How to Invest in Bitcoin? Is It Safe?
By: Ofir Beigel | Last updated: 1/19/23
There are many ways you can invest in Bitcoin, this post will cover the different options that are available.
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How to Invest in Bitcoin Summary
The main ways for investing in Bitcoins are:
- Buying and holding (aka hodling)
- Derivative trading
- Bitcoin ETFs
The most safest way to invest in Bitcoin is to buy and hold the actual coins in your personal Bitcoin wallet.
If you want a more detailed answer to the question “How to invest in Bitcoin?”, keep on reading. Here’s what I’ll cover:
- The Many Forms of Investing in Bitcoin
- Buying and Holding
- Trading Bitcoins
- Mining Bitcoins
- Various Bitcoin Investment Schemes
- Frequently Asked Questions
- Conclusion – is Bitcoin a Safe Investment?
1. The Many Forms of “Investing in Bitcoin”
Before I begin, a word of advice: Bitcoin is a very risky asset type. It is extremely volatile and even the most solid Bitcoin investment should be treated as a high risk investment.
For example, in the past Bitcoin’s price fell over 80% in the course of several months (this happened a few times throughout its existence).
Bitcoin is not a company or a stock, it’s a currency. If you still don’t understand what Bitcoin is, watch this video. As a currency, the basic form of investing in Bitcoin simply means buying the coin. However, there are additional ways to invest in Bitcoin, as I will cover in the following chapters.
And just fun, use the simulator below to find out how much money you could have made if only…
2. Buying and Holding (Hodling)
Bitcoin has been proclaimed dead over 380 times. However, here’s the truth about how profitable it’s been to buy and hold Bitcoin at any point in time:
Hodling Bitcoin has been profitable for 4340 days out of a total of 4864 days (89.23%)
Last updated: 06/10/23 03:27 PM EST
Click to view all 524 non-profitable days
The most common form of “investing” in Bitcoin is buying the currency in hopes it will appreciate in value (also knowns as “hodling”, see the origins of the term here).
If you do decide to Hodl, the most important rule of thumb is this:
Don’t take anyone’s advice about what will happen with the currency. do your own homework, learn about Bitcoin and come to a conclusion for yourself.
A few pointers for buying and holding Bitcoins:
- Never invest more than you are willing/able to lose – Bitcoin is a very risky investment and you should keep that in mind at all times.
- After buying Bitcoins, make sure to move them into your own Bitcoin wallet and never leave them on an exchange. If we’re talking about substantial amounts, my personal recommendation is to use a hardware wallet. If you can’t afford a hardware wallet, try a paper wallet.
- Make sure to buy Bitcoins only from Reputable Bitcoin exchanges. Sometimes paying a little extra is worth the security and piece of mind.
- Use Dollar cost averaging (DCA) – This means that you don’t buy all of your Bitcoins in one trade but instead buy a fixed amount every month, week or even day throughout the year. This way you average the price over the course of a whole year.
Here’s a short video to explain DCA:
In case you are a US citizen, you can consider investing in a Bitcoin IRA. A Bitcoin IRA is a tax-free investment account that allows you to invest money in order to trade in Bitcoin or other cryptocurrencies. The account is aimed at building wealth toward your retirement and the money in it cannot be withdrawn before retirement age without incurring a penalty.
3. Trading Bitcoins
Bitcoin trading is different from buying and holding. When you are trading Bitcoins, it means that you are actively trying to buy Bitcoins at a low price and sell them back at a higher price in relatively short time intervals.
Trading successfully requires knowledge and practice. The trading market is occupied by very large players who are just waiting for newbies to come in and throw their money away by trading aimlessly.
Here’s our beginner’s guide to Bitcoin trading:
4. Mining Bitcoins
For the past few years mining Bitcoin has only been profitable if done on a large scale. This means you will need to get expensive mining equipment and have access to free or very cheap electricity.
From my perspective, it’s much more cost effective to buy Bitcoins with this money instead of using it to buy mining equipment. If you want to learn more about mining watch this video:
You may have heard of all sorts of sites that allow you to mine Bitcoins through the web. This is known as cloud mining and from what I’ve seen these sites fall into one out of two categories:
- They are complete scams that will run away with your money and will never actually use it to mine Bitcoin.
- They are not scams, but they are bad investments since you will probably get more Bitcoins if you just use that money to buy Bitcoins instead of paying for the service (e.g. Genesis Mining, Hashflare).
If you want to learn more about my take on cloud mining, read this post.
5. Invest in Bitcoin Doublers / Grow your Bitcoins / HYIPs
Almost every other day I get a question about a site or company that claims to double your Bitcoins, give you insane daily interest on your Bitcoins or help you invest them in some sort of complex and obscure ponzi scheme.
These sites can be categorized mostly as scams or HYIPs (high yield investment programs).
What these sites usually do is take money from people around the web with the promise to give them good returns. They will then start off by paying these returns through money they get from new sign ups and create a big buzz around the site.
Usually they will also have some sort of referral program so that users can bring in their friends.
This will go on for around 3-4 months until one day the website will just go offline and the money will be gone. No more payments will be made and a lot of people will get mad that they got scammed.
I have reviewed many Bitcoin investment sites in the past 3 years (e.g. Bitconnect, USI Tech and more) and I have yet to find a site that I can say is legit or safe to invest in.
Any site that promises you something that is too good to be true is probably just a facade for scammers trying to steal your coins.
How can you find out if a site is a scam for yourself? Easy, use my Bitcoin scam test tool.
STAY AWAY FROM SITES THAT CLAIM THEY WILL DOUBLE YOUR COINS OR GIVE YOU DAILY INTEREST ON THEM.
6. Frequently Asked Questions
How do I Make Money with Bitcoin?
Aside from what I’ve mentioned in this post there are several other ways to make money with Bitcoin such as:
- Micro earnings
- Owning a faucet
- Signature campaigns
- Affiliate programs
- Writing about Bitcoin
- Bitcoin related services
- Bitcoin Lending
- Bitcoin forks
You can read about these methods here.
How Much was a Bitcoin Worth in 2009?
On October 12, 2009 Martti Malmi, a Finnish developer that helped Satoshi work on Bitcoin, sold 5050 Bitcoins for $5.02. This gave 1 Bitcoin the value of $0.0009.
Can You Convert Bitcoin to Cash?
Yes, Bitcoin can be converted to cash. If you’re looking for physical cash you can find buyers through Paxful or HodlHodl. If you’re just looking to convert Bitcoin into fiat currency (i.e. USD, EUR, etc.) there are a variety of Bitcoin exchanges available.
7. Conclusion – Should You Invest in Bitcoin?
By now you can probably see that there is no simple answer to this question. It’s not just a matter of should you invest, but also a matter of how to invest.
Like I said in the beginning, start by educating yourself (you can use our free 7 day crash video course). Learn about the currency, what affects it, what its advantages and disadvantages are, etc.
After you feel you’ve acquired some basic education, it’s time for you and you only to answer this question. When you start out, start small and learn as you go. You’ll probably make some mistakes, everybody does.
You can consult with others and read information online but never follow someone’s advice blindly. Finally, once you’ve decide to get your feet wet and invest in crypto, consider getting a crypto portfolio tracker, read our full review here.
Have you had any experience with different investments in Bitcoin? If so, I’d love to hear about it in the comment section below.
Hey there! Your videos and explanation are great!
One very beginner question. Everywhere says that you need to wait for a confirmation when buying Bitcoin, or that you have to pay to put your transaction in the Blockchain. But why buying with an Exchange is so fast? I mean, you send fiat, press buy and it is done. What is different? Is this transaction really in the blockchain?
This is a blockchain transaction. Typically, exchanges are fast because they have direct access to chains and they have their own crypto supplies. In addition, they are licensed businesses, which means things are going to operate a little differently with them than if just two third parties were engaging in a private transaction.
good article to enlighten beginner investors.
From How to Invest in Bitcoin in 2021? (Hodl Calc + Profit Simulator)
Do not be scammed by *** Link Removed*** THE ALLEGED SCAM SITE IN QUESTION IS – SWISS TRADE OPTIONS. I invested $420 and within one week I got $8326 interest. I was sent an email telling me my trading is completed and I have to pay 20% into the same wallet that was given to me and I invested in, as trading/mining commission fee before I can have access to my balance or do withdrawal. I sent the required amount, which is $1745 from my balance. They told it is not done that way. I have to buy Bitcoin to the wallet they provided.
100% Scam for sure. I had a similar experience as above, but with one more twist. When I was told about the 20% mining fee I smelled a rat and backed off. Then my contact/account manager/salesperson told me I could pay just half of the fee and get half of the profit. I am sad to say that I went for that option. The company happily accepted my payment of 50% then declined to honor the agreement and demanded payment in full. I refused and demanded a refund. They said no problem they would process my refund but I would have to wait 16 weeks to get it. Who ever heard of such crap? That is where I stand now. Waiting for nothing. I also suspect they are in cahoots with ABRA somehow to make sure there is always another ready excuse not to pay.
Do you think XRP will bounce back? Or is it safer to stay out of it all together?
Milyen oldalk vannak ilyen befektetésesbe és menyi pénzzel lehet el kezdeni?