Fractional Crypto Investing: Getting Started With Small Amounts

Cryptocurrency is a hot topic right now, with Bitcoin leading the way as the most popular and dominant force in the market. Investing in Bitcoin can seem intimidating, especially when you see the price of a single Bitcoin, which is currently over $28,000. However, it is important to know that you don't have to buy a whole Bitcoin to enter the world of cryptocurrency.

Bitcoin and other cryptocurrencies can be bought in fractional amounts, making it much more accessible to those who want to invest without risking too much. These smaller units are called Satoshis, and each Bitcoin is divided into 100 million Satoshis. This means you can buy as little as 0.00000001 Bitcoin, or $25 worth of Bitcoin, for example.

There are several trusted ways to buy fractions of Bitcoin and other cryptocurrencies. Major cryptocurrency exchanges such as Coinbase, Gemini, Kraken, and Crypto.com, as well as brokerage firms like Robinhood, allow you to purchase fractional shares. Additionally, peer-to-peer platforms and Bitcoin ATMs provide alternative options for buying fractional amounts of Bitcoin.

Before investing, it is crucial to understand the risks and do your research, as the cryptocurrency market is very volatile.

Fractional Bitcoin ownership

Bitcoin is divisible into 100 million subunits, known as Satoshis, named after Bitcoin's enigmatic founder, Satoshi Nakamoto. This divisibility means that you can buy fractions of Bitcoin, rather than needing to pay for a whole coin. For example, if the price of Bitcoin is $50,000, you can invest $1,000 and own 0.02 Bitcoin. As the value of Bitcoin increases, so does the value of your fractional share.

Fractional ownership of Bitcoin is a great way to get started with cryptocurrency investment, allowing you to "test the waters" without taking on too much risk. You can buy fractional shares of Bitcoin through major cryptocurrency exchanges or brokerage firms, such as Coinbase or Robinhood.

There are many ways to buy Bitcoin, including through traditional stockbrokers, money transfer apps, and Bitcoin ATMs. However, one of the most popular methods is through a cryptocurrency exchange. Exchanges such as Gemini, Kraken, Coinbase, and Crypto.com offer dozens of cryptocurrency options and allow you to purchase fractional shares.

It's important to remember that Bitcoin is a volatile investment, and it's recommended that you don't invest more than you can afford to lose. Always do your research and understand the risks and potential rewards before investing in any cryptocurrency.

Bitcoin wallets

If you're looking to invest in Bitcoin, you'll need to choose a Bitcoin wallet to store your cryptocurrency. There are several options available, each with its own pros and cons. Here's a detailed guide to help you choose the right Bitcoin wallet:

Types of Bitcoin Wallets:

Before selecting a specific wallet, it's important to understand the two main types of Bitcoin wallets: hot wallets and cold wallets.

• Hot Wallet: A hot wallet is connected to the internet, often in the form of an online platform or a mobile app. Hot wallets are typically free to use and offer convenient features such as trading or staking. However, they may be more vulnerable to hacking attempts as your Bitcoin is stored online. Examples of hot wallets include online platforms like Coinbase and mobile apps like Trust Wallet.
• Cold Wallet: A cold wallet is a physical device that is not connected to the internet. Cold wallets are considered more secure since they are offline, but they usually come with a cost. If you lose the device, recovering your Bitcoin could be challenging. Examples of cold wallets include hardware wallets like Ledger and Trezor.

Factors to Consider:

When choosing a Bitcoin wallet, consider the following factors:

• Security: The level of security offered by different wallets varies. Look for features like two-factor authentication, encryption, and backup options.
• Supported Cryptocurrencies: Some wallets support a wide range of cryptocurrencies, while others are designed for specific coins like Bitcoin. Ensure the wallet you choose supports the cryptocurrencies you plan to invest in.
• Ease of Use: Consider how user-friendly the wallet is, especially if you're new to cryptocurrency. Look for wallets with intuitive interfaces and good customer support.
• Accessibility: Decide if you want a wallet that is always connected (hot wallet) or one that is offline (cold wallet). Also, consider whether you want a wallet that is accessible on multiple devices, such as your phone and computer.
• Fees: Different wallets have varying fee structures for transactions and additional services. Compare the fees to find the most cost-effective option for your needs.
• Additional Features: Some wallets offer staking, rewards programs, or integrations with exchanges. Choose a wallet that aligns with your investment goals and provides the features you need.

Popular Bitcoin Wallet Options:

• Crypto.com DeFi Wallet: This wallet is designed for decentralized finance (DeFi) and offers support for over 1,000 cryptocurrencies. It has a mobile app, a browser extension, and a desktop app that integrates with Ledger hardware wallets.
• Zengo Wallet: Zengo is a next-generation wallet that uses multi-party computation (MPC) cryptography to secure assets. It claims to have a strong security track record, but it currently lacks support for some popular cryptocurrencies.
• Coinbase Wallet: Coinbase is a well-known crypto exchange, and its separate wallet product allows users to store cryptocurrency themselves. The wallet easily integrates with the Coinbase exchange, making it a good choice for beginners.
• Trust Wallet: Trust Wallet is the official wallet of Binance, a leading digital asset firm. It supports over 10 million digital assets and integrates with Binance for buying, selling, and trading.
• Ledger: Ledger is a popular hardware wallet that offers strong security features, a mobile app, and educational resources. It integrates with various software wallets and supports over 5,500 cryptocurrencies.
• Trezor: Trezor offers high-end hardware wallets with a touch screen interface. It integrates with software products like Exodus and provides features like staking and crypto purchases.

Remember to do your own research and choose a wallet that suits your specific needs and investment goals. Always prioritize security and consider diversifying your storage methods to minimize risk.

Cryptocurrency exchanges

When choosing a cryptocurrency exchange, it is important to consider factors such as fees, security, and the range of cryptocurrencies offered. Here is an overview of some popular cryptocurrency exchanges:

• Kraken: One of the oldest crypto exchanges, founded in 2011. It offers a range of coins and competitive trading fees. Kraken provides two trading platforms: the basic Kraken platform and Kraken Pro, which offers volume discounts and lower fees for advanced users.
• Gemini: A well-suited platform for crypto traders of any skill level, offering a simple, intuitive user interface and a wide range of features. Gemini is available in all 50 states and has a strong commitment to meeting regulatory compliance requirements.
• Crypto.com: Provides a large selection of over 250 cryptocurrencies. It offers unique perks and crypto rewards for its Visa Card users, as well as trading fee discounts for users who hold high balances in its utility token, Cronos (CRO).
• KuCoin: Provides access to a wide library of altcoins at low fees. It is headquartered in Seychelles and has a growing number of users in Asia, Europe, the Middle East, and Africa. KuCoin is not licensed in the U.S.
• EToro: A relative newcomer to the U.S. market, offering a crypto exchange and an online brokerage platform. It provides an engaging communal experience and allows users to copy the trading strategies of advanced users.
• Coinbase: Offers more than 200 tradable cryptocurrencies and is known for its user-friendly interface. Coinbase stands out for its ease of use, strong security features, and positive user reviews. However, it charges relatively high fees for convenience.
• Binance: One of the largest crypto exchanges by trading volume. Founded in 2017, it quickly rose to the top spot, registering more than USD 36 billion in trades by 2021.
• Huobi Global: A top exchange for trading derivatives, offering a percentage-based fee structure with a taker fee of 0.04%. It is one of the longest-lasting exchanges, surviving China's ban on Bitcoin trading.
• FTX: Created specifically to facilitate the trade of crypto derivatives, with maker and taker fees similar to those of Binance and Huobi. FTX has quickly made a name for itself, despite being operational for only about two years as of 2021.

These are just a few examples of cryptocurrency exchanges, and there are many other options available depending on your specific needs and requirements.

Peer-to-peer money transfer apps

Cash transfer services like PayPal, Venmo, Cash App, and Zelle allow users to purchase Bitcoin using the apps. These apps also allow users to purchase, store, send, and sell Bitcoin directly.

PayPal

• One of the first and most well-established P2P services
• No fee to send money within the US from linked bank accounts or using a PayPal balance
• Debit card, credit card, and PayPal credit transactions have a fee of 2.9% plus 30 cents
• International transactions are possible, with an additional 5% fee ($0.99 minimum and $4.99 maximum per transfer)
• Instant transfers with eligible debit cards may take up to 30 minutes and there's a 1.5% ($15 maximum) fee

Venmo

• Owned by PayPal but operates independently
• Adds a social element to payments, allowing users to send emojis and messages with a payment
• Can be linked to debit cards, bank accounts, and credit cards
• Direct deposits can also be set up, and the money received is kept in the Venmo account
• No fee to send money from a debit card or bank account, but a 3% transaction fee applies to credit card payments
• Instant transfers (within 30 minutes) may be available for a fee

Cash App

• Allows users to link to debit cards, credit cards, and many government payment cards to send payments
• Money can also be directly deposited into the Cash App account
• There's a 3% fee to send money using a linked credit card, but the other options are free
• The Cash App also offers a free Visa debit card that can be used to spend the Cash App balance
• The balance can also be used to invest in stocks and Bitcoin from the app, with fractional shares starting at $1

Zelle

• The only non-third-party app on this list
• Money is sent directly between bank accounts
• A transfer between two Zelle users could be completed within a few minutes, making it one of the fastest ways to move money from one bank account to another
• The Zelle app can be downloaded, or it may be built in as a benefit for many bank and credit union accounts
• The recipient must have a US bank account
• There's no option to transfer money from a credit card

Bitcoin ATMs

The process of buying Bitcoin from a Bitcoin ATM is straightforward:

• Enter the amount to purchase. Depending on local regulations and the amount you are purchasing, you may be required to verify your identity.
• Provide your Bitcoin wallet address by scanning the QR code of your Bitcoin wallet address using the ATM's camera.
• Pay using cash, credit card, or payment app.
• Receive the Bitcoin in your Bitcoin wallet. This generally takes a few minutes, and the ATM will provide a transaction ID to monitor the status of the purchase.

Selling Bitcoin via an ATM follows a similar process:

• Enter the amount to sell.
• Send Bitcoin to the provided address by scanning the QR code of the provided address and sending the Bitcoin using your wallet app.
• Once the ATM receives the Bitcoin, it will dispense your cash. This usually takes a few minutes, and the transaction status can be monitored using your wallet app.

It is important to note that there may be fees associated with using Bitcoin ATMs, and it is recommended to have a plan for where to send the Bitcoin after purchase.

Some popular Bitcoin ATM providers include:

• Coinhub: Allows for instant registration and purchases, with daily cash limits of $25,000.
• Lowest Fee Bitcoin ATMs: Offers daily cash limits of $50,000, instant approval, and low fees.
• Byte Federal: Focuses on security, privacy, and financial freedom, offering ATMs, POS systems, and a non-custodial wallet.
• Coinme: The first licensed Bitcoin ATM operator in the US, with thousands of trusted locations.
• CoinFlip: Provides personalized service and has over 5,000 kiosks worldwide.
• Cash2Bitcoin: Offers thousands of Bitcoin ATM locations, most of which are open 24/7, prioritizing customer privacy.
• Bitstop: One of the oldest and largest Bitcoin ATM networks, with over 2,500+ locations, offering competitive exchange rates and an easy onboarding experience.

Frequently asked questions