How to Invest in Bitcoin: A Complete Guide
How to Invest in Bitcoin
After reading the news for the past few months, you may be thinking about getting involved with Bitcoin. In a previous article I’ve covered the basics of Bitcoin.
But now you might be thinking to yourself: it seems this whole Bitcoin thing is pretty popular. How do I actually get involved, though?
This is an entire guide on how to invest in Bitcoin. While you may be thinking about how to invest in Bitcoin purely from a buying standpoint, there are many other options available depending on how much risk you’re comfortable with and how much capital you have to invest.
By Buying From an Exchange
One of the most direct ways to answer how to invest in Bitcoin is to tell you how to buy it directly. This is done via an exchange. There are dozens of cryptocurrency exchanges currently in operation. One of the most popular currently, and the one used as an example in this article, is Coinbase.
I recommend Coinbase for newcomers because it’s a one stop solution. It’s a wallet (a concept I’ll cover in later articles), an exchange, and a processor. This means you can store, spend, buy, and accept Bitcoin through Coinbase. It’s also very user friendly. This means that in addition to security and privacy, you get convenience.
Coinbase charges a transaction fee that scales with the size of your purchase. There are also limits to abide by, both for credit cards and bank accounts. It’s very important to keep the private key that comes along with your wallet secure. If you lose this, or if someone else gets access to it, you can lose your entire wallet.
If you want to learn more about how to invest in Bitcoin through other exchanges, you can check out this article.
Another option if you’re wondering how to invest in Bitcoin is to mine it. This requires investing in the necessary equipment. The initial capital barrier is a significant one. It can also be hard to set up the actual system or get the necessary components.
All that being said, mining is the only way to get a cryptocurrency like Bitcoin without buying it from an exchange. And if you are mining it through a service like NiceHash, the actual process is almost entirely automatic. It can run when you sleep, shower, drive, eat. This makes it an excellent source of passive income.
To set up a mining system, you would need to purchase specific computing hardware. You can either use powerful graphical processor units (GPUs) or specific mining machines. These mining machines are known as application-specific integrated circuit (ASIC) machines. These have been sold out for months. Depending on how well the crypto markets are doing, you can make back your initial capital in three to six months on average.
By Investing in Companies Related to Bitcoin
In addition to other cryptocurrencies, you can invest in Bitcoin companies. I’ll tell you how to get involved with other cryptocurrencies momentarily.
Investing in Bitcoin related companies isn’t overly complicated. For the most part, this takes the form of buying traditional assets likes stocks of companies involved with Bitcoin. A great example is AMD or Nvidia. Both of these companies create chips used for mining coins.
But to make real money, it might be helpful to focus on companies that haven’t already seen a large boost from the crypto boom. Companies like Riot Blockchain, Marathon Patent Group, and Bitcoin Investment Trust are all good bets. Marathan Patent group acquired a major mining company. And Riot Blockchain was once Bioptix and sold diagnostic equipment to the biotech industry.
Thinking outside of the box can help. For example, Overstock.com began accepting Bitcoin as a form of payment and has seen some steady stock price growth since then. Look for the companies that make the blockchain industry work.
By Not Buying It At All
Perhaps the most unusual answer to how to invest in Bitcoin is not to. That’s not to say you should throw up your hands and wonder why you read this. Rather, Bitcoin can be seen as the leader of a large trend. While it’s the fiat cryptocurrency at the moment, other currencies are useful also.
The myriad of other currencies, covered in our Altcoin series, can be worthy investments as well. But some of the smaller and newer ones aren’t on exchanges yet. So how do you go about purchasing those?
One of the biggest issues with Bitcoin is its high transaction fees. The Bitcoin transaction fee is $14.99 per transaction. When considering how to invest in Bitcoin, or any cryptocurrency, transaction fees should definitely be a consideration. If you’re investing thousands of dollars in a single transaction, eating the $14.99 fee may be worth it.
But if you’re like most people learning how to invest in Bitcoin, your contribution will be considerably more modest. As a result, the $14.99 fee can eat up a sizeable chunk of your investment. Over time, those transaction fees can add up.
Litecoin as the Medium of Choice
For purchasing many other cryptocurrencies not directly available via exchanges, Litecoin quickly becomes the transition coin of choice. Litecoin (LTC) can be purchased on most exchanges like Coinbase. Coinbase also allows you to purchase Ethereum (ETH) and Bitcoin Cash (BCH).
The advantages of Litecoin are its much cheaper transaction fee and its swift transaction speed. When you exchange one cryptocurrency for another, you pay the transaction fees for both cryptocurrencies. Using Litecoin as your primary major currency of exchanges helps keep overall transaction costs much lower. Over many transactions, this can save you astounding amount of money.
As the final now on how to invest in Bitcoin, always remember to be careful. It’s worth doing research, and it’s worth considering all your investment options. Investing in stocks is less risky than investing in speculative new cryptocurrencies. At the same time, almost no stock price has ever seen the sort of massive growth of crypto. Your investing strategy should reflect the risk you’re willing to tolerate. And your portfolio should take this into account generally. Good luck as you begin your crypto journey!
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