the most powerful algorithm of all times: the Blockchain, and learn how crypto-currencies can reduce the risk of fraud for e-commerce merchants and consumers. With a solid base of Blockchain, you will write and execute your own custom transactions. Most importantly, you will be able to protect and secure your Bitcoin with the help of effective solutions provided in the book. Packed with plenty of screenshots, Learning Bitcoin is a simple and painless guide to working with Bitcoin.

Who is this book for?

If you are familiar with online banking and want to expand your finances into a resilient and transparent currency, this book is ideal for you. A basic understanding of online wallets and financial systems will be highly beneficial to unravel the mysteries of Bitcoin.
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Length: 236 pages
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Language : English
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Table of Contents

9 Chapters
1. Setting up a Wallet Chevron down icon Chevron up icon
2. Buying and Selling Bitcoins Chevron down icon Chevron up icon
3. Protecting Your Bitcoins Chevron down icon Chevron up icon
4. Understanding the Blockchain Chevron down icon Chevron up icon
5. Installing a Bitcoin Node Chevron down icon Chevron up icon
6. Understanding the Mining Process Chevron down icon Chevron up icon
7. Programming Bitcoin Chevron down icon Chevron up icon
8. Exploring Alternative Coins Chevron down icon Chevron up icon
Index Chevron down icon Chevron up icon

Customer reviews

Rating distribution
Full star icon Full star icon Full star icon Empty star icon Empty star icon 3
(3 Ratings)
5 star 33.3%
4 star 0%
3 star 33.3%
2 star 0%
1 star 33.3%
Amazon Customer Mar 14, 2016
Full star icon Full star icon Full star icon Full star icon Full star icon 5
As developer, this is the book I would have liked to read when I started getting interested in bitcoin. If a good book if you do not know nothing about bitcoin as final user or developer. Or if you know a little bit about it and you want to have a global vision of bitcoin posibilities.
Amazon Verified review Amazon
Feng SHI Dec 07, 2015
Full star icon Full star icon Full star icon Empty star icon Empty star icon 3
I really recommend this book.This book is concise and comprehensive. it covers basic knowledges about bitcoin and also provides plenty of practical examples.As the author is a veteran in software development and entrepreneur, especially in bitcoin currency, he has successful experiences of others to go byFeng
Amazon Verified review Amazon
Eth Jun 26, 2017
Full star icon Empty star icon Empty star icon Empty star icon Empty star icon 1
no clear explanation provided for any of the topics.
Amazon Verified review Amazon
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