Are you considering investing in Bitcoin? Do you want to learn how to start investing?
If you are new to bitcoins and want to take your new venture further by investing in it, then, this article will be helpful for you. Buying Bitcoin is not really difficult and I will make it easier for you.
I’ll also make it easier for you by giving you a step-by-step process in buying your first Bitcoins and the various strategies you can apply for personal finance in crypto trades.
So, continue reading, and let’s get started!
- 1 Different Ways To Buy Bitcoins
- 2 Investment Strategies
- 3 How To Buy A Bitcoin: Step-By-Step
- 4 Guideline On How To Invest In Bitcoin
- 5 Risk When Investing In Bitcoin
- 6 Conclusion
Different Ways To Buy Bitcoins
For those who are thinking about buying bitcoin, but aren’t sure if they should pursue it or not, this might help you.
You have a lot of options when it comes to crypto investing!
In this section, I’ll share with you the different ways on how to invest in bitcoin and see for yourself if they are worth your time and money.
1. Bitcoin trusts and funds
You invest in Bitcoin via trust and funds. This is among the easiest options for you because it allows you to have Bitcoins by simply buying shares in a publicly-traded bitcoin trust.
This works like ETFS or mutual funds because they offer a portfolio that holds or trades the currency allowing you to buy and sell your digital assets.
“The easiest way to buy bitcoin is through the Grayscale Bitcoin Trust (GBTC) because it tracks the cryptocurrency and trades via the traditional financial market,” says Ari Wald, the MD of the Institutional Portfolio Strategy team at Oppenheimer & Co.
Among your most popular options for this approach is Grayscale Bitcoin Trust (GBTC) because it’s by far the largest compared to its competitors. Grayscale Investment Trust debuted as The Bitcoin Investment Trust on Sep. 25, 2013, it is a digital currency investment product where individual investors can buy and sell in their own brokerage accounts.
On Jan. 21, 2020, GBTC became an SEC reporting company registering its shares with the commission and designating the Trust as the first digital currency investment vehicle to attain the status of a reporting company by the SEC.
It is traded publicly on OTCQX, an over-the-counter market under the Alternative Reporting Standard for companies not required to register with the Securities and Exchange Commission (SEC).
Bitwise 10 Private Index Fund offers you a secure way to get diversified exposure to bitcoin and other best cryptocurrencies. The Fund seeks to track an Index comprising the 10 most highly valued cryptocurrencies, screened and monitored for certain risks, weighted by market capitalization, and rebalanced monthly. It also provides security and simplicity of a traditional investment vehicle with shares tradable in brokerage accounts using ticker “BITW.”
Aside from Greyscale’s Bitcoin Investment Trust and Bitwise 10 Private Index Fund, your other options include the following:
• ETC Group offers an “exchange-traded cryptocurrency” product that tracks bitcoin and is listed on the Deutsche Börse XETRA.
• 3iQ’s Bitcoin Fund, listed on the Toronto Stock Exchange.
• CoinShares has several bitcoin tracker funds listed on the NASDAQ/OMX exchange in Stockholm.
• Wisdom Tree owns a physically-backed bitcoin exchange-traded product listed on Switzerland’s SIX exchange.
However, please note that the fees for funds and trusts can be fairly high. Grayscale Bitcoin Trust charges an annual management fee of 2% and it “also trades at a substantial premium” relative to the value of the bitcoins it holds, Wald added.
2. Amplify Transformational Data Sharing ETF (BLOK)
There are several exchange-traded funds (ETFs) and some offer shares from a variety of blockchain-related companies like the Amplify Transformational Data Sharing ETF (BLOK). In this way, you are not directly investing in cryptocurrency but in corporate stocks of companies that utilize bitcoin.
ETFs are safe and most outperform in this category outperform the market. Also, the exchange rate of a bitcoin to conventional currencies follows the principle of pricing on a stock exchange.
When choosing a Bitcoin ETF or ETN (exchange-traded note), one should consider several factors other than the underlying index and performance of an ETF. So, you have to compare them to find the best one.
3. Peer-to-Peer Bitcoin owners
Aside from decentralized exchanges with match-up buyers and sellers anonymously and facilitate all aspects of the transaction, you can buy bitcoins from peer-to-peer (P2P) exchange services that provide a more direct connection between users.
You can check out Local Bitcoins to find other Bitcoin users who are selling cryptocurrencies. It facilitates some of the aspects of the trade. However, it does not offer the same anonymity as decentralized exchanges.
But it allows users the opportunity to shop around to find the best deal to buy bitcoin and other cryptocurrencies like Bitcoin Cash (BCH), Ethereum (ETH) and Litecoin (LTC) to name a few.
For safe transactions, most of these exchanges provide rating systems so users have a way to evaluate potential trade partners before starting transactions.
4. Bitcoin futures
Bitcoin futures allow investors to gain exposure to Bitcoin without having to hold the underlying cryptocurrency. Like a future contract for a commodity or stock index, it allows investors to speculate on the future price of Bitcoin.
Trading Bitcoin futures comes with a number of benefits too. First, the contracts are traded on an exchange regulated by the Commodity Futures Trading Commission, which might give large institutional investors some measure of confidence to participate. Second, futures are cash settled and don’t require a Bitcoin wallet. Moreover, the transaction does not involve the physical exchange of Bitcoin.
5. Bitcoin mining
Another way to invest in bitcoin is through mining. Although it can be costly, bitcoin mining can be profitable and rewarding. Mining is appealing to many investors interested in buying bitcoin and those technologically inclined because they are rewarded for their work with crypto tokens.
With bitcoin mining hardware, you have to put down money because you need equipment. Aside from that, you need to invest time to reap the results. To set up a mining rig, you either need a graphics processing unit (GPU) or an application-specific integrated circuit (ASIC).
There are also bitcoin mining software, which are rewarded with Bitcoin after completing blocks of verified transactions that are added to the blockchain. Mining rewards are paid to the miners who discover a solution to a complex hashing puzzle first and the probability that you will be the one to discover the solution is related to the portion of the total mining power on the network.
6. Financial and investment apps
Another way to purchase bitcoin is through financial and investment apps. Yes, there are already specialized services and investment apps that are designed to help you invest in Bitcoin.
The good thing about Bitcoin investment apps is the fact that they are an ideal way to track your Bitcoins or buy more at any given time because you can access them on your mobile, so you can check them almost every hour or anytime you wish.
The minimum bitcoin investment varies from platform to platform, but with bitcoin investment apps, you can start from as low as $10 to $30. If you are considering this option, I highly suggest that you check out the following apps:
• Square cash
• River Financial
7. Cryptocurrency exchanges
When you want to invest or trade bitcoin, you will need an account on cryptocurrency exchanges.
So, you have to sign up for a cryptocurrency exchange that will allow you to buy, sell and hold cryptocurrency like bitcoins.
It’s best to use one that allows users to withdraw crypto to their own personal wallets for safer keeping.
Right now the most commonly used type of exchanges are not decentralized and require KYC (Know Your Customer), to ensure a secure connection to the internet and method of payment. The valid method of payment includes a bank account, debit cards, and credit cards.
Using exchange offers a number of benefits like a 24/7 operation system, deflationary nature of the digital currency, irreversibility of the transaction, and investment in digital currencies.
Some exchanges like Coinbase offer affiliate programs that allow you to earn additional revenue. You will earn additional bitcoins when someone registers using your referral link which you can conveniently share on your site, blog or social media profiles.
You’ve got to consider the buying limits, liquidity, the cryptocurrencies that it supports, the reliability of the broker, and the risk factors. The most popular exchanges include Coinbase, Coinmama, and eToro.
There are different ways to invest in bitcoin. In this section, I’ll give you a short overview of each strategy so you can properly handle your digital asset and get a good grasp on how you can win the crypto investing game.
Buy and Hodl
Hold is an intentional misspelling of the word “hold” and is the term used in the bitcoin investment community for holding bitcoin. One holding a bitcoin is hodling or called a hodler.
Many people invest by simply buying and holding cryptocurrency and those who do use this strategy. Those who buy and hodl believe in the long-term prosperity of bitcoin and see the volatility as a little more than a blip on a long journey toward the high value of bitcoin.
Some investors want an immediate return, so they buy and sell bitcoin at the end of a price rally. There are several ways to make that happen, they can rely on cryptocurrency’s volatility for a high rate of return should the market move in their favor.
There are already bitcoin trading sites that provide leveraged trading and which trading sites could lend you money to hopefully increase your return.
Some investors bet on bitcoin’s value decreasing especially during a bitcoin bubble (a rapid rise in prices following a rapid decrease). In this approach, investors sell their bitcoin at a certain price to buy it back again at a lower price.
For example, if you buy a bitcoin worth $100, you would sell it for $100 and wait for its price to reduce and buy it at a much cheaper price. You will make a profit on the difference between your selling price and the lower purchase price.
However, finding a platform for short selling can be difficult. But Chicago Mercantile Exchange offers options for bitcoin futures.
How To Buy A Bitcoin: Step-By-Step
As mentioned above you have several options to invest in bitcoin. The good thing is that buying bitcoin is now very easy and it becomes easier over time. In this section, I will discuss what you should do to buy bitcoins via cryptocurrency exchanges and sites, so you will know what to expect when making your first purchase.
For those who have no bank account, do not worry it is not required.
• Government-issued ID
• Pen and Paper
• Camera (fro selfie)
• Computer connected to the internet
• Utility Bill (optional depending on the exchange)
Things to consider
• Which payment method you want to use
• How much you want to spend.
Guideline On How To Invest In Bitcoin
Here is a step-by-step guideline for you to buy bitcoins from a crypto exchange.
1. Look for an exchange
When looking for a cryptocurrency exchange make sure that its services include your country because each country has its own laws that the exchange must comply with. next, make sure that the exchange also accepts your form of payment. For example, if you want to pay via credit card, then look for one that allows it.
Buy Bitcoin Worldwide can help you find the ideal exchange for you by simply inputting your country and payment method in this form.
2. Sign up and go through KYC
Create a cryptocurrency exchange account by supplying the needed information. You need to go through KYC after signing up to verify your account. Somewhere on the website, you will likely find something that reads, “verifying your account” or “getting verified.”
Some exchanges might require you to do this during the sign-up. It might also ask you to take picture of your government ID (front and back). It might also ask you for a selfie while you hold your ID. Some will also ask you to write the date and the name of the exchange on a piece of paper and hold that in the picture as well.
There are usually multiple levels of verification. But you should take it this way, higher levels mean you can make bigger purchases or have access to lower fees. But sometimes both.
Bitcoin exchanges enforce KYC to ensure that the account making the purchase is tied to a real identity. This is also another way to ensure that users comply with regulations. You should not think of faking IDs because it could only get you in big trouble.
3. Set up a payment method
Once your crypto exchange account is up and you have already completed KYC, you will have to set up your payment method. Many exchange user services securely connect your bank account to your exchange account.
Others also allow the use of PayPal or ApplePay. Some also accept credit cards and debit cards. Regardless of what payment method you want, the exchange should be simple and straightforward, and most importantly, accepts your preferred payment method.
4. Buy Bitcoin
When buying bitcoins you have two options — (1) buy from the exchange itself or (2) buy from other users on the exchange. Between the two, the first option is easier.
The exchange will let you know the price that you will need to pay. Exchanges tend to be more complicated when they allow users to trade.
Bitcoin sellers offer it at prices they are willing to accept and buyers offer to purchase Bitcoins at prices they are willing to accept. You can also accept a sellers’ offer or create your own offer as a buyer.
There are also different kinds of orders:
Market Orders: orders to buy or sell at the market rate right now. It is similar to walking into a store and haggling with the seller for price.
Limit Orders: orders to sell at or above a certain price or buy at or below a certain price.
If you set a market order, you will receive your Bitcoins almost immediately. Meanwhile, setting a limit order may take longer for you to receive your Bitcoins.
5. Withdraw your bitcoin
Once you purchase bitcoin, make it a practice to withdraw them to a wallet you control. Some exchanges require withdrawal addresses before allowing you to buy Bitcoin from them.
Meanwhile, most exchanges will hold your Bitcoin for you after your purchase, but it’s not safe because hackers might steal them, the exchange may go out of business, freeze your account for some reasons and you can’t assure your coins are still there until you withdraw them.
There are two types of Bitcoin wallets cold and hot. Cold wallets are offline storage of your coins and are deemed to be safer than hot wallets because they are inaccessible from hackers. Hot wallets are connected to the internet making it less secure but convenient to use.
Risk When Investing In Bitcoin
By now, I’m pretty sure you are close to making your first bitcoin investment.
But before you do so, there are some things you need to consider to ensure a safe investment.
In this section, I’ll share with you the potential risks when investing in bitcoins, so you can prepare for it head-on.
The price of bitcoin is not stable, it always ripples back and forth. In just a matter of days, the price can go up and down because the bitcoin market constantly changes. With an unpredictable market, you can hardly get a good return on your investment.
Solution: It’s best if you keep a close eye on the market and using apps can make this easier for you.
2. Online hacking threats
One of the challenges that Bitcoin investors face is the threat from hackers especially if you keep your bitcoins on hot wallets because they are available online making them susceptible to hacking. Also, bitcoins held on exchanges aren’t insured by the FDIC.
Solution: You have the option to keep your Bitcoins in a cold wallet and keep them offline.
3. Little to no regulation
The bitcoin market is not legal tender and operates with no major regulations. Some countries have regulations, but it isn’t the same everywhere. In fact, cryptocurrencies are not taxed and governments have no clear stance on it, so you might fight yourself at risk of fraud and malpractice.
Solution: Study the bitcoin regulations in your area if it is available to help ensure your safety.
4. Limited use
A number of merchants worldwide have already started accepting Bitcoins. However, some companies still don’t recognize it as a legitimate exchange, therefore, limiting its usage. Also, there’s only a limited and finite supply of Bitcoins. Satoshi Nakamoto set Bitcoin’s supply limit to only 21 million so its unit prices will eventually align with the traditional fiat currencies.
“I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that’s very hard. I ended up picking something in the middle,” Nakamoto said in an email shared by Hearn.
“If Bitcoin remains a small niche, it’ll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there’s only going to be 21 million coins for the whole world, so it would be worth much more per unit.”
Solution: If you want to use Bitcoin for purchases, check out the list of stores that accept Bitcoin as payment. You can also convert it to cash via Bitcoin ATM or through a Bitcoin exchange.
Bitcoin investment can be risky but it is also profitable. Its volatility can either lead to your gains or losses, in the end, it depends on how you play the Bitcoin market and how long you hold onto it after several losses if you encounter any.
The good thing is that you have a lot of options when it comes to investing in Bitcoins. Choose the one you’re most comfortable with or which you think is the safest route for profits. But only decide after doing your research or consulting with the pros.
Always remember that there are risks you need to weigh, but BTC is profitable. When looking for the best app or exchange, Coinbase is a good option. Coinbase also offers a brokerage account.
If you wish to learn more about bitcoins, feel free to check our homepage.