Fractional Bitcoin Investing: A Guide To Getting Started

Bitcoin is a cryptocurrency that has experienced wild swings in price since its introduction in 2009. It's possible to buy fractions of a Bitcoin, known as satoshis, for as little as $10 or less. The process is similar to buying a full Bitcoin, but there are additional ways to buy smaller amounts.

There are several ways to buy Bitcoin, including through cryptocurrency exchanges such as Coinbase, Kraken, Crypto.com and Binance, or traditional brokers like Robinhood, Webull, TradeStation and Fidelity. It's also possible to buy Bitcoin through peer-to-peer money transfer apps such as PayPal, Venmo, and Cash App, or even Bitcoin ATMs.

When investing in Bitcoin, it's important to consider the costs, security, and potential upside and downside of each option. Additionally, Bitcoin can be stored in two types of digital wallets: hot wallets, which are connected to the internet and offer faster transactions, and cold wallets, which are offline and provide greater security.

Fractional Bitcoin shares

How to Invest in Fractional Bitcoin Shares

There are several ways to invest in fractional Bitcoin shares, including:

• Cryptocurrency exchanges: You can purchase fractional Bitcoin shares from popular cryptocurrency exchanges such as Coinbase, Kraken, Crypto.com, and Binance. These platforms offer a range of cryptocurrencies and usually have low fees.
• Traditional stockbrokers: Some traditional brokers, like Robinhood, Webull, TradeStation, and Fidelity, offer access to Bitcoin and other cryptocurrencies. This option may be suitable if you already have a brokerage account and are familiar with the platform.
• Money transfer apps: Cash transfer services like PayPal, Venmo, and Cash App allow users to purchase, store, send, and sell Bitcoin directly within the apps. This option is convenient if you already use these services for money transfers.
• Bitcoin ATMs: You can use Bitcoin ATMs to buy and sell Bitcoin with cash or a debit card. However, the fees for using these ATMs can be high, sometimes charging around 7% per transaction.
• Bitcoin exchange-traded funds (ETFs): With the recent approval of spot Bitcoin ETFs by the SEC, investors can now gain exposure to Bitcoin through traditional brokerage accounts. This option provides a regulated way to invest in Bitcoin and may offer lower fees compared to other methods.

Things to Consider

When investing in fractional Bitcoin shares, it's important to consider the following:

• Fees: Online brokerages often charge flat rates for small crypto transactions, and there may be additional spreads or service fees. These fees can eat into your investment, so it's crucial to understand the fee structure of the platform you choose.
• Security: The security of your investment is critical. Some newer crypto platforms have faced security breaches, so opting for more established brokers or exchanges may offer better protection. Consider using a crypto wallet for added security, such as a hot wallet for easy access or a cold wallet for more robust protection.
• Volatility: Bitcoin is known for its high volatility, and its value can fluctuate significantly. It's essential to understand the risks involved and invest only what you can afford to lose. Diversifying your investments across different asset classes can help mitigate the impact of Bitcoin's price swings.

Bitcoin wallets

Hot wallets are connected to the internet and are often free to use, offering add-on services such as trading or staking in exchange for fees. They make it relatively easy to carry out transactions using crypto but may be more vulnerable to hackers. Examples of hot wallets include mobile, desktop, and browser extension wallets.

On the other hand, cold wallets are disconnected from the internet and are considered more secure. They tend to cost money as you have to buy a hardware device to store your crypto. Cold wallets may be harder for other users to access, but if you lose the device, recovery can be challenging. Examples of cold wallets include hardware wallets like Ledger and Trezor.

When choosing a Bitcoin wallet, consider factors such as security, ease of use, transaction fees, and the number of supported cryptocurrencies. Additionally, ensure you understand the risks associated with each type of wallet and take the necessary precautions to secure your crypto assets.

Crypto exchanges

There are several crypto exchanges that allow you to buy fractional Bitcoin. These include:

• Coinbase: This is one of the most trusted and well-known exchanges, especially for retail investors. It is available in over 100 countries, including the US, UK, and most of Europe. The signup process is straightforward, requiring an identity document, and you can buy Bitcoin almost instantly by linking your bank account or debit card. Coinbase also offers a free online Bitcoin wallet and the ability to buy fractional amounts of other cryptocurrencies like Ether, Stellar, ZCash, and Chainlink.
• Binance: This exchange is a credible competitor to Coinbase, especially in non-US countries. It offers a wider range of tokens and cryptocurrencies and is built for traders, with options for futures and margin trading. Binance also allows withdrawals of up to 2 BTC without strict ID checks.
• Square's Cash App: This app allows you to buy fractions of Bitcoin easily by specifying a dollar amount, such as $100 worth of Bitcoin. Unlike some other apps, it lets you withdraw your Bitcoin to your personal wallet address.
• Circle: Circle doesn't charge fees, although its Bitcoin prices tend to be slightly higher. It allows you to buy Bitcoin with a credit card, although you'll have to pay the credit card processing fees.
• Expresscoin and BitcoinInsanity: These platforms allow you to buy fractional Bitcoin with a credit card, and BitcoinInsanity also supports PayPal purchases, although the prices may be higher.
• LocalBitcoins: This is a good option for peer-to-peer trading, especially if you're outside the US and want more privacy.

When choosing a crypto exchange, it's important to consider factors like fees, consumer protections, security, and the range of cryptocurrencies offered.

Bitcoin ETFs

How Bitcoin ETFs Work

Advantages of Bitcoin ETFs

One of the main advantages of Bitcoin ETFs is their convenience and accessibility. They lower the barriers to entry into the crypto market by eliminating the need for investors to manage crypto wallets, navigate online exchanges, or deal with private and public keys. Bitcoin ETFs also provide liquidity, allowing investors to easily buy and sell Bitcoins through their familiar brokerage accounts. Additionally, Bitcoin ETFs operate under regulatory oversight, ensuring transparency and protection for investors. In certain jurisdictions, they may also offer tax benefits compared to holding cryptocurrencies directly.

Disadvantages and Risks

Investing in Bitcoin ETFs carries several risks and disadvantages. The volatile nature of the crypto market can lead to significant financial losses. While the ETF structure simplifies the process, it does not protect investors from the inherent risks of the market. There is also a lack of a clear regulatory framework, creating uncertainty about how issues like fraud, manipulation, and loss of assets will be addressed. Security risks are another concern, as the large number of coins held by Bitcoin ETFs make them attractive targets for cybercriminals. Finally, Bitcoin ETFs charge management fees or expense ratios, which can reduce investment returns over time.

Impact on Bitcoin Prices

The introduction of Bitcoin ETFs can have an impact on the price of Bitcoins in several ways:

• Increased Adoption: Bitcoin ETFs attract investment inflows from mainstream investors, leading to higher demand and potentially boosting Bitcoin prices.
• Market Validation: The approval and launch of a Bitcoin ETF validate its legitimacy in the mainstream financial system, bolstering confidence and driving prices higher.
• Trading Activity: Bitcoin ETFs create more opportunities for active trading by hedge funds, day traders, and speculators, leading to greater trading volume and volatility.
• Reduced Premiums: Bitcoin ETFs may reduce the premium that institutional investors pay to acquire Bitcoins through trusts and private funds, which could marginally depress Bitcoin prices.

Examples of Bitcoin ETFs

• Franklin Templeton Digital Holdings Trust (EZBC)
• Bitwise Bitcoin ETF (BITB)
• VanEck Bitcoin Trust (HODL)
• Ark 21Shares Bitcoin ETF (ARKB)
• IShares Bitcoin Trust (IBIT)
• Fidelity Wise Origin Bitcoin Fund (FBTC)
• WisdomTree Bitcoin Fund (BTCW)
• Invesco Galaxy Bitcoin ETF (BTCO)
• Valkyrie Bitcoin Fund (BRRR)
• Hashdex Bitcoin ETF (DEFI)
• Grayscale Bitcoin Trust (GBTC)

Bitcoin ATMs

• Get a Bitcoin wallet: When you purchase Bitcoin, you need a place to store it. A Bitcoin wallet is a digital tool that allows users to store, send, and receive Bitcoin securely.
• Find a Bitcoin ATM near you: According to the Bitcoin.com Map, there are tens of thousands of Bitcoin ATMs globally.
• Buy Bitcoin from the ATM: Enter the amount you want to purchase. Depending on local regulations and the amount you are purchasing, you may need to verify your identity. Provide your Bitcoin wallet address by using the ATM's camera to scan the QR code of your Bitcoin wallet address displayed in your Bitcoin wallet app. Pay using cash, credit card, or payment app. Receive the Bitcoin in your Bitcoin wallet, which usually takes a few minutes.

You can also sell Bitcoin using a Bitcoin ATM by following a similar process:

• Enter the amount you want to sell.
• Send Bitcoin to the provided address by scanning the QR code and sending it using your Bitcoin wallet app.
• Take your cash. Once the ATM receives the Bitcoin, it will dispense your cash, which generally takes a few minutes.

It is important to note that most US cryptocurrency ATMs charge transaction fees between 6.5% and 20%. Additionally, always be cautious of scams and only use trusted companies when dealing with Bitcoin and cryptocurrencies.

Frequently asked questions