What to consider when buying bitcoin

2016-09-19 13:32 - Kyle Venktess, Fin24
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Mike Caldwell, a 35-year-old software engineer, holds a 25 Bitcoin token at his shop. (Rick Bowmer, AP, file)


Durban - Numerous ways of buying bitcoin are springing up online, with traders even turning to social media websites like Facebook to sell the cryptocurrency.

READ: Bitcoin sellers on Facebook: Can they be trusted?

But Werner van Rooyen, of South African linked digital wallet service BitX, has advised that the safest way to buy bitcoin is to open an account with a compliant, local bitcoin exchange. 

“The quality of these online bitcoin exchanges can also vary, so it is important to make sure that there are a few checks in place.”

These then are good questions to ask, explained van Rooyen:

1) Is it a South African registered company with local bank accounts?

2) Does the exchange have a compliance policy in place to prevent money laundering and ensure they're not facilitating crime?

3) What is their staff size and can you verify the owners and employees they claim to have?

4) Do they have security measures like cold storage in place to prevent loss of customer funds?

5) Are they backed by reputable investors or businesses that you can verify?

The steps and time in getting bitcoin the safe way would be:

1) Sign up with a local bitcoin exchange

2) Provide once-off basic information (two minutes)

3) Wait for compliance to verify your information (two days)

4) Make an EFT bank transfer from your bank to your exchange (two minutes to two days, depending on your bank)

5) Buy your bitcoin (seconds)

“Like any other investment, people shouldn't put all their eggs in one basket. Diversify your assets, start with responsible amounts as you're learning and slowly invest over time, but do get some bitcoin, it is one the most important financial inventions of our time,” van Rooyen said.

@KyleVenktess on Twitter.

Read more about: online safety  |  online banking  |  bitcoin