The digital cryptocurrency, Bitcoin, has turned many heads in the past couple of months. With tech expert and richest man, Elon Musk investing a whopping $1.5 billion in it, many people are now considering their options of investing in Bitcoin themselves.
Assuming that cryptocurrency is here to stay, what really are your options while investing in Bitcoin?
Ways of investing in Bitcoin:
- Greyscale’s Bitcoin Investment Trust or GBTC: Investment can be made through GBTC. It gives the advantage of the investment being eligible in some IRA, Roth IRA and other brokerage accounts. This allows access to multiple levels in a high number of accounts.
- Buying Standalone Bitcoins: Bitcoins can be purchased as a whole or a fraction of its value. The process of buying standalone bitcoins is similar to the purchase of some basic commodity. You first have to set-up an account on a trading app (Eg: Coinbase). It requires you to share personal information about you and your bank account. Post this, you can make the transaction and purchase a bitcoin. Like a stock or ETF, you are given access to bitcoin's price performance and options to buy/sell. Your purchase is kept safe in an encrypted wallet only you can access.
- Brokerage: Bitcoins can be purchased or sold through a middle broker.
- Bitcoin ATM: Functions similarly to an ATM, a person can transact and deposit bitcoins through this account easily.
- Direct Purchase: It can be directly purchased from a seller.
What are the risks involved when investing in Bitcoin?
Just like every new commodity entering the market, Bitcoin too, is an extremely young concept. It will surely take some time for it stabilises and possibly also be regulated.
At the onset, the risks involved in the investment of Bitcoins early on are:
-It is not regulated by the government or a regulating body. This leaves room for discrepancies which may lead to some financial problems.
-The market is highly volatile. Early investors of bitcoin may experience high gains and losses as the value of bitcoin is constantly fluctuating. Hence, it may be conceived as a high-risk game.
-Digital currencies are susceptible to falling into the pit of fraud. Hackers can easily take over or make fake bitcoins and lure people to invest in the bitcoins, cheating them. Unless there are regulations along with multiple walls of security protecting the digital money, digital transactions continue to remain risky.