Plan to enter your name, address, phone number, email, and social security number to activate your cryptocurrency account. Some require additional information, such as a photo of your driver’s license or passport, to access full account features. The experience is similar to opening any regular brokerage or bank account.
Bitcoin is the largest and most popular cryptocurrency in terms of market capitalization. While Bitcoin is arguably the most important digital currency, most exchanges also give you access to currencies like Ethereum, Cardano, Stellar Lumens, or Dogecoin.
Each currency has its own use cases, potential benefits, and market risks. Most cryptocurrencies are considered riskier than Bitcoin, so invest with caution. Make your first trade
To buy Bitcoin, enter the amount of Bitcoin (“BTC”) into the trading tool on your exchange. You will need enough local currency for the transaction to go through once you click the submit button.
Bitcoin transactions happen instantly on some exchanges, while others may take some time to process transactions on the Bitcoin blockchain. According to an exchange called Kraken, standard Bitcoin transactions require four confirmations and take about 40 minutes.3 However, you can choose to pay higher transaction fees for faster processing times with some exchanges.
Alternatives to buying Bitcoin directly
If you want to buy cryptocurrency through a third party, you can take advantage of the growing number of alternative investment options. For example, Grayscale Bitcoin Trust allows investors to invest in Bitcoin through a traditional investment fund that is, in some ways, like an ETF. Shares of this fund trade under the symbol GBTC on the OTC exchange OTCQX and can be purchased through your brokerage account.
Another way to gain indirect exposure to Bitcoin and the cryptocurrency industry is to use other ETFs focused on the cryptocurrency and blockchain industry, such as Siren NASDAQ NexGen Economic (BCLN), Bitwise Crypto Industry Innovators (BITQ) and Capital Link NextGen Protocol ETF (KOIN) . Consider the fees and risks of investing in an ETF, especially if it focuses on a relatively new sector.
Bitcoin is risky and volatile. Prices go up and down very quickly and sometimes without warning. One Twitter message from Elon Musk or one negative message from a government official could be enough to cause Bitcoin’s value to plummet.
While Bitcoin and other cryptocurrencies may be reasonable assets to hold in your portfolio, don’t invest more than you can afford to lose and consider holding cryptocurrencies as a relatively small portion of your total investment.
If you do it right and sell your Bitcoin for a profit, it’s important to note that Bitcoin sales are taxable. So set aside enough money to cover your tax bill if you expect a significant capital gains tax after a profitable crypto sale or trade. Should I invest in Bitcoin? Everyone has to make their own choice as to whether they think the price of Bitcoin will go “to the moon” or to the landfill. If you decide to invest in Bitcoin, invest cautiously and avoid devoting too much of your net worth to this highly volatile asset.