Since its inception in 2009, Bitcoin has turned into a highly volatile investing asset. Stories like the one about the Norwegian guy who bought $27 in Bitcoins and earned one million dollars 4 years later have probably made you think about investing in Bitcoin yourself.
If you’re planning on joining the Bitcoin bandwagon and have no previous experience, you should know that there are certain risks involved. For that reason, maybe you should consider working with a professional digital asset investor. A digital asset investor will help you manage the risk and design a personalized portfolio solution that best suits your needs.
If you decide to invest on your own, it’s very important that you know what you are doing, and that you don’t invest more than you can afford to lose. In this article, you will learn about the different ways you can invest in Bitcoin, as well as the strategies you can use, and the potential dangers involved.
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1. Trade Online
Online exchanges are one of the most popular ways to invest in Bitcoin. Sites like Gemini, Coinbase, and Kraken allow you to exchange any currency for Bitcoin.
To be able to trade online, you’ll first need to set up an account, which requires you to provide documents to verify your identity. Once this is done, you will need to wait for about 2 more weeks for your bank account to be verified.
The problem with this is that during the waiting time, the value of the cryptocurrency can significantly change, so if you choose this option, it might be wise to start with a small investment just so you get a sense of how the whole process works.
2. Face-to-Face Exchanges
This is an option that more experienced investors might look into. In-person exchanges, known as Buttonwood meetups, involve a group of people getting together to exchange currencies and goods (like silver and gold) for cryptocurrencies.
These meetups are typically small and, very often, the objective is to get people informed and interested in cryptocurrencies like Bitcoin. At the same time, they can be a perfect place to meet with other Bitcoin enthusiasts and trade.
3. Face-to-Face Transactions
During an in-person transaction, you give the Bitcoin seller cash in exchange for virtual cryptocurrency transferred directly from their virtual wallets to yours.
Face-to-face buying is the perfect option for those who want to finish the transaction quickly, but bear in mind that it can be quite dangerous. In-person transactions can involve big amounts of cash, so it comes as no surprise that some investors have been robbed during such exchanges.
Thankfully, there are some precautions you can take in order to make the transaction safer. For instance, you can make sure to meet in a public place and never go alone. In addition, you can check out Bitcoin sellers and buyers on websites like LocalBitcoin. This site gives each user a reputation score (where a higher score indicates greater trustworthiness) to help you decide who to buy from.
4. Mining Bitcoins
Mining is not a very common option for investing in Bitcoins. This is due to the fact that it is done with specialized computers and involves solving complicated mathematical problems. When you solve the problem, you’ll be allowed to chain together blocks of transactions (hence the famous “Blockchain”).
Your computer can do the mining for you. To start mining, you’ll need to connect your computer to the Bitcoin network and set it to solve a cryptographic problem. Very often, these complicated cryptographic puzzles are solved by a group of miners who share profits.
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5. Bitcoin Funds and Trusts
Those who don’t feel at ease with the idea of investing in Bitcoins themselves should also consider buying shares in a publicly-traded Bitcoin investment trust. Similar to mutual funds or ETFs, these trusts offer a portfolio that trades or holds the cryptocurrency.
However, you should know that the fees for trusts and funds can be quite high. For instance, the largest of them, the Grayscale Bitcoin Trust (GBTC), charges an annual management fee of 2%.
Besides GBTC, other Bitcoin funds and trusts include the ETC Group, CoinShares, Wisdom Tree, 3iQ’s Bitcoin Fund, etc.
6. Investment and Financial Apps
Recently, some investment and financial apps have also decided to join the cryptocurrency bandwagon. One of them is PayPal, which started offering its customers in the US the capability to sell, buy, and make purchases using Bitcoin in November 2020.
The whole procedure and waiting time associated with opening an account have been the main obstacle to selling and buying Bitcoins. The fact that millions of people already have PayPal allows them to skip all the hassle and make everything much easier.
The biggest downside to buying Bitcoin with PayPal is that you can’t move your cryptocurrency to your personal wallet, send it to anybody else, or use it for trading other cryptocurrencies. In addition, the transaction fees are relatively high, ranging from 1.5% – 2.3%.
Besides PayPal, other apps dealing with cryptocurrency include Robinhood, Square’s Cash App, and Swan.
Final Thoughts
The future of Bitcoin looks bright and it has never been easier to invest in this cryptocurrency. If you are interested in investing in Bitcoin, you have a number of options, ranging from Bitcoin funds and investment apps to mining and crypto exchanges.
However, you should be aware that buying Bitcoin comes with a certain degree of risk. Collaborating with a professional digital asset investor is a great way to maximize the upside while reducing this risk.
