Small Bitcoin Investments: Are They Worthwhile?

Bitcoin is a highly volatile cryptocurrency that has seen its fair share of ups and downs since its launch in 2009. Despite its volatility, many people have made substantial gains by investing in Bitcoin, especially those who got in early. But is it possible to invest in Bitcoin with just $1? The answer is yes, with apps like Venmo and WeBull allowing users to invest in Bitcoin and other cryptocurrencies with as little as $1. However, it's important to remember that Bitcoin is a risky investment with no guaranteed returns, and its value can rise or fall quickly.

Bitcoin's value and volatility

Bitcoin is considered a volatile financial asset. Volatility is a measure of how much the price of an asset varies over time. The more volatile an asset, the more its price can substantially increase or decrease on any given day.

Bitcoin's price depends heavily on supply and demand. As an asset, it was quickly adopted by investors and traders, and speculation about price movements plays a critical role in Bitcoin's value at any given moment.

Media outlets, influencers, and industry moguls can also influence Bitcoin's price. For example, when media outlets announced Proshare's introduction of its Bitcoin Strategy ETF in October 2021, Bitcoin's price skyrocketed to almost $69,000. After the hype died down, and investors realized the ETF was linked to Bitcoin through futures contracts, prices dropped back down to around $50,000.

Government regulations can also impact Bitcoin's price. For instance, in 2021, China's government and central bank announced that all cryptocurrency transactions were illegal, and Bitcoin mining was cracked down upon. This caused Bitcoin's price to drop to around $29,700 as miners scrambled to relocate.

The varying belief in Bitcoin's utility as a store of value and method of value transfer also drives its volatility. Many investors believe that Bitcoin will retain its value and continue to grow, using it as a hedge against inflation. However, others may have differing opinions, leading to price fluctuations.

As a young asset, Bitcoin is still in the price discovery phase, and it is difficult to predict if its overall growth will last long-term. Bitcoin's volatility can be a gift or a curse, depending on the investor's perspective and risk tolerance.

Apps to invest in Bitcoin

There are several apps that allow you to invest in Bitcoin and other cryptocurrencies. Here are some of the most popular ones:

Coinbase

Coinbase is a specialized cryptocurrency exchange that allows users to trade hundreds of digital currencies, including Bitcoin, Ethereum, Cardano, and Solana. It is one of the most trusted and popular platforms for buying, selling, and managing your digital currency. Coinbase offers advanced trading tools, a user-friendly interface, and educational resources to help users learn about crypto. However, it has been criticized for its high fees and complex fee structure.

Binance.US

Binance.US is the American arm of the larger Binance organization. It offers low trading costs, with commission-free trades for Bitcoin and a sliding scale for other coins. You can trade more than 150 different cryptocurrencies on Binance.US, including popular coins like Ethereum, Solana, and Cardano. However, it has faced regulatory issues and lawsuits related to alleged illegal operations and misuse of customer funds.

EToro

EToro is a crypto-focused broker that offers about 25 cryptocurrencies, including Bitcoin, Ethereum, Dogecoin, and more. It does not charge a direct commission but has a flat spread markup of 1% for all coins. eToro also provides a practice trading account, allowing users to try out crypto trading before investing real funds.

Kraken

Kraken is another specialized cryptocurrency exchange that supports trading in more than 230 cryptos, including popular coins like Bitcoin, Ethereum, Solana, and Uniswap. It offers competitive commissions, especially for high-volume traders, and margin trading for high-net-worth individuals. However, it is not available in New York or Washington state. Kraken has also faced regulatory issues, with the SEC charging it with illegally operating an unregistered securities exchange.

Robinhood

Robinhood is a well-known trading app for stocks, options, and ETFs that has expanded into cryptocurrencies. It offers commission-free trading for 15 different coins, including Bitcoin, Dogecoin, and Ethereum. Robinhood provides instant transfers, making it easy for users to get started. However, it has been criticized for its limited crypto offerings and the inability to trade crypto-to-crypto directly within the app.

Cash App

Cash App, known more for its cash management and stock trading features, also allows users to trade Bitcoin. While it only supports one cryptocurrency, it offers a simple and user-friendly platform for those looking to invest in Bitcoin specifically. There is a small fee for trading Bitcoin, in addition to a spread markup built into the trade.

These apps provide various features and services for investing in Bitcoin and other cryptocurrencies. It is important to carefully review their fees, coin offerings, security measures, and user interfaces before choosing the one that best suits your needs.

Bitcoin's history

Bitcoin is the first and largest cryptocurrency. It was created in 2009 by a computer programmer or group of programmers using the pseudonym Satoshi Nakamoto. Its history can be divided into several key moments:

Inception and Early Adoption

Bitcoin was first implemented by Nakamoto, who integrated many existing ideas from the cryptography community. On 3 January 2009, the bitcoin network came into existence with Nakamoto mining the genesis block of bitcoin, which included a reward of 50 bitcoins. The first bitcoin transaction occurred on 12 January 2009, when Nakamoto sent 10 bitcoins to programmer Hal Finney.

Initial Growth and Volatility

Over the course of its history, Bitcoin has undergone rapid growth and has become a significant store of value both on and offline. From the mid-2010s, some businesses began accepting bitcoin in addition to traditional currencies. In 2013, Forbes named Bitcoin the year's best investment, and its price rose to $1,242. However, in 2014, Bloomberg proclaimed Bitcoin the year's worst investment, and its price dropped to around $400.

Recent Developments and Mainstream Adoption

In 2021, El Salvador became the first country to adopt Bitcoin as legal tender. In 2022, the cryptocurrency exchange FTX, which was led by Sam Bankman-Fried, filed for bankruptcy, causing a significant market reaction. In 2024, the total cryptocurrency market capitalisation topped $2 trillion for the first time since 2022, and the Securities and Exchange Commission approved the first 11 spot Bitcoin ETFs, simplifying investors' access to crypto markets.

Pros and cons of investing in Bitcoin

Investing in Bitcoin has its pros and cons. Here is a detailed analysis of the advantages and disadvantages of investing in Bitcoin:

Pros of Investing in Bitcoin:

• Poignant: As the first-ever cryptocurrency, Bitcoin has led to the creation of thousands of alternative coins, making it a prestigious and desired asset that has revolutionized the way we see money.
• Decentralized: There are no centralized authorities or central banks that may impose high fees or restrictions. Bitcoin is also global, so there are no exchange rates to deal with, making it a tempting investment option.
• Highly liquid: Bitcoin is among the most liquid investment assets, especially in the crypto market. Traders can either trade Bitcoin for other assets in the short term or buy and hold it for long periods.
• Transparent: Bitcoin is a decentralized platform and a public ledger that allows everyone to see transactions as they are stored permanently on the blockchain, making it efficient at fighting financing criminals.
• Portfolio diversification: Investing in Bitcoin can help investors spread their investments and reduce exposure to risks.
• Hedge against inflation: Due to its supply cap of 21 million coins and decentralized nature, some believe Bitcoin is immune to economic turmoil, geopolitical problems, and inflation.
• Valuable business features: Bitcoin has features such as multi-signature authorization that can improve transparency and security in business settings.
• Return on Investment: Figures show that Bitcoin has a significant ROI compared to other assets.
• Backed by major investors: Over the last decade, huge names have become major investors in Bitcoin and have been very vocal in their support.

Cons of Investing in Bitcoin:

• Highly volatile: As a scarce asset, Bitcoin's value is influenced by demand and supply principles and market sentiment, making it highly unpredictable and risky.
• Slow transactions: Many users are frustrated with Bitcoin's slow processing times, which can take up to 10 minutes or even longer on busy days.
• Limited use: Bitcoin has limited use and depends on internet availability. It is mostly limited to financial transactions compared to other coins like Ethereum.
• Not 100% safe: While Bitcoin's blockchain is almost unhackable, it is not entirely safe. Bitcoins can still be stolen if held on an exchange, and there have been instances of notorious hacks and thefts.
• Lack of regulation: There is little regulatory oversight in the Bitcoin market, and crypto regulations and taxation vary and are often unclear or non-existent globally. This lack of regulation can lead to fraud and scams.
• Misunderstood: Despite its innovative technology, Bitcoin investing is still veiled in misconception and associated with illegal services and crypto scams, making cryptocurrency adoption difficult.
• Not energy-efficient: Bitcoin uses a proof-of-work mechanism to validate transactions, consuming a large amount of power, which is harmful to the environment.
• Dominated by big investors: Bitcoin is now dominated by excessively big investors or 'whales' who can easily influence the price by selling off their holdings. This can make it harder for small-time traders to buy at the right price.
• Community disagreements: Community disagreements and splits have occurred in the past, and if they happen again, it could be very discouraging for investors.
• Quantum computer threat: The development of quantum computers could pose a threat to Bitcoin's network security.
• Doesn't work as intended: Bitcoin was designed to be a digital way to transfer value, but today, many people hold it because they believe it will increase in value.
• Creator's identity and disappearance: The elusive creator of Bitcoin, Satoshi Nakamoto, disappeared with 1 million BTC, raising questions about their possible intentions and causing other issues, such as imposters claiming to be Nakamoto.

In conclusion, investing in Bitcoin has its advantages and disadvantages. It is a high-risk investment with lots of potential rewards. Before investing, it is essential to carefully consider and measure the strength of each of these pros and cons to make an informed decision.

How to buy Bitcoin

Step 1: Choose a Crypto-Trading Service or Venue

You can purchase bitcoin from cryptocurrency exchanges, traditional stockbrokers, peer-to-peer money transfer apps, Bitcoin ATMs, and Bitcoin exchange-traded funds (ETFs).

Cryptocurrency exchanges such as Gemini, Kraken, Coinbase, and Crypto.com offer dozens of cryptocurrency choices, while others simply have Bitcoin and a few alternatives. They carry a variety of different fees and consumer protections, so do your research before choosing.

Traditional stockbrokers that offer Bitcoin trading include Robinhood Crypto, Webull, TradeStation, and Fidelity.

Bitcoin ETFs are available through traditional brokerage accounts.

Step 2: Connect Your Exchange to a Payment Option

You will need to connect your bank account, debit card, or credit card to your chosen exchange. Although you can use a credit card to purchase Bitcoin, it is best to avoid taking on high-interest debt to invest in a risky asset.

Some exchanges may require you to provide personal identification information, such as a picture of your driver's license or Social Security card.

Step 3: Place an Order

Almost all crypto exchanges offer market and limit orders, and some also provide stop-loss orders.

You can also set up recurring investments, allowing you to dollar-cost average into your investments of choice.

Step 4: Safe Storage

To store your Bitcoin, you will need a cryptocurrency wallet. There are two types of wallets: hot wallets and cold wallets.

Hot wallets are apps on internet-connected devices such as computers, phones, or tablets. Transactions are generally faster with hot wallets, but they are more vulnerable to security breaches.

Cold wallets are not connected to the internet and are considered much more secure. They can be offline wallets or hardware wallets, which store your private key on something that isn't connected to the internet. Cold wallets usually cost less than $100 and can be set up by following online instructions.

Frequently asked questions