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Bitcoin was intended to be an international currency that might one day replace government-issued (fiat) currencies. Since its inception in 2009, people have been able use it for transactions where merchants accept it. Additionally, bitcoin investing has become popular, although the cryptocurrency has become a highly volatile investing asset.
The question is, is it safe to invest in bitcoin? And if it is, what are the best ways to invest in this cryptocurrency? Moreover, how can an investor minimize risk? Truly, it depends on your appetite for risk.
Here we look into the various ways you can invest in bitcoin. Additionally, we review some strategies that can help you avoid risk when you’re investing in this cryptocurrency.
Learn the Various Types of Investing in Bitcoin
Since its emergence, investors have devised multiple ways to invest in bitcoin. For example, there are bitcoin trusts and exchange traded funds (ETF’s) that are made up of bitcoin-related companies.
You Can Invest in Standalone Bitcoin
Initially, you can step into the bitcoin market by purchasing a coin or a fraction of a coin via trading apps such as bitcoin profit. Most exchanges require you to give your personal information to set up an account. Then, you’ll need to deposit the money you’ll use to purchase bitcoin. Some platforms require a minimum deposit amount.
Next, you you’ll be able to access bitcoin’s price performance and select the option to buy or sell. The platform will keep all your transactions safe in an encrypted wallet that only you can access.
Consider the GBTC
If you’re an investor who wants to invest in bitcoin through the capital markets, there’s the Grayscale Bitcoin Trust (GBTC). Among its many benefits are that your bitcoin investing will be more convenient. You can hold shares of GBTC in some IRA, Roth IRA, and other brokerage and investor accounts. This trust allows easy access for all levels of investors with a wide variety of accounts.
It also provides investors with a product that tracks the value of one-tenth of a bitcoin.
The investors on this platform pay for the extraordinary security, ease of use, and liquidity (cash conversion). However, because of its strong offline mechanism for storage, GBTC helps its investors who have less technical know-how to access the bitcoin market safely.
Invest in Bitcoin by Putting Your Money in BLOK
Amplify Transformational Data Sharing ETF (BLOK) is an actively managed fund that has holdings in 15 different industries and is traded on the NYSE Arca. The company invests in other companies that are involved with and developing blockchain technologies. BLOK’s net expense ratio is 0.70%.
Turn to Bitwise 10 Private Index Fund If You Need a High Level of Security
The Bitwise 10 Private Index Fund operates on the Bitwise 10 Large Cap Crypto Index, a basket of large capacity coins. This company aims to serve its users with foolproof security along with the ease of use of a traditional ETF. This platform requires a minimum investment of $25,000 with a fee ratio of 2.5%. Its system is like GBTC’s, where the company holds assets in cold storage (offline), providing necessary security for its investors who want to invest in bitcoin.
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Which Investment Strategy Will You Choose?
Will You Buy and “Hodl”?
“Hodl” is a term that is specific to the bitcoin investment community. Some say “hodl” is an acronym for “hold on for dear life.” The term refers to an investor who is holding their bitcoin or “hodling.” If someone is investing in bitcoin in this way, it’s okay to call them a “hodler.” Many people step into the bitcoin market believing in bitcoin’s long-term prosperity. They see any volatility in the short term as little more than a blip on a long journey toward high value.
Or Will You Take Long Positions on Bitcoin?
There are other bitcoin investors who wish to get back more immediate return. These investors buy bitcoin and sell it at the end of a price rally. This could be done in several ways, depending on the cryptocurrency’s volatility. Regardless, these investors look for a high rate of return. If your timing is good, the market could move in your favor.
Several bitcoin trading sites now provide leveraged trading services. This means that the trading site lends you money that you invest in hopes of increasing your return.
Perhaps You’ll Gamble on Short Positions with Bitcoin
There are also some active investors who like to bet that bitcoin’s value will decrease. These traders are active especially during a bitcoin bubble. They sell their bitcoin at one price, then try to buy it back again at a lower price.
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The Bottom Line
Bitcoin’s disadvantages are not prohibitive. However, it is best to be mindful of what you’re doing with bitcoin investing. Importantly, don’t invest more than you can afford to lose. Bitcoin is a high-risk investment, so you should invest only a small part of your hard-earned money initially.
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