Online Investments With Bitcoin: Is It Possible?

Bitcoin is a form of digital currency that uses blockchain technology to support transactions between users on a decentralised network. It was created by a programmer or group of programmers using the name Satoshi Nakamoto, and its use as a currency can be transacted most easily through crypto debit cards, many of which are partnered with Mastercard and Visa.

To buy Bitcoin, you'll need to set up an account with a service or exchange, such as Coinbase, and a way to store your purchases safely. This can be done through a hot wallet, which is connected to the internet, or a cold wallet, which is not.

There are many pros and cons to consider when deciding whether to invest in Bitcoin. On the one hand, it can be a risky investment due to its volatile nature, and there are concerns about hacking. On the other hand, it can be a cost-efficient way to make fast transactions, and it offers privacy and decentralisation.

Bitcoin wallets and cryptocurrency exchanges

Bitcoin Wallets:

Bitcoin wallets are software programs that allow users to store, send, and receive Bitcoins. They are similar to physical wallets in that they contain the private keys needed to authorise transactions and access Bitcoin addresses. These wallets can be installed on computers or mobile devices, or they can be hardware-based, such as the Trezor or Ledger. Additionally, paper wallets provide an offline storage option by printing the public Bitcoin address and private key on paper.

It is crucial to safeguard Bitcoin wallets and their private keys to prevent theft or loss. Backup copies are essential, just like with any other important data.

Cryptocurrency Exchanges:

Cryptocurrency exchanges are digital marketplaces that enable traders to buy and sell Bitcoins using fiat currencies or other cryptocurrencies. They act as intermediaries between buyers and sellers, matching them through market or limit orders. Examples of popular exchanges include Coinbase, Kraken, Gemini, and Binance.

When using an exchange, it is important to consider the payment methods, fees, and security measures in place. Two-factor authentication and strong passwords are recommended to protect your account.

While exchanges often provide integrated wallets, it is worth noting that you may not have full control over these wallets, and your private keys may be held by the exchange itself. This raises security concerns, and some users prefer to transfer their Bitcoin to a third-party wallet for added security.

Key Differences:

Bitcoin wallets are primarily for storing and transacting with Bitcoins, while cryptocurrency exchanges facilitate the buying and selling of Bitcoins between users. Wallets focus on secure storage and easy access to your Bitcoins, whereas exchanges provide a platform for trading and converting between different currencies.

In summary, Bitcoin wallets and cryptocurrency exchanges are essential components of the Bitcoin ecosystem, each serving distinct yet complementary functions. Understanding their roles and characteristics is crucial for anyone looking to invest in or utilise Bitcoin securely.

Traditional brokers

Robinhood

Robinhood was the first mainstream investment broker to offer Bitcoin trading. It follows a zero-commission fee model, allowing anyone to get started with Bitcoin trading without incurring high costs. Robinhood also offers a user-friendly mobile app, making it accessible to beginner investors. However, its customer support has been a weak point, and phone support is only available through a callback request on the app.

Fidelity Investments

Fidelity is one of the largest and most well-established brokers, offering extensive research tools, a top-notch trading platform, and strong customer service. While it does charge a fee for broker-assisted trades, it provides a wide range of investment options, including Bitcoin. Fidelity also stands out for its crypto-friendly approach, offering crypto ETFs and allowing customers to add crypto investments to their 401(k) accounts.

Charles Schwab

Charles Schwab is a well-reputed broker known for its high-quality customer service and extensive investment selection. It offers four free trading platforms and three well-featured mobile apps, catering to both beginner and advanced traders. Schwab also provides access to Bitcoin and Ethereum trading. However, one drawback is its relatively low-interest rate on uninvested cash.

Webull

Webull is a mobile-first brokerage with a sleek and intuitive platform, making it appealing to casual investors who prefer trading on their phones. It offers commission-free trading for stocks, options, ETFs, and cryptocurrencies like Bitcoin. Webull also provides advanced tools for active traders, but its educational content and research offerings are limited.

J.P. Morgan Self-Directed Investing

J.P. Morgan Self-Directed Investing is a good choice for beginners looking for a clear-cut investment platform. It offers commission-free trading for stocks, options, and ETFs. The platform integrates seamlessly with Chase accounts and provides in-person customer support at Chase branches. However, it has a low-interest rate on uninvested cash and limited investment tools and research.

Interactive Brokers

Interactive Brokers is a well-established brokerage firm that provides access to a wide range of asset classes, including stocks, bonds, commodities, derivatives, mutual funds, and cryptocurrencies. It introduced crypto trading in 2021, offering Bitcoin and Ethereum trading. Interactive Brokers stands out for its advanced trading platform and low fees, making it a good option for skilled, active traders. However, its website can be challenging to navigate for beginners due to the extensive use of industry jargon.

Money transfer apps

Wise

Wise is a money transfer app that allows users to send money to 160 countries with relatively low transfer fees. It also has the highest transfer limits among apps, allowing users to send up to $1 million per transfer by wire or $50,000 by ACH. Wise is a good option for people who want to send money internationally or make large transfers. It also offers a debit card that can be added to a digital wallet and used to make online and in-store purchases.

Venmo

Venmo is a popular money transfer app with over 60 million users. It is a good option for sending money to friends and family in the US, as it offers instant transfers and no fees when sending from a bank account, debit card, or Venmo wallet. It also supports crypto buying, selling, holding, and transferring. However, it does not support international transfers and has a relatively high credit card transfer fee of 3%.

WorldRemit

WorldRemit allows users to send money to more than 130 countries in multiple currencies. It charges a low, fixed fee for international bank transfers, but has more limited countries, payment methods, and payment receipt options compared to Wise. WorldRemit also offers a wallet feature, but it is only available in a small number of countries.

Zelle

Zelle is a good option for low fees and domestic bank-to-bank transfers. It is integrated into more than 2,000 banks and credit unions, allowing users to send money instantly for no cost. However, Zelle does not support multiple currencies or international transfers, and it does not support credit card payments.

Cash App

Cash App is a money transfer app that offers free domestic transfers from Cash accounts or debit cards. It also provides additional banking and investing services, such as the ability to buy, sell, send, and receive Bitcoin, and buy and sell stocks commission-free. However, Cash App has relatively high credit card transfer fees of 3% and does not support international transfers outside of the US and the UK.

PayPal

PayPal allows users to make free domestic transfers from their PayPal balance or bank account. It also supports international transfers, but with higher fees. PayPal is widely accepted and has well-rated mobile apps, but it has poor customer ratings. It is a good option for those who want a global leader in payments with a wide range of features.

Meta Pay

Meta Pay makes it easy to send and receive money through Facebook Messenger and, in some cases, WhatsApp. It is a convenient option for people who use Messenger or WhatsApp and want to send money instantly without fees. However, it has relatively low transaction limits and does not support international transfers for US residents.

Apple Cash

Apple Cash is built into iPhones as part of Apple Wallet, allowing users to send and receive money domestically through iPhone messages. It offers instant, free transfers and high transfer limits, but it is limited to iOS devices and does not support international transfers or credit card transfers.

Bitcoin ATMs

To use a Bitcoin ATM, customers insert cash or a debit card to exchange their traditional currency for Bitcoin. Some Bitcoin ATMs are bidirectional, meaning users can also use them to sell Bitcoin. In this case, the user enters the amount of Bitcoin they would like to exchange for cash and then collects the cash dispensed by the machine.

There are tens of thousands of Bitcoin ATMs worldwide, with the majority located in the United States. The two largest Bitcoin ATM networks are Coinhub and Coinme. Coinhub has over 2,000 machine locations nationwide and offers instant registration and purchases, with transactions completed in under 2 minutes. Coinme, the first licensed Bitcoin ATM operator in the US, powers thousands of locations around the country.

Using a Bitcoin ATM is a quick and easy way to buy and sell Bitcoin. However, it is important to be aware of the high transaction fees that some Bitcoin ATMs charge, as well as the risk of scams and fraud due to the anonymous and decentralised nature of Bitcoin transactions.

Bitcoin ETFs

A Bitcoin exchange-traded fund (ETF) is a financial product that allows investors to gain exposure to the price movements of Bitcoin without actually holding the asset itself. Shares of a Bitcoin ETF are traded on traditional stock exchanges, making it easier for investors to participate in the cryptocurrency market.

There are two main types of Bitcoin ETFs: spot and futures. A spot Bitcoin ETF aims to provide investors with direct exposure to the current market price of Bitcoin. In this context, "spot" refers to the immediate or current price of the underlying asset, which is Bitcoin itself. A spot Bitcoin ETF typically holds actual Bitcoin as its underlying asset and attempts to track the real-time price of Bitcoin as closely as possible.

On the other hand, futures Bitcoin ETFs do not hold actual Bitcoin. Instead, they use Bitcoin futures contracts to gain exposure to the cryptocurrency. A Bitcoin futures contract allows investors to speculate and bet on the future price of the asset.

The Securities and Exchange Commission (SEC) approved the first Bitcoin futures ETFs in 2021 and the first spot Bitcoin ETFs in January 2024. The approval of spot Bitcoin ETFs was a long-awaited decision that is expected to make it even easier for traditional investors to gain access to Bitcoin.

The demand for a Bitcoin ETF primarily stems from the desire for greater accessibility, convenience, and exposure to Bitcoin as an asset class. Here are some of the key reasons why people are interested in Bitcoin ETFs:

• Ease of access: ETFs are traded on traditional stock exchanges, making it easier for mainstream investors to buy, hold, and trade Bitcoin-related assets through their existing brokerage accounts.
• Regulatory oversight: A Bitcoin ETF would be subject to regulatory oversight, providing investors with a level of protection and transparency.
• Portfolio diversification: Investors view Bitcoin as a potential diversification tool, and a Bitcoin ETF allows them to incorporate the cryptocurrency into their investment portfolios without directly holding and managing digital assets.
• Mainstream acceptance: The introduction of a Bitcoin ETF can be seen as a sign of mainstream acceptance and integration of cryptocurrencies into traditional financial systems.

Frequently asked questions