Investing & locking the value of btc
Last update: April 22, 2016
- Buying gold with Bitcoin
Buying fiat - If you don’t want to hold a position in Bitcoin or in any other commodity you might find it better to get fiat.
- Bitcoin Futures - If you don’t want to mess with fiat you can hedge Bitcoin with low-leveraged futures.
The first thing that a trader comes up with when looking for a solution to Bitcoin volatility is diversification. That’s easy, you don’t have to hold Bitcoins. Stick some in altcoins that are dipping of before the rise but remember it’s a blatant gamble since altcoin markets are too small to be predictable.
The second thing one naturally comes up with is probably gold or some other commodity that is (incorrectly) perceived as of a stable value. That said, gold is probably not a bad investment but be prepared you need to a/ trust a third party to keep your gold, b/ trust your gold exchange that there actually is some gold and c/ probably not being able to sell back for Bitcoin. Thus far, only Vaultoro is real BTC/GOLD market in both directions.
Buying Gold with BTC
If you are a Bitcoin trader and not only want to invest Bitcoin but will also want to make profit on that investment in Bitcoin, be careful here. Selling gold is a service like any other and while some providers will let you buy gold with Bitcoin, they might not let you sell it for Bitcoin.
The only pure Bitcoin-gold market right now, standing completely outside the banking system, is Vaultoro.
There were discussions on Reddit whether BitGold is scam or not but failed to reach other point that the BitGold staff Emily who showed up on Reddit avoided answering questions she was asked:
It looks shady and kind of raises the question if all of the gold in third-party storage actually exists. I have not ventured into this to find out, to be honest.
BitGold requires full AML/KYC for their customers. First step is to verify your phone number which then determines the country of your address.
The important part, and the biggest disadvantage, is that while you can use Bitcoin as a fast way to deposit money, you cannot possible sell gold back to Bitcoin:
What’s the public audit? Well, as you register you get your public account ID. That ID (a random string) is published at audit.vaultoro.com along with your Bitcoin and gold holdings. Everyone can check their own holdings, users don’t have to be logged in.
Joshua Scigala is reported to have lost a chunk of change in Mt. Gox’s collapse, and he went on to found Vaultoro as a “glass books” bitcoin-gold exchange.
The exchange uses three types of bitcoin wallets. They include “a hot wallet that is hosted online and used for daily trades, a warm wallet for auditing purpose that holds an amount of BitcoinCT r: 8 slightly above the amount in the hot wallet, and finally, mutisignature cold wallets, which hold the majority of users’ funds.”
Vaultoro’s vaults are located in Switzerland, and are audited bi-annually by BDO International. No government papers are required to purchase through Vaultoro unless the user buys more than US$5000 worth of gold per day. Services are not offered to anyone from Iran, Syria or North Korea.
Your gold is stilled stored and insured somewhere and redeeming it is not so easy. Vaultoro owns mass of gold so you need to pay the expense of cutting off your slice and sending it to you. The costs of this will be individual.
On Vaultoro you don’t need to verify yourself, you just cannot sign up from those three forbidden countries mentioned above.
- Unverified accounts are limited to 5000 USD.
- Unverified users cannot redeem physical gold.
- Verification takes an ID and a proof of residency not older than 3 months.
But finally, because Vaultoro is a bitcoin-gold exchange, you can sell gold for Bitcoin too. You even can use Coinigy, the Bloomberg-style trading platform, to trade BTC/GOLD.
- Coinigy costs 15 USD a month with 30 days trial.
- For free BTC/GOLD charts head over to CryptoCoinCharts.
JMBullion is a respected provider of not only gold but all precious metals. They are reputable so naturally it was good news for many traders that JMBullion started accepting Bitcoin too. However, they are no bitcoin-gold exchange like Vaultoro.
Bitcoin into fiat
If you don’t want to invest in gold or ony other commodity, you might find it better to just sel Bitcoin for cash.
One stop shops
If you just want to pay out with no intention to use that money for trading again, you can either withdraw the money to your bank account or to PayPal. BitcoinLTD and other places are recommended in this article.
If you want to get fiat but you still want to keep that backdoor of switching back to Bitcoin easily, you need Wirex card (formerly E-Coin). Their prepaid card has this option. Keep in mind the exchange rate will be different for each exchange (to and from fiat) since the market price will probably have changed.
That makes PerfectMoney more Bitcoin-friendly as selling BTC for PM money is not as risky as for PayPal or Skrill money. People on LBC won’t charge so much above market and generally the transfer will be a lot easier.
BTC to PerfectMoney and back - Your options
- Sell BTC for PM on LocalBitcoins, or buy BTC for PM via LocalBitcoins.
- Via AdvCash VCC, it is one of their default transfer options (see image below).
- Exchangers like Coinomat. PM has their own list of supported partners here but scammers sometimes trade in their name on LBC or elsewhere so be careful about that.
Using Bitcoin futures to hedge the Bitcoin dollar value is the most advanced way to do this. It is probably of some use for you only if you plan to accept BTC in your business or if you plan an expense in BTC in, say, three months time.
So, if you rent a VPS or two with quarterly payments, if you also pay your VPN subscription around that time or if you hire people for Bitcoin, hedging with futures could help you quite some with your finance management. At least if the price for those services is pegged to USD.
##The gist of hedging Bitoin dollar value:
You are expecting to get certain amount of Bitcoin on certain date and you will need to use those coins to cover other expenses as soon as you get them. The expenses are all pegged to a fiat currency.
You want them to have certain dollar value, possibly the one they would have today. That means you sell a future contract that will be mildly leveraged.
By selling the contract you open a short position and by leveraging it (say, 3x) you don’t need to put in the full amount of hedged Bitcoins (since you probably don’t even have them yet).
##The day you receive your Bitcoin comes:
If their dollar value is higher than you needed you are fine. Your future contract is in red numbers but the profit from increased value should compensate it.
If the dollar value of BTC is lower than you need, you use the profit from your future contract to add the rest of the dollar value you need.
If you want to learn more about futures try
As for hedging, the best platform is definitely CryptoFacilities but sadly, not available for US identities.
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Good to Read
- Finance & Technology: VPRO Backlight on Youtube (full documentaries)
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- How to trade on mobile
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About This Site
There is a rumor around the web that Bitcoin has no real value other than for speculations.
Sherlock Holmes: ”Has all my instruction been for naught? You still read the official statement and believe it.”
- Top up a debit card with Bitcoin
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