Strategic Bitcoin Investment: A Guide For Businesses

Investing in Bitcoin can be a risky move, so it's important to understand the process and the market before you begin. There are several ways to buy Bitcoin, including through a cryptocurrency exchange, a traditional stockbroker, a money transfer app, a Bitcoin ATM, or a Bitcoin exchange-traded fund (ETF).

If you're a company looking to invest in Bitcoin, you'll need to open a brokerage or cryptocurrency account. You'll then need to fund your account with fiat currency, which can be done through a bank transfer or by using a credit or debit card. Once your account is funded, you can place a purchase order for Bitcoin.

It's important to note that Bitcoin is a highly volatile asset, and its value can fluctuate significantly. As such, it's crucial to understand the risks involved and only invest what you can afford to lose. Additionally, it's essential to prioritize the security of your digital assets by utilizing secure storage methods, such as cold wallets or trusted third-party hot wallets.

Choosing a crypto-trading service or venue

There are several factors to consider when choosing a crypto-trading service or venue. Here are some key considerations:

• Supported assets: If you plan to invest in cryptocurrencies beyond Bitcoin, check the list of supported assets offered by the exchange. Some platforms only support a limited number of cryptocurrencies, while others allow trading in hundreds of different coins and tokens.
• Payment methods: Crypto exchanges typically offer various ways to fund your account or purchase cryptocurrencies directly. While most exchanges support wire transfers, some platforms also accept credit cards, debit cards, and other digital payment options.
• Fees: Crypto exchanges typically charge trading fees, withdrawal fees, and other transaction fees. Compare the fee structures of different exchanges to find the most cost-effective option for your investment needs.
• Security: Crypto exchanges are often targeted by hackers due to the nature of their business. Therefore, it is crucial to select an exchange with robust security measures, such as two-factor authentication, identity verification, and SOC-2 certification.
• Customer service: If you are new to crypto investing, consider choosing an exchange with excellent customer support. Look for exchanges that offer multiple channels of communication, such as live chat, email, and phone support.
• Reputation: Research the reputation of the exchange before signing up. Read customer reviews, check the exchange's history, and stay updated with the latest news to ensure the platform is reliable and trustworthy.
• Regulation: With the recent collapse of major crypto exchanges, regulatory compliance has become increasingly important. Ensure that the exchange complies with financial regulations and is overseen by governmental authorities, such as the U.S. Securities and Exchange Commission (SEC).
• Coinbase: Coinbase is a beginner-friendly exchange with a user-friendly interface. It offers a wide range of supported cryptocurrencies, strong security measures, and advanced trading options.
• Kraken: Kraken is a reputable exchange with low fees and a large number of supported cryptocurrencies. It provides advanced order types and supports margin and futures trading.
• Crypto.com: Crypto.com offers a comprehensive ecosystem with its own blockchain, native token, crypto visa card, and yield-generating products. It also has an impressive mobile app that provides a wide range of features for on-the-go trading.
• Gemini: Gemini stands out for its strong emphasis on security and compliance. It offers insurance for user funds, two-factor authentication, and SOC 2-certification. Gemini also supports a wide range of digital currencies and tokens.
• Bisq: Bisq is a decentralized, KYC-free exchange that allows users to buy and sell Bitcoin and other cryptocurrencies privately and securely. It supports various payment methods and is ideal for experienced crypto investors who value privacy and decentralization.

Connecting your exchange to a payment option

Choose a Payment Gateway

Firstly, you'll need to select a crypto payment gateway that suits your business needs. A payment gateway is a service that facilitates cryptocurrency transactions for merchants. One popular option is CoinGate, which allows you to accept various cryptocurrencies, including Bitcoin. It offers features such as crypto-to-fiat payouts to bank accounts, email and direct link billing, and an automated cryptocurrency payment gateway that can be easily integrated into your website or online store.

Set Up Your Merchant Account

To start accepting cryptocurrency payments, you'll need to create a merchant account with your chosen payment gateway. This usually involves providing basic information about your business and may require you to meet certain know-your-customer (KYC) requirements. Make sure to review the fees, transaction limits, and other terms associated with the merchant account before signing up.

Integrate the Payment Gateway into Your Platform

Once your merchant account is set up, you can integrate the payment gateway into your website or online store. This typically involves following the payment gateway's instructions for API integration or using e-commerce plugins and extensions, such as those offered by CoinGate for platforms like Wix, WooCommerce, and WHMCS. This integration will enable you to accept cryptocurrency payments seamlessly.

Test and Launch

Before going live, be sure to test the payment gateway integration thoroughly. Make test transactions to ensure that the entire process, from checkout to payment confirmation, works smoothly and securely. Once you're satisfied with the results, you can launch your platform and start accepting cryptocurrency payments from your customers.

Explore Additional Features

Many payment gateways offer additional features that can enhance your platform. For example, CoinGate provides the ability to refund customers in crypto, build a subscriber list, and accept payments from Binance Pay users. Explore these features to maximize the potential of your payment gateway and provide a better experience for your customers.

By following these steps, you'll be able to connect your exchange to a payment option effectively, allowing your business to seamlessly accept and manage cryptocurrency transactions.

Placing an order

Once you have chosen a cryptocurrency exchange or broker, you can place an order for Bitcoin.

Cryptocurrency exchanges have evolved to mimic stock brokerage platforms, offering several order types and ways to invest. Almost all crypto exchanges offer both market and limit orders, and some also provide stop-loss orders.

For example, Kraken offers the most order types, including market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders.

Additionally, some exchanges offer ways to set up recurring investments, allowing clients to dollar-cost average into their investments of choice. For instance, Coinbase lets users set recurring purchases for every day, week, or month.

When placing an order, you will need to enter the amount of Bitcoin (BTC) you wish to purchase in the exchange's trading tool. Ensure you have enough of your local currency to complete the transaction.

Bitcoin transactions can occur instantly or take some time to process, depending on the exchange. Standard Bitcoin transactions require four confirmations and take about 40 minutes to complete, according to Kraken. However, you may be able to pay higher transaction fees for faster processing times on some exchanges.

After placing your order, you officially become a Bitcoin owner.

Safe storage

Understanding Wallets

Before delving into the specific types of wallets, it's important to understand the two broad categories: custodial and non-custodial wallets. Custodial wallets involve a third party managing the private keys, while non-custodial wallets give users full ownership and control of their private keys. Another important distinction is between hot and cold wallets. Hot wallets are connected to the internet, making them more susceptible to hacks but also more convenient for frequent transactions. Cold wallets, on the other hand, are offline and considered much safer for storing large amounts of Bitcoin.

Types of Wallets

Hardware Wallets (Cold Wallets)

Hardware wallets, such as Ledger Nano X or Trezor Model T, are considered one of the safest options for storing Bitcoin. These are typically USB-type drives that connect to your device. They allow you to store your private keys offline, keeping them out of the reach of hackers. While hardware wallets can be a bit confusing for less technical users and may cost around $100 on average, they offer a high degree of security.

Mobile Wallets (Hot Wallets)

Mobile wallets are applications installed on your smartphone, making them convenient for sending or paying with Bitcoin. These are usually self-custodial, giving you full control of your private keys. However, they are less secure than cold wallets and are not recommended for storing large amounts of Bitcoin due to the potential for loss of funds if the device is not properly secured or backed up.

Paper Wallets (Cold Wallets)

Paper wallets were one of the earliest forms of cold storage for Bitcoin. They involve printing out your private and public keys. While paper wallets provide an affordable cold storage option, they have a high risk of user error or physical damage. If someone gains access to the paper, they can easily steal your Bitcoin.

Exchange Wallets (Hot Wallets)

When you buy Bitcoin on an exchange, it typically goes into an exchange wallet. These are custodial hot wallets where the exchange holds the private keys for you. While convenient and supporting a wide array of assets, exchange wallets have the drawback of lacking total control over your private keys and being more vulnerable to hacks and theft.

Recommendations for Companies

For companies investing in Bitcoin, a combination of hot and cold wallets can provide a good balance between security and usability. Here are some recommendations:

• Use hardware wallets for long-term cold storage of a significant portion of your Bitcoin holdings.
• Utilize mobile wallets for spending and transacting with smaller amounts of Bitcoin on a regular basis.
• Take advantage of exchange wallets for trading niche crypto coins and tokens, as they provide a convenient platform for buying, selling, and exchanging various cryptocurrencies.

General Security Precautions

Regardless of the type of wallet you choose, there are some general security precautions you should follow:

• Always back up your wallet and create a recovery seed phrase to prevent permanent loss of access to your Bitcoin.
• Keep your software and operating systems up to date to patch security vulnerabilities.
• Use strong passwords and enable two-factor authentication whenever possible to add an extra layer of security.
• Be cautious when choosing an exchange, prioritizing those with robust security features and positive reviews regarding their safety protocols.

Understanding the risks

Bitcoin is a relatively new and risky asset. While it has been around for over a decade, it is still a young technology, and the market is unpredictable. The value of Bitcoin is highly volatile and subject to sharp market swings, so there is no guarantee of a return on your investment. The currency lost about half its value over three months in the first half of 2021, and its price movements can sometimes be prone to movements of thousands of dollars.

The market is also constantly rippling back and forth, and with such fluctuations, there is no telling if you will get a return on your investment. The price of Bitcoin is constantly changing, and with such an unpredictable market, there is no telling if you will get a return on your investment.

Bitcoin is also susceptible to government actions and could be made illegal or severely limited, as happened in China. There is also a lack of regulation and taxation around Bitcoin, which could lead to problems if it competes with government currency.

As a technology-based currency, Bitcoin is also vulnerable to cyberattacks, hacking, and fraud. There is no way to retrieve lost or stolen Bitcoins, and exchanges are more likely to be hacked. Additionally, Bitcoin owners can lose access to their currency if they forget or misplace their private keys.

Another risk to consider is that Bitcoin may be a step towards a new monetary exchange, but it is not widely accepted or recognised as a legitimate exchange. There are few companies that accept it as a viable form of currency, and it has been referred to as a Ponzi scheme.

Finally, with a constantly shifting market, no regulation, and zero physical collateral, investors can end up losing everything they invest. As with any investment, particularly one as new and volatile as Bitcoin, investors should carefully consider if Bitcoin is the right investment for them.

Frequently asked questions