In this overview, we will look at how to buy bitcoin. There are currently two ways to buy bitcoins. The first is to buy bitcoins directly. The second is to buy ETF shares. Yes, bitcoin has its own ETF, but not everybody knows about it, so let’s start with it.
How to buy bitcoin through ETF?
The bitcoin fund is owned by Grayscale Investments and is called Bitcoin Investment Trust (GBTC). It is traded in the US and in order to buy it, you will need access to the US market. If you have access to the American market, purchasing GBTC stock will not be a problem, but there are two important things to consider.
The first one is that GBTC shares are not traded in an open market, but in the over-the-counter market – OTC Market. In that market, the requirements for issuers are lower than on the main exchanges. Therefore, there is less control and, consequently, higher risk.
The second point is to choose the right entry point. This is when a fund’s securities are traded close to the Net Asset Value (NAV) of the fund. You can find NAV in the Perfomance section of Grayscale Investments’ website or on Morningstar.com by typing in the fund ticker (GBTC).
How to buy bitcoin directly?
In order to buy bitcoin directly, you just need to go to one of the exchanger websites, for example, LocalBitcoins. On this and similar sites you will be able to buy digital currency for regular or, as they say nowadays, fiat money. But this is only half the battle. As the bitcoins you buy need to be stored somewhere.
To store your cryptocurrency you will need a wallet. It can be a PC wallet, an online wallet, a wallet-mobile app or a wallet-device. (If you want to understand the pros and cons of each one, read this article.) But if you want to invest a lot of money in bitcoin, you will want to choose a device and buy it (to avoid fakes) directly from a producer, like Trezor.
So, in order to invest in cryptocurrency on a buy-and-hold basis, you only need fiat money, an exchange website and a wallet. However, if you need more investment options, then go for cryptocurrency exchanges.
Increase your return on investment
The advantage of cryptocurrency exchanges is that they give you access to other digital currencies. You can buy any coins on them and diversify your crypto portfolio. However, that’s not all you can do on them. On some of them you can earn interest income by renting out your bitcoins to other exchange members. This service is called Lending, and in the example of the Poloniex exchange it looks like this
Lending is not available on all exchanges, but you will surely find it on Poloniex, Bitfinex (post in comments below if you find it somewhere else). By setting up an account on these exchanges, you can make your bitcoins not just lying around, but generating passive income. That’s the added bonus of investing in bitcoin. And by opening the hidden lock, you will find a couple of useful links that will help you in your search for exchanges.
A couple of useful links
Investing.com has a separate Crypto section on working with digital currency. It lists all exchanges and offers a selection of currencies by currency. Another useful resource is Coinmarketcap.com. You can quickly find out on which exchange this or that coin is traded. Just go to its page and click the Markets tab, as shown in the screenshots below.
To summarise, you can invest in bitcoin by buying it directly through exchange websites or through an ETF. In the first case, you will have to buy the bitcoins yourself and store them. In the second option, you don’t need to purchase and store them, but you will need to go out to the US exchanges and choose the right time to buy the fund’s shares.