A collective insanity has sprouted around bitcoin over the last decade. It’s hard to predict whether this cryptocurrency will eventually prove to be a great investment or just a passing storm. That thrill of riches or ruin leaves some investors wary, but others want to chase the chance for profits from a bitcoin investment.
Is bitcoin a good investment? Start with our guide to learn more and make your own judgment.
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Simply Put: Is Investing in Bitcoin Risky?
Similar to any speculative investment, buying bitcoin carries some well-known risks: The price could drop precipitously and a single online hacking or crashed hard drive incident can wipe out your stash of bitcoin with no recourse.
Bitcoin has seen dramatic run-ups in price followed by some painful crashes but has consistently retained a significant portion of its previous gains every time it plummets. Since its inception, Bitcoin was the 1st digital asset to beget the current ecosystem of cryptos. For quite a while, it grew an underground following of investors who saw its future as a possible replacement to the physical monetary system.
The decision to invest in bitcoin comes down to your appetite for risk.
Where to Invest in Bitcoin
You can use an online broker to invest in bitcoin. Investing in bitcoin is similar to investing in stocks, but it is far more volatile due to the daily swings in bitcoin. Here are the steps to invest in bitcoin:
- Open a brokerage account with a company that allows crypto investments.
- Deposit funds into your brokerage account.
- Buy BTC.
- Later sell the crypto for a gain or loss.
These steps, however, depend on the exchange or trading platform you’re using.
Here are some top brokerages to invest in bitcoin.
Trade popular cryptocurrencies, explore professionally managed portfolios and connect with traders. eToro currently supports the purchase and sale of 15 unique coins, including:
- Bitcoin (BTC)
- Ethereum (ETH)
- Bitcoin Cash (BCH)
- Ripple (XRP)
- Dash (DASH)
- Litecoin (LTC)
- Ethereum Classic (ETC)
- Cardano (ADA)
- MIOTA (IOTA)
- Stellar Lumens (XLM)
- EOS (EOS)
- NEO (NEO)
- TRON coin (TRX)
- Zcash (ZEC)
- Tezos (XTZ)
Coinbase makes it safe and simple for you to buy, sell and hold bitcoin. You can buy a portion of bitcoin with a $0 account minimum.
Pay for purchases conveniently using your debit card or by connecting your bank account. Owning bitcoin on this brokerage is as simple as creating an account, verifying your identity and buying your cryptos.
Take control of your bitcoin investment everywhere you go through the Coinbase mobile app. The brokerage allows you to hold onto your bitcoin, convert it into another crypto, spend it on expenses and transfer it to anyone, anywhere in the world.
BitcoinIRA’s proprietary platform enables you to self-trade crypto anytime so you can take action right when the market moves.
Here’s how it works:
- Create an account. Get your customized dashboard and digital wallet after you create an account. Fund your account, access live pricing and learn more with a knowledge base.
- Transfer funds. Transfer your IRA in 3 easy steps. Simply tell us how much you want to invest, how you want to fund your account and your profile information. Most accounts will be ready to trade in just 3 to 5 days.
- Start trading. Trade digital assets inside your self-directed retirement account using our proprietary platform. Buy, sell or swap anytime, anywhere by visiting the self-trading area within your dashboard.
Advantages of Bitcoin Investments
The overwhelming performance of bitcoin — as a currency and investment — has attracted traditional and institutional investors alike. Bitcoin as an investment tool provides you with the following advantages over traditional investments.
- Liquidity. Bitcoin is arguably 1 of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges and online brokerages. You can easily trade bitcoin for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
- Lower inflation risk. Unlike world currencies — which are regulated by their governments — bitcoin is immune to inflation. The blockchain system is infinite and there’s no need to worry about your cryptos losing their value.
- New opportunities. Bitcoin and cryptocurrency trading is relatively young — new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
- Minimalistic trading. Stock trading requires you to hold a certificate or license. You must also go through a broker to trade a company’s shares. But bitcoin trading is minimalistic: simply buy or sell bitcoin from exchanges and place them in your wallet. Bitcoin transactions are also instant — unlike the settlement of stock trading orders, which could take days or weeks.
Disadvantages of Bitcoin Investments
Bitcoin may be the future of monetary exchange, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. Here are some serious risks associated with bitcoin investments.
- Volatility. The price of bitcoin is always rippling back and forth. If you happened to buy bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. The bitcoin market is constantly changing. With such an unpredictable market, you can hardly get a good return on your investment. To avoid huge loss, keep a close eye on the market.
- Threat of online hacking. Hacking is a big threat facing a bitcoin investor. Bitcoin exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. And bitcoin held on exchanges isn’t insured by the FDIC.
- Little or no regulation. The bitcoin market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
- Limited use. Bitcoin is currently only accepted by few online merchants. Many companies don’t also recognize bitcoin as a legitimate exchange, making it an unfeasible investment vessel. Besides, there’s only a fixed supply of bitcoin — 21 million.
- Wallets can be lost. If your hard drive crashes or virus corrupts your wallet file, you lose your bitcoins. You can go from a wealthy to bankrupt investor within seconds with no way to recover.
Can Bitcoin be Exchanged for Real Money?
Bitcoin can be converted to cash in a couple of different ways. You can sell bitcoin on a cryptocurrency exchange like Coinbase or Kraken. The cash will be deposited directly into your bank account.
Bitcoin ATMs are rare, but if there is 1 near you, you can exchange your bitcoin for cash. And some websites allow you to sell bitcoin for a prepaid debit card.
Is Bitcoin the Future, Really?
Price volatility isn’t all you need to worry about in this hyped-up market. Since bitcoin largely exists outside government regulation, it poses more risk than dealing with government currency and other asset classes. However, it isn’t hard to sell or buy and you can make a limited amount of purchases.
If you decide to dabble in bitcoin, classify it under your high-risk, high-reward portfolio. You can reap huge profits in the short-term and lose heavily if the value drops. Understand that bitcoin is a relatively new technology, and even futurists aren’t sure about its fate. Use the philosophy “buyer beware” when investing in bitcoin.
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Take the Cryptocurrency Explained Beginner Course
Take a look at the Cryptocurrency Explained Beginner Beginners Course for a solid start in bitcoin. The course is designed for beginners with little or no knowledge of bitcoin.
It includes 19 video with practical tutorials and tips that total nearly 3 hours. You’ll learn how to buy bitcoin anywhere in the world and how to set up a crypto wallet, as well as how to avoid common mistakes.
The course is offered by Lark Davis, cryptocurrency expert and host of New Zealand’s No. 1 bitcoin YouTube channel, “The CryptoLark.”
Gemini builds crypto products to help you buy, sell, and store your bitcoin and cryptocurrency. You can buy bitcoin and crypto instantly and access all the tools you need to understand the crypto market and start investing, all through one clear, attractive interface. Gemini Crypto Platform offers excellent account management options. You can manage your account at a glance, view your account balance 24-hour changes and percent changes. Get started with Gemini now.