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How to Invest in Bitcoin

September 15, 2018

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How to Invest in Bitcoin

Between January and December 2017, the price of bitcoin rose from $980 to over $19,700—an increase of approximately 1,800%. Growth like this is unprecedented in the traditional markets and it highlights bitcoin’s potential as an investment vehicle.

To take advantage of this opportunity, you need some background information and in this post, you’ll find everything you need to know about bitcoin and how to invest in bitcoin – the world’s most valuable digital currency. Here we go:

What is bitcoin?

Bitcoin is a digital currency that facilitates the transfer of money between two or more people. It is stored in online (and hardware) wallets and transactions are recorded in a public, trustless, and decentralized ledger called the blockchain. With bitcoin, people from all over the world can transfer money across the globe quickly, cheaply, and without the bureaucratic hassles associated with international transfer from traditional banks.

Bitcoin is the foremost and most valuable cryptocurrency in the world. On August 30, 2018, it had a market capitalization of over $120 billion—making it more valuable than global investment bank, Goldman Sachs; giant retailer, Target; and the 2 biggest airlines in the world, Lufthansa and American Airlines.

Is there a “bitcoin stock”?

Since it shares some characteristics with fiat currency (dollars, pounds, euros, yen etc.), many people assume that bitcoin is a physical currency; this is wrong. Also, bitcoin is not a company that is traded on traditional stock exchanges and there are no bitcoin stocks. Rather, bitcoin offers other investment opportunities: it can be bought and sold like an asset and it can be used as a store of value.

Bitcoin price history

On August 23, 2010, the price of 1 bitcoin was $0.06. About a year later, the price rose to $11.19, and by November 2013, bitcoin’s price had increased to over $950. The year 2017 was a groundbreaking one for all cryptocurrencies and bitcoin led the charge. In January 2017, the price of 1 bitcoin was just over $980; by December of the same year, bitcoin price had skyrocketed to over $19,500.

Bitcoin’s first real-world transaction was made by Laszlo Hanyecz in May 2010. He bought 2 pizzas for 10,000 BTC in Jacksonville, Florida. Today, hundreds of companies from all over the world accept bitcoin as a medium of payment, including Microsoft, Wikipedia, Reddit, Virgin Galactic, Playboy, Overstock and KFC Canada.

Advantages of bitcoin

  • Bitcoin reduces the possibility of fraud and identity theft. Traders do not need to share personal information (name, address, or credit card details) with third parties.
  • On average, bitcoin transactions take 15 to 20 minutes. International bank transfers take longer—days, in some cases.
  • Unlike bank accounts that are vulnerable to tampering by the government or central authorities, bitcoin gives wallet holders total control over their money.
  • Fees charged for bitcoin transactions are significantly lower than credit/debit card charges.
  • Bitcoin transactions require no intermediaries (bankers, brokers, etc.). This reduces the margin for human error when payments are being processed.

Drawbacks

  • The cryptocurrency market is still in its infancy. As a result, regulations have not yet been laid down, and infrastructural support is just being set-up.
  • The Bitcoin network is yet to achieve mass adoption. However, resources are being put in place to make this happen as quickly as possible.
  • People with expertise in bitcoin and blockchain technology are a bit scarce at the moment. This is expected to change in the coming years as many people are taking bitcoin-related courses and professional certifications.

Reasons to invest in bitcoin

  • Scarcity equals value. Only 21 million bitcoins will ever be mined and as at August 2018, over 17 million bitcoins are already in circulation. With dwindling circulation, expect bitcoin’s value to rise significantly, giving bitcoin owners unprecedented returns on their investment.
  • In all growing sectors, early investors have an opportunity to make large profits before the sector becomes saturated.
  • In 2017 alone, bitcoin grew by almost 2,000%. That is a 20-times return for traders that held a long position on bitcoin—meaning $10,000 worth of investment at the time returned almost $200,000.
  • Given how quickly the cryptocurrency sector is growing and with bitcoin leading this rapid advancement, in a matter of years, bitcoin will have even more functionalities.

Investment strategies

There are 2 major ways you can invest in bitcoin. They are:

  • Short-term trading: Buying and selling bitcoin through an OTC marketplace, or trading currency pairs e.g. BTC/ETH, BTC/USDT for short intervals. Short-term trading requires a basic level of technical analysis. An ability to isolate trends in the market and to keep track of market sentiment can be used to make more educated predictions and wiser trades.
  • Long-term trading (HODL): Buy some bitcoin, save it in your wallet, hold, and wait for the price to increase. No technical know-how is needed for this, just patience and the shrewdness to buy/sell depending on market conditions.

CoinCola provides traders with all the tools they need for both short-term and long-term trading.

Start Investing

To begin your bitcoin investment journey, open a CoinCola account and start trading right away. CoinCola offers both over-the-counter cryptocurrency trading and crypto-to-crypto pair trading. See also: What’ the difference between OTC and Exchange? Our integrated platform is expressly designed to give users a complete cryptocurrency trading experience. With fast, reliable, and secure trading services at affordable fees, we aim to connect you to the future of finance.