Stock Market Bitcoin: A Guide To Investing

Investing in Bitcoin can be a daunting task for those who are used to traditional financial products. However, there are several ways to buy Bitcoin and other cryptocurrencies, including through stockbrokers, dedicated exchanges, and even in-app purchases. Here are the steps to help you get started:

1. Choose a Crypto-Trading Service or Venue: Select a cryptocurrency exchange that offers a range of features, cryptocurrencies for trading, and consumer protections. Popular exchanges in the US include Coinbase, Kraken, Gemini, and Binance.

2. Connect Your Exchange to a Payment Option: Most exchanges allow you to connect your bank account directly or link a debit or credit card. Keep in mind that using a credit card for cryptocurrency purchases can incur additional processing fees and interest charges.

3. Place an Order: Cryptocurrency exchanges offer various order types and ways to invest, including market and limit orders. Decide on the amount of Bitcoin you want to purchase, keeping in mind that exchanges often allow you to buy fractions of a single coin.

4. Safe Storage: It is essential to store your Bitcoin securely in a digital wallet. You can choose between a hot wallet, which is connected to the internet, or a cold wallet, which is an offline storage device. Consider the level of security and convenience offered by each type of wallet before making a decision.

Before investing in Bitcoin, it is important to understand the risks involved. Bitcoin is a highly volatile asset, and its value can fluctuate significantly over short periods. Additionally, there are regulatory, security, insurance, and fraud risks associated with investing in cryptocurrencies. It is crucial to do your research, carefully evaluate your risk tolerance, and consult with a financial professional before making any investment decisions.

Choose a crypto-trading service or venue

There are several crypto-trading services and venues, or cryptocurrency exchanges, to choose from. These include:

• Kraken: One of the oldest crypto exchanges, founded in 2011. It offers a solid range of coins with competitive trading fees and is one of the few exchanges in the U.S. to offer margin trading and advanced order types. Kraken has two platforms: the basic Kraken platform and Kraken Pro, which offers volume discounts and lower fees for advanced users. Kraken is not available in all 50 U.S. states and has limited account funding options.
• Coinbase: A beginner-friendly exchange with an easy-to-use interface and strong security features. It offers over 200 tradable cryptocurrencies and provides a custodial wallet option for new investors and a non-custodial wallet for experienced users. Coinbase is available in 100+ countries but is not supported in all 50 U.S. states. It has been charged by the SEC for allegedly operating as an unregistered securities exchange.
• Crypto.com: Offers an extensive ecosystem with its own blockchain, native token, crypto visa card, and yield-generating products. It supports over 350 cryptocurrencies and provides a highly-rated mobile app. Crypto.com offers trading fee discounts and crypto rewards for users who hold high balances of its native token, CRO. However, customer support is lacking, and lower-volume traders incur higher fees.
• Gemini: Available in all 50 U.S. states and highly focused on security and compliance. Gemini offers a professional-grade trading dashboard and supports over 70 digital currencies and tokens. It provides a cryptocurrency reward card and allows users to pay for goods and services with crypto. The platform has a convoluted fee structure, with high fees on many trades, and supports fewer cryptocurrencies than some competitors.
• Binance: Founded in 2017 with a strong focus on altcoins. It is available in 180+ countries and allows users to buy, sell, and store over 1,500 cryptocurrencies. Binance suffered a major hacking incident in 2020 and has received poor customer feedback regarding withdrawal issues and transparency. It is not licensed in the U.S.
• Robinhood: A mainstream investment broker that was one of the first to offer Bitcoin trading. Robinhood charges no fees for crypto trades and is available in most U.S. states. However, it does not allow users to transfer crypto holdings to an external wallet.
• Webull, TradeStation, and Fidelity: Traditional brokers that offer access to Bitcoin and other cryptocurrencies.
• PayPal, Venmo, and Cash App: Peer-to-peer money transfer apps that allow users to purchase, store, send, and sell Bitcoin directly within the apps.

When choosing a crypto-trading service or venue, it is important to consider factors such as security, fees, the range of cryptocurrencies offered, customer service, and regulatory compliance. Additionally, some exchanges may be more suitable for beginners, while others cater to more advanced traders.

Connect your exchange to a payment option

Once you've chosen a crypto exchange, you'll need to connect it to a payment method. This is a crucial step in the process of investing in Bitcoin. Here's what you need to know:

Types of Payment Options

At most exchanges, you can connect your bank account directly or link a debit or credit card. Valid methods of Bitcoin payment include bank accounts, debit cards, and credit cards. It's important to note that fees vary for deposits via these different methods, and exchanges also charge fees per transaction. Additionally, using a credit card to purchase cryptocurrency can result in higher overall costs due to the combination of the cryptocurrency price volatility and the credit card's interest charges.

Personal Identification

Depending on the exchange, you may be required to provide personal identification information. This could include a picture of your driver's license or Social Security card, as well as details about your employer and source of funds. The process is similar to setting up a typical brokerage account.

Payment Services

There are payment services available, such as BitPay, that allow you to pay with crypto and make bill payments. You can also use these services to buy gift cards from various brands and retailers. Additionally, payment processors like PayPal can be used to purchase Bitcoin directly or connect your account to a debit card or bank account.

Bitcoin ATMs

Another option for connecting your exchange to a payment option is through Bitcoin ATMs. These machines allow you to insert cash to purchase Bitcoin, which is then transferred to your online wallet. However, it's important to be aware of the associated fees, as Bitcoin ATM purchases typically have a higher fee compared to other options.

Peer-to-Peer Exchanges

Peer-to-peer (P2P) exchanges provide a direct connection between users. After creating an account, you can post requests to buy or sell Bitcoin, including payment method and price information. While these exchanges don't offer the same level of anonymity as decentralised exchanges, they provide an opportunity to shop around for the best deal.

Crypto Debit Cards

A crypto debit card is a convenient way to spend your cryptocurrency holdings. By loading your card with crypto, you can use it like a traditional debit card for online or in-person purchases. Crypto debit cards, such as the BitPay Card, are widely accepted and offer features like cashback rewards.

Security Considerations

When connecting your exchange to a payment option, it's crucial to prioritise security. Ensure that you only use trusted and established wallet services and payment processors. Additionally, always double-check wallet addresses and never share your private key or recovery phrase.

Now that you've learned about connecting your exchange to a payment option, you're one step closer to investing in Bitcoin through the stock market. Remember to carefully evaluate the different payment methods and choose the one that best suits your needs and security preferences.

Place an order

Once you have chosen a crypto-trading service or venue, connected your exchange to a payment option, and set up a Bitcoin wallet, you can place your order.

Cryptocurrency exchanges offer several order types and ways to invest. Almost all crypto exchanges offer both market and limit orders, and some also provide stop-loss orders. A market order buys or sells shares at the market price until your order is filled. You put in the order and will get the next available price. A limit order, on the other hand, specifies the price you're willing to pay, though there is no guarantee that some or all of the order will trade if you haven't named a price that other traders want.

Kraken offers the most order types, which include market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders. Exchanges also offer ways to set up recurring investments, allowing clients to dollar-cost average into their investments of choice. For example, Coinbase lets users set recurring purchases for every day, week, or month.

When placing your order, it is important to consider your risk tolerance and investment strategy. Investing in Bitcoin is very risky, and it is important to carefully determine your risk tolerance and review your investment strategy before purchasing any Bitcoin.

Store your Bitcoin in a hot or cold wallet

Once you've decided to invest in Bitcoin, you'll need to consider how to store it. You can store Bitcoin in a hot wallet or a cold wallet.

Hot Wallets

Hot wallets are digital cryptocurrency wallets that are connected to the internet. They are often provided by cryptocurrency exchanges, but there are also third-party hot wallet providers. Hot wallets are generally free and can hold a wide variety of cryptocurrencies. They are convenient and easy to access, making them ideal for day trading. However, they are vulnerable to hacking and other security threats.

Cold Wallets

Cold wallets, on the other hand, are physical devices that store cryptocurrencies offline. They are considered much more secure than hot wallets since they are not connected to the internet. Cold wallets are typically small, portable devices that resemble USB flash drives. They are more expensive than hot wallets, often costing around $100, and may only support a limited variety of cryptocurrencies. Cold wallets are ideal for long-term storage and for investors who want to hold large amounts of cryptocurrency.

When choosing between a hot wallet and a cold wallet, consider your security needs, the amount of cryptocurrency you plan to store, and how actively you plan to trade. If you prioritise security and plan to hold large amounts of Bitcoin, a cold wallet is likely the best option. If you prioritise convenience and ease of access for trading, a hot wallet may be more suitable. Additionally, you can use a combination of hot and cold wallets to balance security and accessibility.

Manage your Bitcoin investments

Once you've purchased your Bitcoin, you'll need to decide how to manage your investment. Here are some options:

• Use your Bitcoin to make online transactions.
• Hold your Bitcoin for the long term, hoping that it will appreciate in value.
• Perform day trading with your Bitcoin, buying and selling with other Bitcoin owners on a cryptocurrency exchange.
• Consider applying the Stash Way, a philosophy focused on regular investing, diversification, and investing for the long term.

It's important to keep in mind that Bitcoin is a very high-risk investment due to its volatility. That means that its value may rise or fall dramatically in a very short period, even within a few hours or days. As such, it's crucial to carefully assess your risk tolerance and investment strategy before purchasing Bitcoin.

Frequently asked questions