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Wanna buy a bitcoin? Here’s how…

Paddy Hirsch Dec 12, 2013

Fidelity Investments contradicted a report today that said the company was offering customers the chance to put bitcoin into their IRAs.

The manager of Bitcoin Investment Trust said in an interview that Fidelity customers would now be able to invest their retirement money in his fund.

I’m a Fidelity customer, so I called to ask about this, and was told the company does not have any such arrangement.

A few hours later Fidelity announced: “On an individual basis, we allowed an investor to invest in that Bitcoin Investment Trust. We are no longer allowing that.”

Never mind. Still interested in buying a little bitcoin?

Q. You betcha! How can I get some of that action?

A. Well, before we get to that, do you understand what bitcoin is?

Q. Ummm….? [silence]

A. Fortunately, there are a lot of good explainers of what bitcoin is and how it works out there.

Try this video:

(Bitcoin Explained from Duncan Elms on Vimeo.)

This written explainer:

“A Bitcoin is a unit of currency, launched in 2009, that only exists online and isn’t controlled by any kind of central authority, like the US Federal Reserve. You can send Bitcoins to anyone who has a web connection (or hand someone your hard drive containing the currency.)”

This infographic:

Bitcoin infographic  

by bpalacio@mac.com.
Explore more infographics like this one on the web’s largest information design community – Visually.
 

Q. OK, so I’m ready dip my toe in the waters. What’s the first step to buy some?

Well, there are a number of ways:

1. You can sell some stuff and ask for bitcoin in return, instead of dollars.

2. You can buy bitcoin “over the counter,” which means buying them with cash from another party in a face-to-face transaction, in the same way that you might buy baseball cards. Or diamonds.

3. You can sign up with a company, like LocalBitcoins, BitBrothers or CrypXchangewhich will help you buy bitcoin in a direct over-the-counter transaction. They may charge a facilitation fee.

4. You can use your phone to buy bitcoin. Definitely a fee.

5. You can use a gift card. Most definitely a fee.

6. You can sign up for Second Life and use Second Life Lindens (that’s the virtual world currency) to buy bitcoin.

7. You can buy Bitcoin through an exchange like Coinbase.com, Blockchain.info and MtGox.com. If you do it this way, you have to pay the exchange a fee, just as you pay a stock exchange when you trade securities.

8. You can make Bitcoin part of your retirement account by investing in SecondMarket’s Bitcoin Investment Trust. But there’s a $25,000 investment minimum, and you have to pay a bunch of fees – as much as 5 percent – just as you do in any fund.

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