How to Invest in Bitcoin? Is It Safe?
By: Ofir Beigel | Last updated: 2/21/24
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 to invest in Bitcoin are:
- Buying and holding (aka hodling)
- Derivative trading
- Bitcoin ETFs
The 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 Bitcoin
- Mining Bitcoin
- Various Bitcoin Investment Schemes
- Frequently Asked Questions
- Conclusion – is Bitcoin a Safe Investment?
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…
Bitcoin has been proclaimed dead over 475 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 5318 days out of a total of 5460 days (97.4%)
Last updated: 02/26/24 07:27 AM EST
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.
Here are a few pointers for buying and holding Bitcoin:
- 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 peace of mind.
- Use Dollar cost averaging (DCA) – This means that you don’t buy all of your Bitcoin 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.
The first European Bitcoin ETF was launched on August 15, 2023, on the Euronext Amsterdam stock exchange. This was followed up less than five months later with the U.S. Securities and Exchange Commission (SEC) approving 11 different Bitcoin ETFs in January 2024. Major asset managers earned approval, including BlackRock, Fidelity, and Franklin Templeton.
ETFs are an easy way to invest in an asset or group of assets without having to buy the actual asset yourself. For example, gold ETFs allow people to invest in gold without having to buy their own gold bars. The same goes for Bitcoin ETFs; you can invest in this asset (Bitcoin) without having to understand the blockchain, private keys, or cryptocurrency wallets. Bitcoin ETFs are good for getting investment exposure to cryptocurrency as an asset class. The downside with Bitcoin ETFs is you can’t freely move your Bitcoin around, send it to friends, or directly buy goods and services with it, like you could if you owned the real thing.
Bitcoin trading is different from buying and holding. When you are trading Bitcoin, it means that you are actively trying to buy Bitcoin at a low price and sell it back at a higher price in relatively short time intervals.
Successful trading requires knowledge and practice. The trading market is occupied by very large players who are waiting for newbies to come in and throw their money away by trading aimlessly.
Here’s our beginner’s guide to Bitcoin trading:
From my perspective, it’s much more cost-effective to buy Bitcoin 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.
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).
These sites usually take money from people around the web with the promise of good returns. They then start off by paying these returns with money from new sign-ups, which creates 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.
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.
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 who 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.
By now, you can probably see that there is no simple answer to this question. It’s not just a matter of whether you should invest but also of how you should 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, its advantages and disadvantages, 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 Bitcoin investments? If so, I’d love to hear about it in the comments section below.