The bitcoin price continues to hover just below record highs above $23,000, and as a result, many people may be looking to get a piece of the action. If you’re thinking about investing in bitcoin, the big question you must ask now is whether the price will keep going up or if it’s going to take a breather now that it has reached a new record high.
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The good news is that bitcoin reached new records twice within a matter of days, surpassing $24,000 on Sunday after breaching the $23,000 level for the first time last week. If you're confident that the bitcoin price has more room to run in the near term, there are a few ways for you to invest in the cryptocurrency.
Direct Purchases Of Bitcoin
The most basic way to invest in bitcoin is to actually purchase some of the cryptocurrency and hold it, similar to how investors buy gold. If $23,000 is more than you can afford, you can even choose to buy a fraction of a bitcoin instead of an entire one. To do this, you'll need to have an account on a cryptocurrency exchange like Coinbase.
There are many cryptocurrency exchanges in the world, but not all of them are reputable. Coinbase is well-known because it's the largest exchange in the U.S. and the most popular one in the U.K. Unlike some cryptocurrency exchanges, Coinbase is also registered.
In the U.S., the exchange is registered with the Financial Crimes Enforcement Network. In the U.K., Coinbase holds an E-Money license from the Financial Conduct Authority, according to Bloomberg. Other cryptocurrency exchanges include Binance, Bittrex and Kraken.
How To Buy Bitcoin On An Exchange
To set up an account on a cryptocurrency exchange, you'll need to enter some personal information and bank account details. Then you'll need to verify your identity before you can buy bitcoin by transferring money into your account.
Cryptocurrency exchanges charge fees, usually several percent of a transaction for depositing crypto funds and trading. You may also have to pay fees to exchange fiat currency, depending on which fiat currency the exchange uses when trading with bitcoin.
Aside from cryptocurrency exchanges, there is one other way to buy bitcoin directly, and that's through PayPal. The company announced that it would start allowing users to buy bitcoin on its platform. Users can start with as little as $1 in their PayPal Wallet and the buy, sell and hold it through the payment service. In addition to bitcoin, PayPal also supports Ethereum, Litecoin and Bitcoin Cash.
However, the catch is that you can't transfer the cryptocurrency outside of PayPal, which means you can't store it in another digital wallet or send it to an exchange. Other ways to buy bitcoin include through Square and even the Robinhood trading app.
Crypto Asset Managers And Stocks
If you don't want to buy bitcoin directly, there are additional ways to invest in it. Crypto asset managers offer a great way to invest in the cryptocurrency through other avenues. Perhaps the most well-known asset manager is Grayscale Investments, which operates the Grayscale Bitcoin Trust, among other cryptocurrency funds. The Grayscale Bitcoin Trust is traded on the OTC markets in the U.S., making it easy for you to buy shares.
Brokerages like Fidelity or Charles Schwab support trading of OTC stocks. One of the benefits of the Grayscale Bitcoin Trust is the fact that it is the first digital currency investment vehicle to achieve the status of a company that reports to the Securities and Exchange Commission. Other crypto asset managers include hedge funds like Galaxy Digital, Blockchain Capital, Polychain Capital and Alpha Sigma Capital.
You might also consider investing in cryptocurrency-related stocks like Riot Blockchain, Marathon Patent Group and Bit Digital. All three are bitcoin miners, so when bitcoin's price rises, these companies' stocks usually do too.
Warning About Bitcoin
It's important to note that there are always risks associated with investing, whether in bitcoin or any other asset. In some ways, bitcoin may present even more significant risks than other assets, so it's essential to keep that in mind before making any investment. To learn more about bitcoin investing, it may help to look at what some well-known investors have said about cryptocurrency.
Warren Buffett said earlier this year that bitcoin and other cryptocurrencies are worthless. In February, he told CNBC that "you can't do anything with it except sell it to somebody else." He also vowed never to own any cryptocurrency.
However, other well-known investors have had plenty of good things to say about bitcoin. Stanley Druckenmiller and Paul Tudor Jones have both made statements supportive of cryptocurrency this year. Tudor Jones said bitcoin reminded him of the internet stocks of 1999. In October, he said the bitcoin rally was only in its "first inning," months before the rally that took the price above $23,000 for the first time.
Druckenmiller said he now owns some bitcoin and has "warmed up to" it as a store of value. He even said he expects it to "work better" than gold, although his gold position is "many, many more times" larger than his bitcoin holding. Clearly, the famous bulls and bears can't both be right on bitcoin, but if you do your research on it, you can form your own opinions and decide which side you agree with.
The post How To Invest In Bitcoin And What To Watch Out For appeared first on ValueWalk.
