Are more of your friends and family making money from crypto? Like a growing number, you may be interested in adding crypto to your trading or retirement accounts.
Learning how to invest in Bitcoin can give you the confidence to buy while avoiding scams and fees.
Approximately 40% of Americans own crypto, as more people seek another way to earn investment income.
It’s still an excellent time to start for several reasons I’ll show below.
Find a crypto IRA company to help you take control over your retirement savings.
Is it safe to invest in Bitcoin today?
Bitcoin is one of the safest cryptocurrencies since it has ample name recognition, demand, and liquidity.
Additionally, it’s less volatile than altcoins, including well-established ones like Ethereum.
Below are several factors to consider before investing in Bitcoin:
- Price trends: The original cryptocurrency has bullish and bearish periods with volatile price swings. For example, your profit potential can be higher when buying before the next Bitcoin halving, typically increasing scarcity and token values.
- Holding period: Long-term investors have been awarded so far, but it can take several years if you buy near a cycle high or during “crypto winter.” Short-term trading can also be a successful strategy if you’re happy accumulating small gains.
- Asset allocation: It’s essential to invest only what you can afford to lose with position sizing. One suggestion is to allocate 1% of your portfolio towards Bitcoin. A small asset allocation helps you profit while responsibly managing risk.
- Security: You must decide if you want to buy actual Bitcoin, which requires holding private keys in a secure crypto wallet to prevent account theft. Otherwise, you may consider Bitcoin-linked funds in your brokerage account for indirect exposure.
The increase in successful Bitcoin investors is one reason why more investing apps and retirement accounts offer exposure to this digital asset.
Still, the bulk of your portfolio typically remains in traditional stocks and bonds for more predictable returns.
For example, I started investing in Bitcoin in 2019 and continue to maintain a small position while taking profits along the way as its value goes up and down.
However, I’ve also lost money trading cryptocurrency and it’s critical to understand your personal habits and goals.
Cryptocurrency is volatile, thus requiring a high risk tolerance and patience.
In addition to cryptocurrency investing, you may also consider real estate and alternative assets like gold or silver.
These investment options have a longer track record and less volatility without relying entirely on the stock market.
5 Best Ways to Invest in Bitcoin
There are several different avenues of buying Bitcoin with direct or indirect ownership.
Crypto IRA
A cryptocurrency IRA is a tax-advantaged traditional or Roth retirement account in which you pay taxes only once.
Depending on the account type, that can be during the contribution year or withdrawal date. Consider this account to maximize your potential long-term gains and for direct ownership.
This account is separate from your stock and bond IRAs and specifically for alternative investments.
Rolling over an existing 401(k) or IRA is usually the easiest way to start. New contributions count towards your annual IRA contribution limit.
You directly invest in crypto with the ability to transfer your Bitcoin keys to a personal wallet in retirement.
Until then, the IRS requires a third-party custodian to store your assets in a multi-signature custodial wallet to qualify for the tax perks.
Investment options, fees, and minimums differ by platform. Several reputable providers include:
- Bitcoin IRA: One of the oldest IRA companies, perks include over 75 cryptocurrencies and military-grade security. Start with a $3,000 minimum investment, although setup and annual service fees apply.
- iTrustCapital: Another of the original crypto IRAs, trade over 60 cryptocurrencies with only a 1% transaction fee and no setup or ongoing fees. You can also buy or sell fractional gold and silver for additional portfolio diversification.
- Alto CryptoIRA: Invest as little as $10 in over 200 cryptocurrencies and a 1% trade fee. There are no setup or ongoing fees, making this one of the most budget-friendly platforms.
The best crypto IRAs store your assets offline in a cold storage wallet for optimal security. Your tokens are usually fully insured against digital theft and crime.
Bitcoin ETF
A Bitcoin-linked ETF (exchange-traded fund) lets you track the spot price of Bitcoin through passive ownership.
The trading fees and fund expense ratios are competitive with traditional stock and bond index funds, although you can’t convert your shares into crypto.
Some are strategy funds that invest in crypto futures and miners instead of tracking the spot price. These funds have different investment performance and fees from spot funds and can be riskier.
You may appreciate the simplicity of investing in “paper Bitcoin” through your existing brokerage account instead of buying Bitcoin directly.
This can be a taxable trading account, IRA, or 401(k). For example, your 401(k) provider may offer an ETF that you can invest in directly from your paycheck and potentially earn matching employer contributions.
I also like holding a combination of ETFs and private keys for optimal versatility.
I specifically like that you’re not responsible for storing your crypto keys or remembering a seed phrase while enjoying a similar investment performance.
Conversely, you don’t have a 24/7 trading window and are bound to when the stock market is open to buy or sell.
Some of the biggest spot Bitcoin funds include:
- Bitwise Bitcoin ETF (BITB)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- Grayscale Bitcoin Mini Trust (BTC)
- iShares Bitcoin Trust (IBIT)
To perform your due diligence, read the fund prospectus and compare fees. These funds should be available on your favorite investing app.
You may be able to buy fractional shares instead of having to purchase whole shares which is costlier than fractional crypto.
Bitcoin Stocks
Bitcoin-related stocks provide indirect exposure as you invest in companies that mine or accumulate cryptocurrency.
MicroStrategy (MSTR) is perhaps the best-known Bitcoin stock that uses most of its revenue to purchase Bitcoin as its primary reserve asset.
You may also decide to buy shares of crypto mining stocks, such as:
- CleanSpark (CLSK)
- Hive Digital Technologies (HIVE)
- Mara Technologies (MARA)
- Riot Platforms (RIOT)
This option is more volatile as stock shares perform differently than the spot price.
It can be better for short-term trades as these companies can temporarily outperform Bitcoin and other cryptocurrencies.
Cryptocurrency Exchanges
Buying directly from a crypto exchange is the original way to buy Bitcoin.
It’s still the only way to hold your private keys and transfer your tokens to a personal wallet. Perhaps you’re familiar with the expression, “Not your keys, not your coins.”
This investment method solves that problem and is similar to buying individual stocks or physical gold.
You can buy or sell crypto on the exchange 24/7 with a taxable trading account.
Depending on the exchange, you may be able to earn staking rewards which is similar to earning bank interest by keeping your assets on the platform for liquidity.
Some of the most-used crypto exchanges are:
Compare fees, features, and platform layout to find the most appealing option. The minimum trade size is $1 for most assets on any platform.
Many consider Coinbase the best for beginners. It’s where I started as it’s one of the largest crypto trading platforms in the United States with an easy-to-use platform.
The default storage method is a “hot wallet,” which keeps your coins readily available for trading but is more prone to account breaches and theft.
For an extra security layer, consider opening a cold wallet to store your long-term holdings offline instead of relying on a strong password.
Traditional Stockbrokers
Several stock trading apps let you open a crypto trading account for buying Bitcoin and select altcoins, usually commission-free.
Therefore, it’s possible to invest in stocks and crypto on the same platform. These platforms typically offer a semi-direct ownership method.
Unlike a crypto exchange, your assets are held in a custodial wallet so you can’t view your private keys. However, you can usually transfer them out to a private wallet for a fee and receive your keys then.
You won’t pay trading fees, but transaction costs are usually baked into the spread between the spot price and buying/selling cost. Anticipate a 1% spread and a $1 minimum investment.
Participating online brokers include:
These platforms are beginner-friendly and typically offer several stock trading tools that can help if you’re a swing trader or want to buy fractional stock and ETF shares.
Is investing in Bitcoin for retirement a good idea?
Adding Bitcoin to your retirement strategy can be smart when you’re comfortable with the extra risk and practice responsible asset allocation.
The upside potential suggests it can help build wealth if you hold it for multiple years across several market cycles.
More workplace retirement plans are offering Bitcoin-linked funds as investors increasingly want access to alternative assets to hedge against stock and bond risk.
Self-directed crypto IRAs are another option when you prefer direct ownership.
Before investing, it’s critical to evaluate your personal goals along with the pros and cons.
Advantages of a Bitcoin retirement strategy include:
- Only pay taxes once
- Can potentially outperform stocks and bonds
- Additional portfolio diversification
- Purchase fractional shares
Potential disadvantages include:
- More volatile than stocks and bonds
- Potentially high transaction and service fees
- Limited investment history
- Pre-retirement withdrawals are penalized
Should I invest in Bitcoin?
Knowing how to invest in Bitcoin using the above options can help you avoid expensive fees and scams.
Bitcoin ETFs and crypto exchanges are the best options for many investors. If you want exposure to potential growth, it’s worth buying a small position.
However, this isn’t a good option for risk-averse investors. Instead, assets like large-cap stocks, dividend-payers, and precious metals can be a better fit.
FAQs
Can you invest in Bitcoin with $100?
Yes, you can buy fractional Bitcoin in any dollar amount on most crypto exchanges. Bitcoin-backed IRAs may require a higher initial investment, such as $1,000 to $5,000, but there are no subsequent minimums, making it possible to invest $100 at a time tax-advantaged.
Is it too late to invest in Bitcoin?
It’s not too late as Bitcoin has strong demand and continues to have long-term growth potential, albeit investment risk. However, it’s harder to become a “crypto millionaire” with a small investment as the early gains have already been made.
Why should I invest in Bitcoin over other cryptocurrencies?
Bitcoin is less volatile and has more demand than its alternatives. Its pricing trends are more predictable, which makes it a better candidate for profitable short-term trades or long-term investing. Finally, many consider it the “gold standard” of cryptocurrency.
What is the best way to store Bitcoin after buying?
A non-custodial cold storage wallet is the most secure method as you keep your cryptocurrency offline in a personal storage device instead of relying on a custody service. However, you cannot recover your assets if you lose your private keys or seed phrases.
Find a crypto IRA company to help you take control over your retirement savings.