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This Is What You Need to Know Before Buying Bitcoin

Make it rain.

Bitcoin is that buzzword we keep hearing but if you’re confused about how to get in on the action, you’re are not alone.  You may be feeling brave and want to try a new type of investment which has the potential to form the backbone of a new financial system. The first thing you need to know is, you don’t need to buy a whole Bitcoin currently valued at over R146 000.  Marius Reitz, GM for Africa of Luno, South Africa’s leading cryptocurrency exchange, explains that you can invest any amount from R20. Yes, you read correctly, just R20.

Hold up, what is Bitcoin?

Bitcoin is a new technology that’s a mix of a credit card, a piece of gold and hint of ‘internet’. Because it allows you to move money so easily, Bitcoin functions as a global payment system, similar to bank transfers or credit cards. It is similar to gold in that gold can also be used as money or as an investment, but Bitcoin is much easier to move.

In South Africa, most people currently use Bitcoin as an investment, but increasingly people are using it as a payment system. Finally, Bitcoin is like the internet in that no single person or entity controls it, and this gives it some very distinct characteristics. Bitcoin has already changed our financial system and makes money easier and cheaper to move.

What should I be cautious of? 

The same intuitive rules that apply to traditional money also apply to Bitcoin. For example, don’t invest more than you can afford to lose and don’t put all your eggs in one basket. Bitcoin is brand-new technology and it will mature, addressing some of these risks in the process. Bitcoin is more volatile (it can move a lot in value both up or down in a short time) than many other currencies.

Transactions are like cash in that they are irreversible – so if you send Bitcoin to the wrong person, or your wallet is compromised and someone steals your Bitcoin, it might be impossible to get it back. On the upside, this makes it more secure and easier for retailers to accept with a lower risk of payments being reversed.

Just as in the traditional investment world, it is important to do your own research and to use your own judgement. Ensure that you partner with a trusted exchange with transparent investor and director information. Be wary of any scheme that promises guaranteed returns on investment. Read how to avoid Bitcoin scams and protect your crypto from hacks, scams and phishing and use Luno built-in security features like OTP (one-time-pin) authentication.

What happens if the price goes down after I buy?

Just like investing in shares on the stock exchange, ideally, you buy Bitcoin at one price and then sell it at a higher price. You can expect lots of spikes and troughs, but when viewed as a long-term investment, the price is on an upward trajectory despite all the ups and downs over the past few years. You are in control and make your own decision about whether you’d like to wait for a higher price or at which point you want to sell.

How do I get Bitcoin?

You can buy Bitcoin from a credible exchange provider, like Luno. This is similar to how you would buy shares online.

Just like traditional money, you can earn it by providing goods or services, and asking for people to pay you in Bitcoin rather than in traditional money. This is one of the easiest ways to get your hands on some Bitcoin. Online retailers, including Bidorbuy, allow you to make purchases with Bitcoin.

How much do I buy?

One of Bitcoin’s distinct characteristics is that you don’t have to purchase a single Bitcoin currently valued at around R146 000, but you can buy small fractions from as little as R20.  Once you’ve deposited money via EFT from your bank, you’ll choose the cryptocurrency you want to buy (Bitcoin and Ethereum are traded on Luno).  You can then track the price of your chosen currency in Rand. Selling cryptocurrency is just as easy. Simply select the ‘sell’ option and enter the amount in Rand you want to sell.  There are transaction fees payable for buying and selling cryptocurrencies, which range between 0 and 1% per transaction on Luno.

How much do I buy?

One of Bitcoin’s distinct characteristics is that you don’t have to purchase a single Bitcoin currently valued at around R146 000, but you can buy small fractions from as little as R20.  Once you’ve deposited money via EFT from your bank, you’ll choose the cryptocurrency you want to buy (Bitcoin and Ethereum are traded on Luno).  You can then track the price of your chosen currency in Rand. Selling cryptocurrency is just as easy. Simply select the ‘sell’ option and enter the amount in Rand you want to sell.  There are transaction fees payable for buying and selling cryptocurrencies, which range between 0 and 1% per transaction on Luno.

If you’d like to learn the basics of cryptocurrency, visit the learning portal on at www.luno.com/learn

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