Bitcoin good to invest in

Understanding the Various Ways to Invest in Bitcoin

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Bitcoin was designed with the intent of becoming an international currency to replace government-issued (fiat) currencies. Since Bitcoin’s inception in 2009, it has turned into a highly volatile investing asset that can be used for transactions where merchants accept it.

Could you and should you invest in Bitcoin? You can, and it depends on your appetite for risk. Learn the various types of ways you can invest in Bitcoin, strategies you can use and the dangers involved in this cryptocurrency.

Investment Types

Over the past decade, multiple ways to invest in Bitcoin have popped up, including Bitcoin trusts and ETFs comprised of Bitcoin-related companies.

Buying Standalone Bitcoin

The first way you can invest in Bitcoin is by purchasing a coin or a fraction of a coin via trading apps such as Coinbase. In most cases, you’ll need to provide personal information to set up an account, then deposit money you’ll use to purchase bitcoins.

Some platforms may require a minimum deposit amount to purchase bitcoins.

Then, as with any stock or ETF, you have access to Bitcoin’s price performance and the option to buy or sell. When you buy, your purchase is kept safe in an encrypted wallet only you have access to.  

Greyscale’s Bitcoin Investment Trust (GBTC)

Investors looking to invest in Bitcoin through the capital markets can access an investment through Greyscale’s Bitcoin Investment Trust (GBTC).   Using Greyscale provides certain advantages that make an investment in bitcoin a more digestible option. For one, shares of GBTC are eligible to be held in certain IRA, Roth IRA, and other brokerage and investor accounts—allowing easy access for all levels of investors in a wide variety of accounts.  

Investors are provided with a product that tracks the value of one-tenth of a bitcoin. As an example, if the value of Bitcoin is $1,000, each share of GBTC should have a net asset value of $100. This value is not without costs, as GBTC maintains a 2% fee that affects the underlying value.  

In reality, investors are paying for security, ease of use, and liquidity (conversion to cash). By arranging strong offline storage mechanisms, GBTC allows investors who are less technical to access the bitcoin market safely.

GBTC trades on the capital markets as well, which allows it to trade at a premium or discount of its net asset value (NAV).

Amplify Transformational Data Sharing ETF (BLOK)

BLOK is an actively managed fund that has holdings in 15 different industries and is traded on the New York Stock Exchange Arca. The company invests in other companies that are involved with and developing blockchain technologies. BLOK’s net expense ratio is 0.70%. 

Bitwise 10 Private Index Fund

The Bitwise 10 Private Index Fund is based on the Bitwise 10 Large Cap Crypto Index, a basket of large capacity coins in which the company tries to provide security and the ease of use of a traditional ETF.

The Bitwise 10 Private requires a $25,000 minimum investment and has a fee ratio of 2.5%. Similar to GBTC, the assets are held in cold storage (offline), providing necessary security for its investors.   

Investment Strategies

Buy and ‘Hodl’ Bitcoin

Hodl (an intentional misspelling of hold) is the term used in the bitcoin investment community for holding bitcoin—it has also turned into a backronym (where an acronym is made from an existing word)—it means «hold on for dear life.» An investor that is holding their Bitcoin is “hodling,” or is a “hodler.”

Many people invest in Bitcoin simply by purchasing and holding the cryptocurrency. These are the people who believe in Bitcoin’s long-term prosperity, and they see any volatility in the short term as little more than a blip on a long journey toward high value.

Long Positions on Bitcoin

Some investors want a more immediate return by purchasing Bitcoin and selling it at the end of a price rally. There are several ways to do this, including relying on the cryptocurrency’s volatility for a high rate of return, should the market move in your favor. Several bitcoin trading sites also now exist that provide leveraged trading, in which the trading site effectively lends you money to hopefully increase your return.

Short Positions on Bitcoin

Some investors might bet on Bitcoin’s value decreasing, especially during a Bitcoin bubble (a rapid rise in prices followed by a rapid decrease in prices). Investors sell their bitcoins at a certain price, then try to buy them back again at a lower price.

For example, if you bought a bitcoin worth $100, you would sell it for $100, and then wait for that bitcoin to decrease in value. Assuming the buyer of that bitcoin wanted to sell, you could buy it back at the lower price. You make a profit on the difference between your selling price and your lower purchase price.

It can be difficult to find a platform for short selling, but the Chicago Mercantile Exchange is currently offering options for Bitcoin futures.  

There is always the danger that the market will move against you, causing you to lose the money that you put up. Any trader should understand the concepts of leverage and margin calls before considering a shorting strategy.

Understanding Risk if You Invest in Bitcoin

Bitcoin Is a Volatile Asset

Those fluctuations can be dramatic. In April 2013, the world gasped when Bitcoin’s value jumped from around $40 to $140 in one month. That increase, however, paled in comparison to the Bitcoin surge of 2017. In January, Bitcoin was hovering between $900 and $1,000. In the first week of September, it pushed past $4,700, only to drop down near $3,600 two weeks later. By mid-December, it raced to an all-time high of $19,891.99, then plummeted to around $6,330 less than two months later.  

Exchanges May Have Glitches and Hacks

Exchanges can be tricky because many of them have proven to be highly unreliable—especially in the early days of Bitcoin. One of the first and largest Bitcoin exchanges, Japan-based Mt. Gox, collapsed after being hacked—losing 850,000 bitcoins and hundreds of millions of dollars. In April 2016, a glitch in an exchange led to Bitcoin’s price to momentarily drop to $0.60 on Coinbase.  

The Bottom Line

Bitcoin’s drawbacks aren’t prohibitive. However, it is extremely important that you know what you’re doing, and that you don’t invest more than you can afford to lose. It is considered a very high-risk investment, meaning that it should represent a relatively small part of your investment portfolio.

If you are interested in investing in Bitcoin, you have multiple options. Buying bitcoins through an exchange subjects you to volatility, but opting for a trust or an ETF investing in crypto-tech companies could minimize the risk you’d face buying coins.

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How To Invest In Bitcoin (BTC) in 2021

In 2010, around the same time Bitcoin and Cryptocurrency terms were peering into the world of finance, the most you could do with 10,000 BTC was buy a Pizza.

10 years later, the value of a single bitcoin has soared to peak at $20,000. The success of the digital currency has inspired the formation of a new global industry, the cryptocurrency industry, which threatens to take on the mainstream banking and finance sector.

And in its wake, it has left a trail of successful investment tales. Numerous individuals and institutions have amassed considerable wealth because they stuck with the legacy alternative coin from early on.

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About Bitcoin

The past few years have seen the legacy digital currency assume numerous roles, key among them being an acceptable payment method adopted by leading ecommerce as well as main street stores.

It has, on one hand, sparked national and international debates around the viability of the coin and the ramifications of its adoption as a legal tender. On the other, it has birthed an investment rush where every investor now wants a piece of the highly lucrative coin. The uncontrolled demand and the ever condensing supply of the commodity have in turn led to never-seen-before market volatility that saw bitcoin gain 10000%+ in value in one year and shed as much in the next.

Industry experts, however, believe that the most unpredictable phases of bitcoin as an investment tool are over and that it is nearing stabilization. In such a case, and with the proliferation of ways in which you can acquire the coin safely, one might argue that there probably will never be a better time to invest in Bitcoin.

But how do you go about it?

We have investigated and found that the easiest, most secure way to invest in Bitcoin is through the highly respected online brokerage, eToro. Click on the table above to get started or read on to find out how to start investing in Bitcoin.

Why invest in bitcoins?

Portfolio diversification:

A good investment portfolio should be carefully spread to include virtually every investment vehicle. And this includes bitcoin investments. The portion of your investment that you allocate to the high-risk/high-reward bitcoin should, however, be determined by such factors as your risk averseness and age. This age factor is premised on the fact that younger investors who have more than enough time to recover from bad trades and the negative market turns. They, therefore, have the luxury of risking more compared to seniors who will probably be gambling their pensions and retirement savings.

Huge potential for growth:

Every new day opens Bitcoin to more expansive horizons. It brings forth news about a new ecommerce store or legacy institution embracing bitcoin payments, another country acknowledges crypto trading or another multinational seeking to leverage the digital coins anchor blockchain technology.

Without downplaying any negativity associated with the coin like the threats of governmental regulation and bans in countries like China, every investor can agree that the strides achieved by Bitcoin far outshine any possible threats. The fact that it still has more ground to cover in this quest to replace modern fiat currencies makes it an excellent long term investment choice.

Ease of liquidation:

Unless you are investing in Bitcoin futures, Bitcoin investments may turn out to be the most liquid asset class in your portfolio. This means that it doesn’t tie your funds in long-term and highly complicated projects with painfully sluggish opt-out processes.

It also means that should you suspect an impending significant downturn you can quickly liquidate your investments, shielding you from massive losses. This is not possible with such other investments as shares and stocks.

Above-average gains in the shortest time possible

Real Estate investments have for the longest time been considered the golden child of investments. In 2018, however, this considered lucrative industry reported a 5% annual growth. Bitcoin has, on the other hand, reported an average 200% gain in the past five months.

You will, therefore, want to invest in bitcoin if you are looking for above-average gains within the shortest time possible. The only caveat being the fact that you are also faced with the threat of above-average losses over the same period.

Hedge against ordinary investments and fiat currencies

The cryptocurrency industry is so far removed from the national economies that an economic mishap that results in near-catastrophic impacts on the shares and equity markets have little to no impact on bitcoin prices. This makes it the perfect hedge for your shares and equity investments. You can also learn how to leverage significant shares and equity losses with short term gains trading bitcoin.

How to trade bitcoins in 2021

Buying bitcoins is not an event but a four-part process that starts with identifying where to buy the digital coin, the buy/sell approach, and how to keep it safe. A well-calculated trade strategy must also involve constantly watching over the bitcoin markets for hints on the selling point.

Step 1: Identify where to buy bitcoins

There are several approaches to bitcoin trading. Some of the most popular, however, include buying from a reputable crypto exchange like eToro, Binance, through a peer to peer crypto exchange site like LocalBitcoins, or through a multi-asset brokerage. And while buying from an acquaintance may easily pass as one of the quickest approaches to acquiring the crypto assets, it is hardly safe, especially when dealing with online strangers.

Understand that the biggest and most impactful bitcoin scams today are conducted by the ’sellers’ you meet online and promise to sell you the digital coins at discounted rates. In such a case, there is no way of vouching for their legitimacy or verifying the existence of their coins.

The proliferation of bitcoin trading scams also demands that you thoroughly vet the authenticity of any of these trading approaches before creating a trader account with a particular broker. Start by checking whether they are licensed by the financial regulatory agencies in the jurisdictions within which they operate. A bitcoin broker in the USA, for instance, should ensure that their preferred bitcoin company is licensed by the SEC and registered with the FDIC.

Additionally, go through their user reviews from independent customer review websites like BBB and TrustPilot to check their customer satisfaction scores. You would do well to avoid exchanges and P2P platforms with a history of hacks and irrecoverable loss of the client’s bitcoin assets.

Our recommended platform for buying bitcoins is a well-known broker and exchange eToro.

Step 2: Decide on your trading approach ( long, short or buy and hold)

Buying and holding onto bitcoins for a long term with the hope of profiting from its long term prosperity remains one of the most popular approaches to bitcoin trading. This strategy is largely adopted by individuals who believe that Bitcoin prices will continue to soar in the foreseeable future. This group of traders isn’t bothered by the short term volatilities that are synonymous with the trade. They will just shrug them off as a blip with some viewing it as a necessity in the coins path towards stability. If you are buying and holding onto the coins for the long term, chances are you will be buying bitcoins in bulk. And in such a case, we advise that you consider buying from a highly regulated exchange and store your coins offline in a secure hardware wallet.

II. Buying Bitcoins and disposing them at a higher price

Going long on a bitcoin position can be considered part of day trading and involves buying bitcoins at a low price and selling them off as soon they turn a profit or at the end of a bullish price rally. It involves taking advantage of bitcoins volatility to score the highest returns on investment in the shortest time possible. And while you could try this and in a conventional bitcoin exchange, the slow processing speeds recorded by most of them make the process painfully tedious. You, therefore, are better off investing in the more flexible bitcoin CFDs that guarantee near-instant transaction processing speeds.

III. Investing in a Bitcoin CFD

One of the main advantages of dealing with a Bitcoin CFD over the other forms of Bitcoin trades is the ability to short sell. Short selling is an advanced form of online trading that involves speculating on the decline in price or the ultimate collapse of a stock or any other financial instrument. If you wish to short-sell bitcoins, you will want to first register with an exchange that provides for bitcoins CFDs or crypto-related EFTs. Like taking long positions, short selling involves taking advantage of the bitcoin volatilities and profiting from a bearish run.

Step 3: Learn how to keep it safe

Planning for the safety and security of your bitcoins involves identifying a crypto wallet where you can secure your bitcoins. You have the option of settling for the bitcoin hardware wallet or the convenient online and mobile wallet. However, if you chose to trade bitcoin CFDs, you won’t need a wallet. Ideally, CFD trading involves price action trading and, therefore, doesn’t trigger the generation of transactional private keys. Neither does it involve the distribution of actual bitcoin tokens.

United States residents using eToro to buy and sell Bitcoins will, however, require the eToro mobile bitcoin wallet for the safekeeping of their tokens. This is available in both iOS and Android operating systems and is also easily accessible on the go. Launched earlier in the year, the wallet seeks to seal most security loopholes wrecking other mobile wallets available today. Chief among this is unauthorized access of the mobile wallets that eToro sought to solve by introducing a two-factor authentication feature.

Step 4: Identify the price influencers to watch out for

Prudent bitcoin trading demands that you hold onto an asset for no longer than is necessary. And buying or selling in either eToro bitcoin CFD for international traders or the crypto coin tokens for United States residents is no different. You need to keep an eye out for any factors that may necessitate the liquidation of your bitcoin wallet. These include:

Changing market sentiments Major negative news Direct government interference

Disclaimer: CFDs are complex financial instruments and 75% of retail investor accounts lose money when trading CFDs on eToro.

How to increase your bitcoin investments efficiency

i) Follow the news:

In the highly unregulated crypto world, major news, whether positive or negative has the biggest impact on the price of the legacy coin. It is, therefore, critical that you keep up to date with the global news and learn how to interpret the impact every political or economic event has on bitcoin price.

ii) Avoid leveraged trades:

Leverage is by far the most attractive and also the most destructive aspect of CFD trades. It may lead to above-average profits as well as above-average losses and lead to negative balances. We advise bitcoin investment beginners to shelve the idea of maxing out leverages or practice moderation until they have mastered the trade.

iii) Remove emotion from the equation:

The biggest investment mistakes most people make is skipping on thorough analyses and investing emotionally. Take time to study such market dynamics as whether the asset is over- or under-valued, consider investors and global sentiments, and possible price influencers like impeding major events or announcements.

Challenges rocking bitcoin investments

The surge in price for bitcoin and a ready market has attracted investors, scammers, and hackers in equal measure. The latter are always trying to infiltrate investor’s computers and crypto exchanges’ cold wallets in an attempt to gain unauthorized access to the coins stored therein. You can, however, minimize the incidence of hacks by embracing strong antivirus, firewall settings, and investing in an impenetrable hardware bitcoin wallet.

Uncertainty over impeding crypto regulation:

The threat of global governments stepping in to regulate critical aspects of bitcoin investments has been dogging the industry for years. Developed nations, like the United States, are always sending mixed signals about bitcoin regulations while others like China have already imposed a total ban on any form of crypto investment and trade. Every time any of this happens, it sends the bitcoin market into a panic mode, causing disastrous volatilities that take months of rebalancing for the market to recover from.

Uncontrollable volatilities:

By now, only the most risk-tolerant investors have dared try the bitcoin investments. The huge volatilities that see the coin gain and lose significant values in minutes have seen most conservative investors shy away from this market. This doesn’t, however, translate to lack of interest, they are only waiting for the market to gain stability while seeking clarity on the uncertainties rocking the industry.

Rouge exchanges:

The absence of regulation has birthed numerous crypto exchange crooks out to fleece bitcoin investors. Most will set up shop using pseudo names and addresses and fall off the grid later with investor funds and coins. Others have employed underhand tactics like manipulating bitcoin trade volumes aimed at attracting investors barn while others have been accused of engineering self-hacks in order to swindle investor funds and bitcoins stored in their vaults.

Bottom line

In February 2016, Bitcoin’s price was trending around $800, three years earlier one coin was worth no more than a few dollars. Today, however, a single coin has shot well above $8,000. This translates to a 10 folds gain in less than three years and 40,000%+ gain in the last six years. No other asset in the history of investments has ever been able to pull off similar growth rates in such a short period of time. And while you may be tempted to look at this from a conservative investor’s point of view and write such growth as unsafe, you first need to appreciate the fact that none of the investments in your portfolio is immune to volatilities either.

More importantly, you need to understand that the above-average volatilities the bitcoin investments are exposed to also serve as its biggest benefit. The fact that you can also short a bitcoin price ensures that you can use this volatility to multiply wealth in the industry regardless of the market direction.

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