Plus, its price swings can be frighteningly volatile by the standards of traditional stock and bond markets. Let's demystify how to invest in bitcoin: the various places to buy it, the risks and. Dec 19, · "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. Oct 14, · If you absolutely want bitcoin exposure, the best way to do that would be to buy fintech stock Square (NYSE:SQ). Square's longest-running operating segment, and .
How to invest bitcoin in stock marketHow to invest in bitcoin: Where to buy and strategy tips - Business Insider
You'll also need to factor in management fees as well. As a result, some think it's more worth it to just own the bitcoins yourself. Another possible attempt at investing in bitcoin's value without buying bitcoins is with bitcoin futures.
Bitcoin futures allow you to essentially bet on the cryptocurrency's value in the future; if you think the price of bitcoin will go up in the future, you could buy a futures contract. Should your instinct be right, and the price goes up when the contract expires, you're owed an equal amount to the gains.
Bitcoin futures have fairly extreme pros and cons to them. Contracts are leveraged in that you're paying a fraction of bitcoin's actual price when you buy futures, giving you a chance to profit off them. However, the contract has an expiration date in the near future. If the price is down when it expires, you can't simply hold and wait to see if it bounces back; you just lose. There are other, somewhat more tangential ways of approaching bitcoin investments. Look at industries impacted by bitcoin, how the industry works and how bitcoins are discovered.
Adding stocks from relevant, related companies is one possible way to invest in the future of bitcoin, from a distance. Since there is a prevailing thought that the most valuable aspect of bitcoin is the blockchain technology behind it, investing in blockchain is another way of tangentially investing in bitcoin without the worrisome volatility.
There are many large companies that have been developing their own blockchain networks for a variety of purposes that may be worth looking into.
That doesn't mean it's risk-free, though. Blockchain technology is an intriguing development that could disrupt a number of huge industries, but at the moment, it's also a fashionable word to throw around. Long Island Iced Tea, a beverage company, renamed itself Long Blockchain in late , seemingly knowing that the word itself could cause a jump in stock.
And for a brief moment, the stock actually did jump just because of that. Don't fall for tricks like that, stay vigilant and avoid cryptocurrency scams like these. Some of the larger companies that have begun incorporating blockchain into their industries include:. There are also ETFs that one can invest in that hold a number of stocks related to blockchain.
The growth of bitcoin mining as an industry has grown rapidly ever since the first bitcoin was mined nearly a decade ago. More powerful computers and hardware are required to give miners a better chance of successfully mining, and some companies have inadvertently become involved as a result.
Where the two most successfully intersect, though, are their graphics processing units. This has meant there's been a larger demand than ever for GPUs, especially in the wake of bitcoin's sudden and massive rise in With the explosion of mining and the steady need for GPUs amongst gamers, Nvidia has been an investment worth looking into in AMD, meanwhile, has been a bit more volatile. Bitcoin hasn't just affected other industries; it has essentially created its own. In the wake of bitcoin, hundreds of other cryptocurrencies have popped up and attempted to either dethrone it or provide other uses for it.
Many have failed, but some have survived and may have a future. But here, more than anywhere else, is where you need to proceed with caution.
Bitcoin is already incredibly risky, imagine what risks smaller and lesser-known crypto brings. Rounding out a portfolio with other cryptocurrencies may be able to help you evaluate the state and perhaps the future of that market, but many of them can quickly prove to be a flash in the pan. The sudden rise of initial coin offerings -- a method of crowdfunding new cryptocurrencies in a way that avoids venture capital entirely -- has many people excited for the future but also has many wondering if it's going to create an even more dangerous bitcoin bubble.
Some of the more notable cryptocurrencies, though, offer some things that bitcoin does not, making it harder to definitively call them a bitcoin copy. It's natural to be interested in them. They're riskier than usual. You may find that investing in bitcoin and cryptocurrencies in general aren't worth the risks that could potentially bring.
That's alright, sometimes it's better to be safe than sorry. Those who do decide to make an investment out of bitcoin are now free to decide how their investment should go. Some are content to hold onto them as long-term investments. Other more aggressive people may seek to take up trading. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.
I agree to TheMaven's Terms and Policy. Investing in Blockchain Since there is a prevailing thought that the most valuable aspect of bitcoin is the blockchain technology behind it, investing in blockchain is another way of tangentially investing in bitcoin without the worrisome volatility. For example, in November , PayPal began offering its US customers the capability to buy, sell, and make purchases with bitcoin, along with three other cryptocurrencies ethereum, bitcoin cash, and litecoin.
Because hundreds of millions of people already have PayPal accounts, they can skip all of that hassle," says Glen Goodman, an investment expert and author of The Crypto Trader. However, there are downsides to buying bitcoin with PayPal: "You can't move your bitcoin to your own personal wallet or send it to anybody else.
You can't transfer it to a crypto-exchange to use it for trading other cryptocurrencies, Goodman notes. PayPal isn't the only mainstream app cashing in on the crypto craze. The popular investment app Robinhood is also dealing in the currency now, and it doesn't charge any commission. Square's Cash App is another platform that includes bitcoin trading, while Swan Bitcoin is an app that lets users automatically invest in the cryptocurrency at regular intervals.
Square does usually charge service and volatility fees for bitcoin transactions although it doesn't explicitly state what these are on its website , while Swan Bitcoin charges from 0. One of the main ways investors purchase bitcoin is through cryptocurrency exchanges. These have certain advantages over the apps and funds, such as:. As mentioned, this is a more sophisticated game — you're getting into the professional traders' territory.
Still, "if you're a more advanced user, then you can probably handle buying on an exchange yourself," says Samson Mow, chief strategy officer of blockchain tech firm Blockstream. To start trading, you'll have to open an account with the exchange. These exchanges follow stringent know-your-customer KYC guidelines, so you will need to prove your identity before being able to trade using them.
Most exchanges have minimum deposit requirements for fiat currencies and cryptocurrencies, but these are usually very low. Despite being over a decade old, bitcoin remains a relatively immature asset.
There's less trading volume on its markets, which means it's less liquid , and the price changes can be volatile. It's therefore hard to predict how it will behave from one month to the next. Here are some tips for reducing your exposure to risk while also increasing your exposure to potential gain. Keep it safe and secure: Crypto-exchanges still continue to suffer the occasional hack even today. Since bitcoins do not exist in physical form, seasoned bitcoin investors store them in digital wallets.
A hardware wallet is a handheld, offline device that securely stores the private key necessary to transfer your bitcoin holdings from one place to another. Ledger and Trezor are two reputable brands. A "seed backup" is a backup of the phrase i. Many investors holding large quantities of bitcoin engrave their seed phrases onto metal plates and then store these plates somewhere safe such as a bank deposit vault. Likewise, you should plan on doing all of your investing from a secure internet connection.
In general, trading or buying bitcoin on a public WiFi network makes you more susceptible to attacks from hackers. Start small, rather than big: Given its short history and still highly unpredictable behavior, it's usually wise to keep your initial investment in Bitcoin relatively limited.
Even experienced investors e. And, despite the hype and forecasts, maintain your investment discipline, buying only what you can afford to potentially lose and not getting swept up by promises of gigantic upswings. Bear taxes in mind: Even though it's a currency, the IRS considers bitcoin to be property rather than money, so it's subject to the same tax treatment as other investment assets.
Bitcoin taxes can be triggered by trading, exchanging, or simply spending the cryptocurrency if it's increased in value since you bought it. So documenting every transaction is essential. The good news is that bitcoin profits are taxed at the special capital gains tax rate, which is often less than ordinary income rates.