Three Simple Ways to Start Investing in Bitcoin

As Google Trends suggests, there was a surge of interest in investing in cryptocurrency at the end of April. Search statistics indicate that more and more people are willing to try and start earning with the help of crypto assets.

Direct purchase of cryptocurrency on various platforms isn’t the only way to make money from digital assets. In this article, we will review both this approach and a number of its alternatives.

Direct purchase of cryptocurrency

The first way to get bitcoins is to buy them via a cryptocurrency exchange. However, the platform for such transactions must be chosen responsibly, taking into account its reputation, popularity, and stability. Also, it is advisable that you determine in advance the purpose of buying digital coins. If your goal is to trade cryptocurrency and use it for various transactions, then it is better to store the tokens on the exchange, as this will greatly facilitate your access to them.

Some of the advantages of this investment method are the possibility to use the purchased bitcoins for trading, investor protection (since most of the largest crypto-exchanges have long entered the legal field), as well as the possibility to transfer bitcoins to stable coins at any time, should the quotes start to lower.

And if you are buying Bitcoin for the purpose of long-term investment and do not plan on using it soon, then it is better to withdraw digital coins to a cold wallet for storage.

Mining

You can also obtain cryptocurrency by mining it, i.e. by providing your own computing power to solve difficult mathematical equations and verify transactions on the blockchain. By buying a single ASIC miner and setting it up at home won’t bring you any adequate income. However, you still can do this to get acquainted with the mining industry and gain relevant experience.

If you are expecting serious earnings, you will need at least 10 thousand ASIC miners, which will allow lessening the service maintenance cost per device. It is also worth noting that people unfamiliar with the mining industry may experience technical difficulties when trying to obtain cryptocurrency.

A professional approach to mining means increased chances of making money (compared to simple investing) in the event of a sharp rise in cryptocurrency rates. Note, however, that miners are facing major risks when quotations start falling rapidly, since then mining may become unprofitable.

Indirect investment

Investors may not want to get involved with crypto-exchanges and take responsibility for storing cryptocurrency in cold wallets. 

The option here would be investing in instruments related to digital coins.

The advantages of this method include a lower risk of asset depreciation and lower volatility (at the same time, all of this may reduce the potential income), fewer risks associated with the hacking of exchanges and wallets since the securities are kept at the depositary, availability of financial statements. These features help reduce the risks of losing funds to some extent.

Investment instruments related to cryptocurrencies include:

• securities of companies related to crypto-assets, for example, Coinbase or Canaan shares;
• shares of funds investing in cryptocurrency;
• shares of cryptocurrency-based ETFs;
• Bitcoin or Ethereum futures on the Chicago Stock Exchange (these do not involve physical holding of cryptocurrency).

This article represents FXOpen Markets Limited opinion only, it should not be construed as an offer, invitation or recommendation in respect to FXOpen Markets Limited products and services or as financial advice.

Cryptocurrency CFDs are not available to trade in all jurisdictions.