The Ultimate Guide To Bitcoin Investment

Investing in Bitcoin can be a daunting task for beginners, but there are several ways to get started. Here are some of the most common methods:

- Cryptocurrency exchanges: You can purchase Bitcoin from cryptocurrency exchanges such as Gemini, Kraken, Coinbase, and Crypto.com. These platforms offer a variety of cryptocurrencies and carry different fees and consumer protections, so it's important to do your research before choosing one.

- Traditional stockbrokers: While the options are limited, some traditional brokers like Robinhood, Webull, TradeStation, and Fidelity allow customers to buy and sell Bitcoin. These platforms often charge lower fees for Bitcoin trades.

- Peer-to-peer money transfer apps: Cash transfer services like PayPal, Venmo, or Cash App allow users to purchase, store, send, and sell Bitcoin directly through their apps, providing a convenient option for those already familiar with these interfaces.

- Bitcoin ATMs: These ATMs work like regular ATMs, but they allow you to buy and sell Bitcoin. You can find them in locations where traditional ATMs are usually placed, such as convenience stores. Be sure to check the fees and have a plan for where to send your Bitcoin before making a transaction.

- Bitcoin exchange-traded funds (ETFs): In some countries, such as the US, spot Bitcoin ETFs have been approved, allowing investors to track the price of Bitcoin and trade over major exchanges. This option is expected to make it easier for traditional investors to gain access to Bitcoin.

Before investing in Bitcoin, it's important to understand the risks involved, including price volatility, security concerns, and the potential for scams or fraud. It's recommended to only invest an amount you are willing to lose and to prioritize risk management over potential upside. Additionally, consider consulting a financial advisor to determine if Bitcoin aligns with your financial goals and risk tolerance.

Bitcoin wallets

A hot wallet is connected to the internet and is often free to use. They are typically offered by cryptocurrency exchanges, such as Gemini, Kraken, Coinbase and Crypto.com. They are relatively easy to use for transactions but may be more vulnerable to hackers.

A cold wallet is not connected to the internet and is often a small, encrypted portable device that you can use to download and carry your Bitcoin. Cold wallets are considered more secure than hot wallets but are less convenient for transactions. They can also be harder to recover if the device is lost.

There are a variety of Bitcoin wallet providers, including:

• Ledger
• Trezor
• Zengo
• Crypto.com DeFi Wallet
• Guarda
• Exodus
• Coinbase Wallet
• Trust Wallet
• MetaMask
• BlueWallet
• Nunchuk
• Jade
• Coldcard

When choosing a Bitcoin wallet, it is important to consider security, convenience, transaction fees, and whether the wallet is connected to the internet. It is also crucial to keep your private keys secure and to back up your wallet.

Cryptocurrency exchanges

There are two main types of exchanges: centralized and decentralized. Centralized exchanges are overseen by a third party (called an exchange operator) to ensure that customer sign-up and trading runs smoothly. Decentralized exchanges, on the other hand, lack third-party oversight, are open source, and depend on peer-to-peer trading.

Some well-known cryptocurrency exchanges include:

• Gemini
• Kraken
• Coinbase
• Crypto.com
• Binance
• Robinhood
• EToro

When choosing a cryptocurrency exchange, it is important to consider factors such as fees, currency pairs offered, deposit/withdrawal limits, regional restrictions and regulations, and verification requirements. It is also crucial to use a reputable and regulated exchange to ensure the safety of your investments.

In addition to trading services, cryptocurrency exchanges may also offer price discovery and storage services for crypto.

Traditional brokers

Robinhood

Robinhood was the first mainstream investment broker to offer Bitcoin trading. It charges no fees for Bitcoin trades, but there is a built-in spread markup on any trades. Robinhood also allows you to trade stocks and ETFs for the same low price. However, its trading platform may disappoint those looking for a full-featured trading experience.

Interactive Brokers

Interactive Brokers lets you trade four cryptocurrencies, including Bitcoin and Ethereum, with one of the lowest commissions in the market. It also allows you to buy Bitcoin and Ethereum futures instead of owning the currencies directly. You can buy Bitcoin futures on the Chicago Mercantile Exchange, with contracts costing $5 at five coins per contract or Ethereum contracts for $3 at 50 coins per contract.

Webull

Webull is a commission-free trading app that provides investors with a solid offering, including cryptocurrency trading. While there are no commissions on crypto trades, Webull does charge a spread markup of 100 basis points (1% of the price) on either side of a trade. Several cryptocurrencies are available for trading, including Bitcoin, Ethereum and Dogecoin.

TradeStation

TradeStation offers direct cryptocurrency trading via TradeStation Crypto, with a built-in spread markup. The spread markup is no more than 1% of the trade value, whether you're buying or selling. Traders can also buy and sell Bitcoin futures.

Charles Schwab

Charles Schwab is a well-known broker that offers trading in Bitcoin futures. While there is no account minimum, any futures contracts traded will require a minimum margin to hold them open. Schwab offers an attractive commission of $2.25 per contract.

Money transfer apps

Some of the most popular money transfer apps that allow you to buy Bitcoin are:

• CashApp: This peer-to-peer payment service owned by Square Inc. allows users to buy Bitcoin.
• PayPal: PayPal allows users to purchase Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Users can also use their cryptocurrencies to make purchases through the "Checkout with Crypto" feature.
• Robinhood: The Robinhood app supports seven cryptocurrencies for purchase, including Dogecoin.
• SoFi: SoFi's app allows users to purchase 21 different coins and crypto tokens.
• Venmo: Venmo allows users to purchase, store, send and sell Bitcoin directly through the app.

These apps are well-established and trusted, and they provide a user-friendly interface, making them a good option for new investors. However, they have certain limitations, such as not allowing users to transfer cryptocurrencies to other crypto wallets.

When using money transfer apps to invest in Bitcoin, it is important to consider the fees, the range of cryptocurrencies offered, and the level of security provided. It is also crucial to remember that investing in Bitcoin is risky, and there is a chance of losing money.

Bitcoin ATMs

There are two primary ways to invest in Bitcoin using Bitcoin ATMs:

Buying Bitcoin

To buy Bitcoin from a Bitcoin ATM, follow these steps:

• Enter the amount you want to purchase. Depending on local regulations and the amount, you may need to verify your identity.
• Provide your Bitcoin wallet address by scanning the QR code of your Bitcoin wallet address using the ATM's camera.
• Insert cash, or pay with a credit or debit card. In addition to cash, some ATMs may also accept payment apps.
• Receive the Bitcoin in your Bitcoin wallet. This generally takes a few minutes, and the ATM will provide a transaction ID to monitor the purchase status.

Selling Bitcoin

To sell Bitcoin from a Bitcoin ATM, follow these steps:

• Enter the amount of Bitcoin you want to sell. Depending on local regulations and the amount, you may need to verify your identity.
• Send Bitcoin to the provided address by scanning the QR code of the provided address and sending the Bitcoin from your Bitcoin wallet.
• Collect your cash from the ATM. This generally takes a few minutes, and you can monitor the transaction status using your Bitcoin wallet app.

It is important to note that Bitcoin ATMs may charge high transaction fees, so it is recommended to research potential fees and look for the lowest fees before using one. Additionally, Bitcoin and other cryptocurrencies are not regulated by the federal government and are not insured by the Federal Deposit Insurance Corporation (FDIC).

Frequently asked questions