Today I will be explaining the basics of buying and investing in bitcoin. I am not a bitcoin or cryptocurrency investor, and I will not be sharing my opinion on this currency in this video. My simple goal is to explain in an unbiased fashion how you would go about investing in bitcoin. I hope that you, as a diligent investor, have done your research before deciding to invest in anything.
The simplest way to invest in bitcoin is buying it outright. Buying bitcoin is really easy, as many firms within the United States as well as around the globe are involved in the business of buying and selling bitcoins. For investors in the United States, I recommend using Coinbase. This is the world’s most popular way buy and sell bitcoin, etherium and litecoin. Coinbase makes money from charging a small transaction fee for buying and selling coins as well as foreign currency conversion fee.
Coinbase offers additional services like automatic bitcoin buying at set intervals as well as the ability to link your bank account to your Coinbase wallet. One thing to remember is that Coinbase is not a bitcoin exchange. You are buying your coins directly from the firm, which in turn has to source them from other buyers. This creates issues or delays when executing orders during fast market moves. This is one major disadvantage to using Coinbase, especially for those looking to trade the price swings of cryptocurrencies. If you are looking to buy and hold, this is not much of a concern.
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For traders looking for a bitcoin exchange, I recommend BitStamp. BitStamp works like a traditional stock exchange, where you are trading with other users and the company acts as the middleman. Liquidity is much higher with a bitcoin exchange like BitStamp. Since you are trading with other users, BitStamp does not have to source the coins. They simply facilitate the transactions and charge a small fee based on your monthly dollar volume of trading. The more you trade, the less you pay in fees.
While there are ways to invest in bitcoin indirectly, I do not recommend them. One example of this is the Bitcoin Investment Trust. This is an ETF, or exchange traded fund, operated by Grayscale Investments that trades on an exchange like a stock. As of June 28th, they have 1,868,700 shares outstanding with a bitcoin per share ratio of 0.09289534 which gives them ownership of 173,594 bitcoins. Currently, they have a market capitalization of $741 million giving each bitcoin under management a value of roughly $4270. Today, one bitcoin is worth roughly $2555. This means that the bitcoins in the Bitcoin Investment Trust are at a 67% premium! On top of this, Grayscale Investments charges a 2% fund management fee. For that reason, I recommend investing in the coins through direct ownership if you are going to invest in the currency.
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.