Bitcoin and cryptocurrencies are one of the hottest topics in investment circles right now. Wall Street analysts have started changing their rhetoric from outright dismissal of Bitcoin towards a respectful acknowledgment of its potentials. Bitcoin and the broader cryptocurrency market have the potential to displace fiat currencies and solve some of the biggest economic woes inherent in the transfer of value.
Bitcoin is also enjoying positive press because of the impressive returns on investment it provided to investors in the last couple of years. Bitcoin currently trades around $2,531 to more than double its price from $1,016.30 on January 2 when the markets opened for trading this year. If you had invested $500 in Bitcoin in 2010, you’ll have almost $18 million today.
The impressive price appreciation that Bitcoin has displayed is attracting many investors to its speculative properties. This piece provides a short but definitive guide on investing in Bitcoin.
Make sure Bitcoin fits your portfolio
I hate to bring the rain on your parade but the undeniable fact is that Bitcoin is not meant for all types of investors. You need to examine your profile as an investor objectively to determine if you can afford to have Bitcoin in your portfolio. Some of the factors you need to consider include how much time you plan to stay invested in cryptocurrencies, how much money you can afford to invest, how much risk can your finances permit you to take, and how well can you master your emotions when you read jaw dropping news headlines.
3 ways to get exposure to Bitcoin
- Own Bitcoin
The first way to gain exposure to Bitcoin is to buy and own Bitcoin just as you would buy any simple investment. Your plan should be to buy low and sell high; hence, you need to be convinced that Bitcoin will climb higher if you buy today at $2,531. Of course, you’ll need to work out the logistics of keeping the Bitcoin in a localized wallet or an online exchange. You’ll also need to pay attention to events in the news that could have a material effect on the price of your holding. The SEC considers Bitcoin a commodity; hence, you’ll need to pay attention to taxes as well.
- Self-directed IRA
If you want to invest into Bitcoin for a long-term plan such as retirement, a self-directed IRA might be the best vehicle for gaining exposure to the cryptocurrency. Many brokerage firms don’t yet have a vehicle to facilitate direct investment in Bitcoin. You can set up a self-directed IRA that helps you invest your retirement funds in Bitcoin. You’ll need professional assistance to setup and operate a self-directed IRA account for investing in Bitcoin. It might also interest you to know that creating a self-directed IRA might also attract some overhead costs.
- Bitcoin Investment Trust
This is not an endorsement of Bitcoin Investment Trust (GBTC),I am only providing you with available information. You can invest in GBTC just as you would invest in any publicly quoted security to gain exposure to Bitcoin. GBTC displays a direct correlation with Bitcoin in terms of price. Hence, investors seeking a traditional investment vehicle for Bitcoin will be able to gain exposure to the price movement of the cryptocurrency. The best part about investing in Bitcoin through GBTC is you don’t have to worry about keeping a Bitcoin wallet safe from losses or theft.