Created in 2009 to replace traditional fiat cryptocurrencies, Bitcoin didn’t get much traction until late 2017 when it almost broke the $20,000 price barrier. However, the introduction of new regulatory legislation has been holding it back for the past few years with immense fluctuations in the coin’s price. Even then, Bitcoin recorded an all-time high of almost $69,000 toward the end of November 2021.
Bitcoin is a decentralized blockchain network that relies on a proof-of-work consensus mechanism to authorize transactions. These transactions are immutable and cannot be altered or deleted without consensus. Individuals who take part in the authorization and verification process are rewarded with BTC tokens. The total supply is capped at 21 million Bitcoins.
Whether you are looking to invest in Bitcoin for the long-term or for short-term monetary gains, you need to be aware of all the methods that you can use to invest in Bitcoin, other cryptocurrencies, and other digital assets.
If you want to invest in Bitcoin for the long-term, then the ideal way for buying and selling Bitcoin is through a crypto exchange. These are digital platforms that sell you BTC coins directly so you can own, hold, and sell them anytime you want. That being said, it has to be kept in mind that for holding or storing Bitcoin for months, you will need a compatible Bitcoin wallet. There are two different types of digital wallets that you can get:
Many people who are new to investing in Bitcoin and other cryptocurrencies often get discouraged by its high price. For instance, at the time of writing, a single BTC token is worth more than $34,000, which means that there won’t be many people who afford to invest in an entire Bitcoin token. However, you don’t need to be discouraged at all!
With a digital currency like Bitcoin, you don’t actually need to buy the whole unit of the digital asset or coin. For example, the smallest unit of Bitcoin is called a ‘Satoshi’, which is equal to 0.00000001 BTC. With the current price of Bitcoin and taking high price volatility into consideration, that’s worth less than a penny. This means that you can invest in smaller quantities that you can afford. All you need to do is:
It is important to keep in mind that investing in Bitcoin incurs a network fee since the Bitcoin transaction has to be processed. That’s why you should buy enough BTC that cover your expenses; otherwise, you will end up paying more in terms of fees than your profit.
If you don’t want to deal with the network fee, then there are other methods to invest in Bitcoin which are listed below.
Cryptocurrency brokers are also digital platforms, but unlike Bitcoin exchanges, they do not sell you Bitcoin or other cryptocurrencies directly. Instead, they let you invest in the token of your choice by making predictions about their pricing. This is done through a wide range of financial instruments, the most popular of which is Contract for Difference or CFD. Other instruments include options, futures, and ETFs.
Bitcoin brokers are a better option for those investors who don’t want to hold BTC tokens for a long time and just want to cash in on the price volatility that is not offered by fiat currencies (forex). Another positive of cryptocurrency investing through a broker is that you don’t need to get a Bitcoin wallet and manage your BTC tokens.
An ETF or Exchange Traded Fund is a financial instrument that bundles in a variety of stocks and other digital assets to minimize trading risk. ETFs are created and managed by deliberately selecting those assets that are likely to perform well in the future based on their historical performance, market indicators, and other factors.
This ensures that even if one or a couple of assets don’t see any increase in their prices, the loss gets offset by the performance of other assets. The idea of an ETF is to ensure that your investment has a very high probability of leading to a net positive i.e. profit.
If you want to invest in Bitcoin but also want to manage your risk, investing in a Bitcoin ETF is a smart idea. You can do so through the traditional stock market as well as many digital platforms such as brokerage firms that offer a Bitcoin ETF. You can also invest in an ETF that is comprised entirely of cryptocurrencies if you don’t want diversification in the asset class.
eToro is a global crypto broker and investment platform with over 25 million users worldwide. It is highly regulated, easy to use, and supports a vibrant community of investors and traders.
Despite these impressive credentials, eToro made our list because it allows users to buy Bitcoin and manage their holdings as an investment portfolio. The platform provides investment tools like Smart Portfolios and CopyTrader.
Smart Portfolios are a set of curated portfolios that provide exposure to certain aspects of crypto by investing in coins hand-picked by eToro’s professional portfolio managers. Investors can invest in Bitcoin alongside others within a theme they believe in.
If you prefer only to buy Bitcoin, you can do so at a modest 1% transaction fee per transaction. And if you ever feel like you’d want to explore more coins, eToro has a selection of up to 100 cryptos.
To get started, create an account and deposit at least $20 through a bank transfer, credit card payment, PayPal, Skrill, Sofort, Klarna, and Neteller. Deposits are free while withdrawals cost $5.
To learn more, read our dedicated eToro review.
Binance is a global crypto exchange with over 160 million users and 600+ cryptos. The platform offers trading, investing, staking, saving, NFT, and payment services. It provides one of the most holistic crypto solutions in the industry.
However, it’s on our list because of its conversion fees. At 0.10%, Binance offers possibly the lowest fees in the industry (decentralized exchanges aside). If you hold BNB, the exchange’s native coin, on your balance, you can get up to 25% off on the already low fees.
These fees make it one of the best places to trade large volumes, and its daily volume of $7 billion is a testament to that.
To buy Bitcoin on Binance, you’ll need to get funds into your account. You can do so by depositing funds or buying Bitcoin directly with a supported payment method. To buy crypto directly, click on the Buy Crypto icon at the top left side of the homepage.
Choose the coin you wish to buy and the currency you want to use; Binance supports over 40 major fiat currencies. The payment methods depend on the currency used; however, credit card payment is available for virtually all currencies and costs 1.8%.
Alternatively, you can fund your account using a slew of other methods like the peer-to-peer (p2p) exchange that allows you to transact with people who use the same currency and payment method as you anywhere in the world.
To learn more about Binance’s offerings, read our dedicated Binance review.
Suppose you are a beginner looking for the easiest way to buy Bitcoin. In that case, Coinbase is the ideal option because it prides itself on being the most accessible place to buy and sell cryptocurrency.
We can attest to that as the exchange allows you to connect your bank account to your exchange account and quickly move funds between them, but only if you live in regions like the US and Singapore.
Other regions are not left out as several payment methods are available from PayPal to SEPA for European users, Transac for Canadian users, and credit card payments for all users.
Once you add cash to your account, you can choose any of the 193+ available cryptos and trade a minimum of $2. Direct conversions cost 1% of the transaction volume. However, you can get lower fees, between 0.05% and 0.65%, if you use the trading terminal.
To learn more about Coinbase’s features, like its secure crypto vault, read our dedicated Coinbase review.
Before you invest in Bitcoin, ensure that you are aware of all the major factors that can affect the price and investment decisions. Some of the key considerations include the following:
The first factor that you should keep in mind is your transactional costs which include a variety of fees and charges. If you are using a bitcoin exchange, it means that you are directly buying Bitcoin tokens which will incur a network fee.
For instance, at the time of writing, Bitcoin transaction fees are close to $7.00 per transaction. This can be impacted by the demand and price of the BTC token. Apart from that, the exchange may require you to pay a fee for their services, including deposit and withdrawal charges, wallet fees, and inactivity charges.
On the other hand, if you are investing through a broker or purchasing a financial instrument to bet on the BTC price, you won’t have to pay the network fee. However, you will need to cover the cost of commission, transaction charges, deposit and withdrawal fees, wallet fees, and an inactivity fee.
Also, keep in mind that the bank or your payment processor may also deduct their service charges. This is why it is important to come up with a cryptocurrency investment strategy that covers all of your costs while providing a healthy profit margin.
Just like any other asset class, Bitcoin also comes with its own set of risks. Since it is a relatively new digital asset, you need to ensure that you are managing your risk in an effective manner. Some of the major risks you need to consider include:
Another aspect of investing in Bitcoin is choosing the right payment method since it can make or break your investment experience. The most popular payment methods used to invest in Bitcoin include:
You are the best person to make the decision whether you should invest or not. When it comes to the digital markets, currently, Bitcoin has everything going for it – from price and technological success to demand and internet hype. That being said, some of the major reasons to invest in Bitcoin include:
Buy and Hold involves buying a lump sum of Bitcoin and holding it for as long as possible. The strategy is based on Bitcoin’s historical performance and the assumption that it will continue to appreciate in price over the years.
If you hold it long enough, the price should appreciate beyond what you bought it for; this strategy doesn’t focus much on the current market price. This strategy suits investors who believe in Bitcin’s long-term prospects and don’t mind waiting years.
Dollar-cost averaging involves breaking your total investible amount into portions and using Bitcoin at set intervals regardless of price. This strategy aims to spread the cost of buying Bitcoin across various price points to incur less risk, especially if prices are trending downward.
Buying Bitcoin companies is an excellent way to gain indirect exposure to the crypto. These companies could be institutional miners or holding Bitcoin on their balance sheets.
For example, MicroStrategy is a Business Intelligence firm with 174,530 Bitcoin worth $5.3 billion on its balance sheet. With that much exposure, an investment in MicroStrategy (i.e., holding their stock) would grant indirect exposure to Bitcoin.
There are a few other ways you can get a hold of BTC. You can opt for face-to-face transactions where you meet up with the seller. Ensure you meet in a safe environment to avoid getting conned. You can also opt to use a Bitcoin ATM if there is one near you.
This is a safe and fast process that doesn’t require one to disclose their personal details, and it’s fast. Ensure you check for ATMs that are listed on Bitcoin ATM Radar to avoid getting scammed. Another popular option is using PayPal to buy Bitcoin, although this facility is not yet available worldwide.
You have to sign up and fund the account. Recently the payment giant announced it would have to allow users to purchase, sell, and hold Bitcoin. Another way of investing in Bitcoin is through leverage, a process we will go through below.
Leverage trading helps the investor increase their exposure in the Bitcoin market. Your capital is multiplied by a given percentage, and this helps you profit more. You have to be careful since the bigger the leverage you opt to use, the greater the risk of getting liquidated from small price movements.
Leverage trading is a great way to speculate short term price movements and profit quickly. It’s only possible through an online broker such as eToro, Skilling, Plus500, and many more.
A Bitcoin ETF offers a simple and legally compliant way to invest in the top cryptocurrency. It’s an investment vehicle that tracks the price of Bitcoin and trades on the traditional stock market. The value of the ETF rises and falls depending on the price of the underlying asset. Each share of the ETF represents 1/10 of one BTC.
It’s an ideal way to invest for people with little knowledge of the Bitcoin market who would love to avoid the technicality involved, like dealing with Bitcoin addresses, private keys, and Bitcoin wallets.
Bitcoin mining is the process through which Bitcoins are released on the network. At the start, it was quite easy to participate through the use of GPUs, but as the hash rate went up with more people using the network, so it became more difficult to mine profitably. The dawn of ASICs (Application Specific Integrated Circuits) made competition through the use of a GPU virtually obsolete.
Today mining is only really possible through large Bitcoin mining pools, which you can join to share the profits with other participants. Cloud mining is also an option, where you purchase time on someone’s rig. To make more, you will have to spend more by purchasing a higher hash rate on platforms like Genesis Mining or HashFlare.
If you are looking to invest in Bitcoin, there are multiple effective ways to do so. Every investment method has its own pros and cons, and you need to evaluate your own investment objectives, strategies, accessible capital, and available time to identify the best possible investment method. This will allow you to leverage your time and financial resources in the most effective manner so you can optimize your profit returns.
Don’t forget that there are more cryptocurrencies that you can invest in to create a more diversified portfolio.
UK reader looking for a more specific guide? Check out our article on how to invest in Bitcoin in the UK.