Smart Ways To Invest Your $100 In Bitcoin Monthly

Bitcoin is a cryptocurrency that has become increasingly popular since its introduction in 2009. It is a virtual currency that acts as money and a form of payment outside the control of any one person, group, or entity. This removes the need for trusted third-party involvement (e.g. a mint or bank) in financial transactions. Due to its popularity, many people are interested in investing in Bitcoin, with some even mortgaging their homes to buy the cryptocurrency. In this article, we will explore the topic of investing $100 a month into Bitcoin, including the risks and potential rewards.

Choose a Bitcoin exchange or brokerage

When choosing a Bitcoin exchange or brokerage, it's important to understand the differences between the two. A cryptocurrency broker is a firm or individual that acts as an intermediary between buyers and sellers of cryptocurrencies. They set their own prices and fees and provide a platform for users to buy or sell crypto. On the other hand, a cryptocurrency exchange is an online platform that allows buyers and sellers to trade cryptocurrencies directly with each other based on current market prices. While exchanges typically act as middlemen and charge transaction fees, they do not set the prices.

There are several factors to consider when choosing between a broker and an exchange:

Sign-up and Verification

Signing up for a cryptocurrency exchange usually involves providing basic information such as an email address and creating a password. After signing up, you will need to go through a verification process to enable you to deposit and withdraw funds from your account. This process can take anywhere from a few hours to several days. Signing up with a crypto broker is also straightforward, but account verification is compulsory before you can start trading. The verification process is generally quicker and can sometimes be done in as little as 30 minutes.

Deposits and Withdrawals

Depositing fiat money onto a cryptocurrency exchange can be challenging and often comes with high fees and commissions. Withdrawing funds in fiat currencies can also be time-consuming, and some banks may refuse to accept funds from crypto exchanges. In contrast, depositing with a crypto broker is typically much easier, with various payment methods available, including debit/credit cards and e-wallets. Withdrawing funds through a broker may also be more cost-effective, with lower fees than those charged by exchanges.

Trading

Trading on a cryptocurrency exchange involves choosing your trading instrument, opening a trade, and monitoring the price chart. While exchanges offer a range of order types, their features may be more limited compared to broker platforms. Crypto brokers often provide a wider range of tools and extensions, such as technical analysis tools, to assist with your trading strategies and risk management.

Safety and Security

Crypto exchanges have been targeted by hackers in the past, resulting in significant losses. While reputable exchanges prioritise security, the lack of regulation in the industry makes trading cryptocurrencies risky. In contrast, crypto brokers are regulated by financial authorities, providing an additional level of protection for your investment. Regulated brokers are subject to audits, and clients can file complaints if the broker breaches any rules.

Suitability for Beginners

Crypto brokers are generally considered more suitable for beginners as they offer an easier way to buy and sell cryptocurrencies. The broker sets the prices, eliminating the need for users to closely monitor market movements. Additionally, brokers often provide educational resources and market analysis to help new traders make informed decisions. Exchanges, on the other hand, can be complex and overwhelming for those new to crypto trading.

In summary, when choosing between a Bitcoin exchange and brokerage, consider factors such as ease of use, fees, security, and your level of trading experience. Remember to research the companies or exchanges you intend to use, as cryptocurrency trading carries inherent risks.

Open an account

The first step to investing in Bitcoin is to open an account with a cryptocurrency exchange or brokerage. Some popular places to buy Bitcoin include Coinbase, Robinhood, eToro, FTX, Gemini, and BlockFi. When choosing an exchange, take note of the fees and the reputation of the platform. It is also important to check if the exchange supports transferring Bitcoin out of the brokerage account, as not all platforms offer this feature.

Once you have selected the exchange that best suits your needs, it's time to open your account. For those in the United States, this typically involves providing basic contact information and valid identification to meet the exchange's know-your-customer (KYC) requirements. The specific information required may vary depending on the exchange, but it is generally similar to opening any typical brokerage or bank account.

After your account is opened, you will need to fund it. The fastest and cheapest way is usually through an online funds transfer from your bank account. Depending on the exchange, you may also have the option to use payment apps like PayPal. Keep in mind that some exchanges allow you to buy cryptocurrency immediately, while others may require you to wait for the funds to clear before making a purchase.

Fund your account

Once your account is open, it’s time to add funds. The fastest and cheapest way is usually with an online funds transfer from a connected bank account. Depending on your chosen exchange, you may also be able to use payment apps like PayPal.

Some cryptocurrency exchanges give you instant access to trade, while others may require you to wait for funds to clear before buying. If you can buy cryptocurrency immediately, you may have to wait until the deposit clears before you can withdraw funds from the account.

When you think the moment is right, click the buy button to enter an order. The exchange will turn your dollars into Bitcoin, stored in the same cryptocurrency account, similar to holding stocks in a brokerage account. Once your trade executes, you are officially a Bitcoin owner.

If you move forward and make a Bitcoin purchase, you can choose between storing your Bitcoin in the same exchange account you used to buy the currency or external software, hardware, or paper cryptocurrency wallet. Offline storage with a hardware wallet, known as cold storage, is considered the safest and most secure place to keep your Bitcoin.

Understand the Risks of Investing in Bitcoin

As mentioned, Bitcoin is a relatively new and risky asset. While it’s possible that Bitcoin could double, triple, or even 10x in value over a short period of time, it could also drop to zero. Bitcoin is also susceptible to government actions and could be made illegal or severely limited, as recently happened in China. With Bitcoin or any other cryptocurrency, only invest what you can afford to lose.

Bitcoin is also susceptible to certain forms of hacking, which is why it’s important to keep your digital currency accounts extremely secure. If someone gets hold of your Bitcoin wallet address and password (private key), they can take your Bitcoin and you likely won’t have any way to recoup losses.

If you keep your Bitcoin offline, it’s essential to keep your access information secure and available, as losing your wallet information could lock you out of your currency.

Enter a purchase order

Once you have chosen your brokerage or exchange, opened your account, and funded it, you can enter a purchase order.

When you think the moment is right, click the buy button to enter an order. The exchange will turn your dollars into Bitcoin, stored in the same cryptocurrency account, similar to holding stocks in a brokerage account. Once your trade executes, you are officially a Bitcoin owner.

To purchase Bitcoin, enter the amount of Bitcoin (BTC) in your exchange's trading tool. You will need enough of your local currency for the transaction to go through once you click the button to submit.

Bitcoin transactions occur instantly on some exchanges, while others may process a transaction on the Bitcoin blockchain that takes some time to complete. Standard Bitcoin transactions require four confirmations and take about 40 minutes to complete, according to the exchange Kraken. However, you can choose to pay higher transaction fees for faster processing times with some exchanges.

If you decide to invest in Bitcoin, make sure you understand the risks involved. Bitcoin is a relatively new and risky asset. While it is possible that Bitcoin could double, triple, or even 10x in value over a short period of time, it could also drop to zero. Bitcoin is susceptible to government actions and could be made illegal or severely limited, as recently happened in China. With Bitcoin or any other cryptocurrency, only invest what you can afford to lose.

Understand the risks

Investing in Bitcoin and other cryptocurrencies is considered a risky endeavour due to the volatility of the market and the many uncertainties surrounding the new technology. Here are some of the key risks that you should be aware of before investing $100 a month into Bitcoin:

Volatile and Fluctuating Market

The price of Bitcoin is known to fluctuate wildly and is extremely unpredictable. For example, in the span of a week in December 2017, the price of Bitcoin topped $20,000, then fell to below $14,626. With such volatility, there is no guarantee of a return on your investment, and you could face massive losses.

Cyberattacks and Fraud

As a technology-based investment, Bitcoin is susceptible to cyberattacks and hacking. There have been many reports of buyers losing their investments due to exchanges being hacked, and even smart wallets do not offer complete protection. Additionally, the rise in popularity of Bitcoin has led to the emergence of fraudulent exchanges, where unsuspecting investors are tricked out of their money.

Regulatory Uncertainty

The regulatory environment surrounding Bitcoin and cryptocurrencies is still evolving. Currently, the market operates with little to no major regulations, and the tax implications of investing in Bitcoin are unclear. For example, in the US, the IRS has defined cryptocurrencies as property rather than currencies, subjecting investors to capital gains tax laws. However, the lack of clear and consistent regulations across jurisdictions creates uncertainty and potential legal risks for investors.

Technology Reliance and Digital Security

Bitcoin is entirely reliant on technology, and any issues with the underlying technology can impact the value of your investment. Digital security is a significant concern, and while new types of wallets are constantly being released, investors have not been able to fully eliminate the legal risks associated with owning cryptocurrencies.

Limited Acceptance and Potential Obsolescence

Despite its growing popularity, Bitcoin is still not widely accepted as a currency, and there are few companies that accept it as a form of payment. There is also a risk that Bitcoin could become obsolete or lose its value in the future as the market evolves and new technologies emerge.

In conclusion, investing $100 a month into Bitcoin can be a risky proposition due to the volatile nature of the cryptocurrency market, the regulatory uncertainties, the reliance on technology, and the potential for fraud and cyberattacks. It is essential to carefully consider these risks and do your own research before deciding whether to invest in Bitcoin. Small investments and a long-term perspective may be a more prudent approach to this risky but potentially rewarding investment opportunity.

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