There are many different ways to buy Bitcoin today – through exchanges, through your broker, and maybe even through a previous owner. If you’re new to the world of Bitcoin, though, you may want to weigh the risks and benefits of Bitcoin investing before you actually make a decision to include it in your portfolio. After all, buying Bitcoin (or any cryptocurrency) is a great way to make an investment in a world that is fun, interesting, and downright tempting at this point, but any investment (in any product, currency, or market) needs to come with an internal warning. It can be harmful to your finances, and you must be careful that you haven’t invested too much in any one thing.
Why Are So Many Investors Interested in Bitcoin
Wondering why there’s so much interest in Bitcoin from the world of investors? After all, is Bitcoin safe for the investment world? Bitcoin was the world’s first cryptocurrency, and while there are many others out there today, it’s still the most popular one. It remains a great investment, but in 2017, it was a fascinatingly wonderful investment. It reached untold highs, and while those numbers eventually took a dive that the cryptocurrency has yet to recover from, there’s still some real potential for profit on that market today. Because it’s a cryptocurrency, though, it’s incredibly volatile, more so than most investments that many people know, and that can make it a bit riskier than others. The old rule of thumb still applies to this investment (as it does to any other) – don’t put more than 10% of your portfolio in a risky asset, and Bitcoin is certainly a risky asset.
How to Invest in Bitcoin
If, despite the warning label, Bitcoin investing might be the right option for you, it’s fairly easy to make the initial purchase. Understanding how to invest in Bitcoin really is as simple as buying it. First, you have to decide exactly where you’re going to purchase it. There are actually several ways to get started. Cryptocurrency exchanges are one of the most popular. These tend to charge you a percentage of the price you actually pay for your Bitcoin in fees, so you’ll want to do your research before you get started. Coinbase is the most popular throughout the world because it is easily linked to a bank account and it offers access not just to Bitcoin, but also to a number of other cryptocurrency options. On each one, they charge about .5% of the purchase price and a fee. The fee depends extensively on the amount you choose to transfer. Binance is the exchange option that handles the most volume in terms of cryptocurrency exchange in the world today. There’s a .1% fee for all trades and a withdrawal fee. In most cases, you can only make a purchase using other cryptocurrency, though, they are working on adding some credit card options. Gemini is another exchange you may want to consider. It is based in the United States, and it trades Bitcoin and many other choices. The transaction fees start fairly low, but they can be as much as 1.49% of your order depending on just how big it is. Coinmama is one other option. It offers trades in Bitcoin and seven other cryptocurrency choices, but you have to make a minimum purchase, and you’ll be charged a transaction fee of 5.9%.
You don’t have to answer the “How to Invest in Bitcoin” question through an exchange, though. There are more traditional brokers that offer you a chance to buy and sell Bitcoin, but there aren’t many. Robinhood was one of the first options available, and there are no fees for Bitcoin trades. Tradestation also offers Bitcoin trades, as well as other cryptocurrency trades, but given the popularity of Bitcoin, it’s likely many others will be offering something similar in the near future.
While exchanges and brokers are the most popular answer to the “How to Invest in Bitcoin” question, there are several other ways to buy and invest in Bitcoin. If you’re in a larger city, you may find a Bitcoin ATM. Estimates suggest there are nearly 5,000 Bitcoin ATMS worldwide today, and they give you the opportunity not only to cash out Bitcoin, but to buy it as well. The biggest drawback with this method is that transactions through Bitcoin are rarely instant, and you may have to wait some time to get what you want.
You could also buy Bitcoin from other owners. There are a number of peer-to-peer tools available today including Bisq, Bitquick, and LocalBitcoins that allow you to purchase Bitcoin the way you might purchase an item on Craigslist.
How Much Bitcoin to Buy
No matter how you decide to make your purchase, one of the toughest parts may be trying to decide how much Bitcoin investing you actually want to do. Bitcoins sell for varying amounts, but as of September 2020, they were going for nearly £9,000 each. Fortunately, you don’t have to buy that much. Instead, you can buy or sell a smaller share should you choose to do so.
A Few Tips
No matter how you actually decide to purchase the Bitcoin you’ll need for investment purposes, there are some things you’ll want to know before you make a purchase. First, make sure you have certain pieces of information handy. You may need the number to your bank account or the number to your credit card account if you intend to fund your Bitcoin purchase that way. Keep in mind, though, that while you can use a credit card, if you’re going to make an investment, using a high interest credit card to do so likely isn’t the best option. In some cases, you may also be required to have a picture ID on hand. As you set up your account, be sure you record your passcodes and keep them safe!
Many people ask “Is Bitcoin Safe,” and it can be, but Bitcoin isn’t insured against theft or any other problems, so you may want to invest in some kind of insurance policy offered through an exchange like Coinbase, but read the fine print carefully. It won’t protect you if someone steals your password.
Finally, remember that you should be using a secure, private internet connection to complete the entire transaction. Public internet connections must be avoided if you’re buying Bitcoin as it is easily hacked, and once gone, you can never get your Bitcoin back.
After Your Investment
Once you’ve actually invested in Bitcoin, your work isn’t quite done. You need to decide exactly how you’re going to store it. You want to protect your investment, and many who ask “Is Bitcoin Safe” are doing so because they’ve heard stories of stolen coins. Leaving it on the exchange after purchase can be a really bad idea, as that’s where many thefts occur. There are essentially two kinds of digital wallets in which you can store Bitcoin. The first is a hot wallet. These transactions are fast and the fees tend to be low. They come with some real dangers, though. Cold wallets are your other options. They’re more secure, but transactions take quite a bit longer to complete, and they tend to be more expensive.
Should you choose a hot wallet, you’re going to be accessing it through an app on your phone or through your desktop computer. Most trading exchanges offer a hot wallet for free, but it’s always advisable to transfer and store your Bitcoin out of the range of an exchange. Hot wallets are usually free to use, and some offer insurance options.
If you’d prefer a cold wallet, you’re choosing to store your Bitcoin offline. This tends to be the more expensive route, but it’s also the more secure option. Cold wallets tend to cost about £75, but you get some options you just don’t get with hot wallets. They can be designed to provide complete safety, but they do slow transactions if you intend to do a lot of trading in the near future.
Keeping an Eye on Your Investment
After you’ve made the purchase and found the right wallet to meet your needs, the last step is to actually manage your Bitcoin investment. There are Bitcoin day traders, and it’s not a hard market to learn, but if you want to hang on to your Bitcoin investment for a bit longer, it’s not a bad idea to do so. Part of what makes Bitcoin a valuable, long term investment is that they’re scarce. There are a limited number of Bitcoins to be mined, and once they’re all mined, no additional Bitcoins will be produced. In addition to that fact, though, is the reality that Bitcoin has a sound, predictable monetary policy that can be verified by everyone in the network. That makes it a much safer option than many other investments. It’s completely apolitical, so whether there are problems in the UK, the U.S., or China, the Bitcoin price isn’t going to fluctuate based on those problems.
Should You Invest in Bitcoin?
Not sure whether you should take a step forward and make this investment? It’s a good option for many, but it’s far from a perfect choice. Instead, like all investments, it should be considered with due caution and discussed with your financial advisor before you make a choice to include it in your portfolio. Bitcoin is a great way to expand your portfolio and maybe even boost your profits a bit further, but it’s one investment that simply isn’t for everyone, so make certain you do your research first.