With Bitcoin’s skyrocketing performance today, more and more people are jumping in on the hype train to try their luck in the world of cryptocurrency. There are different ways to invest in Bitcoin for a crypto newbie, but out of these numerous options, which stand out among the rest? Which generates more profit and comes with fewer risks?
Find out all the answers to your questions about Bitcoin investment options here at BTC Post! Here, you’ll discover everything you need to know to start investing in the revolutionary crypto technology.
HODLing: Buy and hold
The easiest and most common way of investing in Bitcoin is by buying and holding on to it. In the online crypto community, this practice is known as ‘HODL’ that stands for ‘hold on [to your coins] for dear life.’ This doesn’t require any trading so all you have to do is choose where to buy Bitcoin, convert your money, and transfer your virtual coins into a safe hardware wallet where no hacker can reach it.
Once you’ve bought a fraction of a Bitcoin, congratulations, you’re already a Bitcoin investor! It’s up to you when to sell it and take profit but the common practice is to wait for its price to appreciate until it reaches a point where there is already a hefty return of investment.
Here’s how you can buy Bitcoin:
- Find a trusted Bitcoin broker, peer-to-peer marketplace, exchange site or financial app
Broker sites let you buy Bitcoin instantly and usually for a higher price in exchange for the streamlined transaction. Coinmama and Coinbase are some of the most popular sites offering this kind of service that’s perfect for beginners.
A peer-to-peer marketplace is where buyers and sellers directly exchange assets without a middleman. Sellers set the price and the payment methods which can sometimes be negotiable. You can consider LocalCoinSwap, Paxful and LocalBitcoins if you want to buy directly from individual sellers.
Exchange sites like Binance, Coinbase Pro and Kraken are where expert traders go to do their business. Buying Bitcoin through a trading platform requires placing a buy order that comes in different forms as well.
Marketplaces and exchange sites can overwhelm a crypto newbie at first, so if you want an easier way to purchase Bitcoin, it’s better to head straight to broker sites.
Lately, financial apps such as Cash App and PayPal have made buying Bitcoin easier. If you already have an account on these platforms, you can just buy directly without having to create new accounts on broker sites.
- Purchase coins
Once you’ve chosen where you want to buy Bitcoin, create an account and do the required procedure to complete your transaction. Most exchange sites require a KYC protocol where you’ll need to provide identification before you can buy assets. These sites also offer different deposit and withdrawal methods so make sure you check your options first before creating an account.
- Transfer your funds to a wallet
Afterwards, send your purchased coins to a hot or cold wallet. Hot wallets are websites or apps connected to the internet, so they can be vulnerable to cyber hacks whereas cold wallets are pieces of hardware that store your funds off the net. Do keep in mind that exchange and broker sites are hotspots for crypto theft so always transfer your assets to your wallet after purchasing them.
GBTC or Grayscale Bitcoin Investment Trust
Traditional investors who are sceptical about speculative assets such as Bitcoin have the option to invest in the traditional way with Grayscale Bitcoin Investment Trust or GBTC. Unlike Bitcoin, GBTC can be traded on the stock market and it allows investors to trade shares in trusts that hold a large pool of Bitcoin. Each investor has a shared price at the fraction of Bitcoin’s price.
How GBTC works
Grayscale is a crypto investment firm based in the US that pools millions worth of investment from big investors and uses it to buy Bitcoin. Then, the fund is listed on public stock exchanges allowing traditional investors to buy and trade shares.
Compared to the custom HODLing practice, trading GBTC shares is more ideal for cautious investors who don’t have the time to manage their crypto investments. Instead, they leave it to Grayscale for safekeeping. Grayscale complies with the regulations set by the US Securities and Exchange Commission or SEC so investors can rest assured that their assets are in great hands.
However, these hassle-free services come at the price of 2% expense ratio. GBTC also sells at a premium rate which is 20% more than the net asset value. If you don’t mind the high fee and think it’s only a reasonable price for trusted crypto management services, then go ahead and start investing through GBTC.
Bitcoin ETF exchange-traded fund
Similar to trading GBTC, buying Bitcoin exchange-traded funds or ETF is another way for mainstream investors to invest in Bitcoin without buying cryptocurrency themselves. A Bitcoin ETF is basically a contract that tracks the price of Bitcoin. It can be traded on regulated stock exchanges, making it accessible to the traditional trading industry.
However, unlike GBTC, Bitcoin ETFs are not backed by actual Bitcoins. Instead, it just mimics the price of the cryptocurrency so those who own this financial product do not actually hold any Bitcoin.
Buying Bitcoin ETF
If you want to try this investment option, you can buy shares in a Bitcoin ETF through public stock exchanges. Do note that this isn’t available in the US since the SEC has repeatedly rejected proposals of allowing Bitcoin ETF trading.
Swedish traders can purchase Bitcoin ETFs, or in their own term, exchange-traded note or ETN. The Bitcoin Tracker One (CXBTF) started trading in Nasdaq Stockholm in 2015 and currently has over US$400 million in assets. Recently, Germany has launched its first Bitcoin ETF named BTCetc Bitcoin Exchange Traded Crypto (BTCE). It went live on August 2020 in Frankfurt Stock Exchange so German investors can now get their hands on a physically-backed Bitcoin ETF.
Choose the best Bitcoin investment option for you
The mentioned investment options above are some of the most sought after methods in today’s climate. With rising inflation rates, it’s best to have a hedge such as Bitcoin to protect you from the depreciation of the US dollar. Fortunately, you only have to pick the choice that suits your budget best from the list above.
Bitcoin (BTC) $ 34,508.00 0.21%
Ethereum (ETH) $ 2,165.17 1.22%
Tether (USDT) $ 1.00 0.14%
Binance Coin (BNB) $ 298.86 2.06%
Cardano (ADA) $ 1.21 2.81%
XRP (XRP) $ 0.599904 2.86%
USD Coin (USDC) $ 1.00 0.04%
Dogecoin (DOGE) $ 0.197362 2.15%
Polkadot (DOT) $ 13.53 3.12%
Binance USD (BUSD) $ 1.00 0%