Investing in Bitcoin is all the rage but how exactly does a beginner get started?
Do you need to already have Bitcoin to invest?
Or do you transfer money from your bank account to somewhere and convert it to Bitcoin? What does that look like?
We’ll answer all of these questions and list 10 popular websites for investing in Bitcoin.
Going forward, we’ll use BTC, which is the symbol for Bitcoin on exchanges and trading platforms.
How To Invest In Bitcoin
Investing in BTC is similar to investing in stocks, except far more volatile because of the daily swings in BTC. Here are the steps to invest in stocks from the beginning:
- Open a brokerage account.
- Deposit funds from your bank into the brokerage account.
- Buy a stock using deposited funds (cash balance).
- Later sell the stock for a gain or loss. Funds are returned to your cash balance.
The main difference with BTC is for step three; you buy BTC or another cryptocurrency instead of stock.
With BTC, the above flow is similar in most cases but it depends on the exchange or trading platform. In some cases, you can buy BTC using your credit card or by transferring funds from your bank account.
For other platforms, you must transfer BTC directly. This is known as a direct deposit of BTC.
We’ll discuss how to invest in BTC for US citizens. The methods vary across countries because of differences in laws and regulations. Some countries require more private information than others to verify you are legitimate.
How To Deposit USD To Buy Bitcoin And Crytpo
Coinbase is one of the most popular platforms and has a straightforward process. Some of the mentioned websites below will follow this same process. We love Coinbase because you get $10 if you invest $100.
With Coinbase, you open a Coinbase account and link your bank account or credit card. Then transfer funds from your bank account to purchase BTC or purchase using your credit card. Credit card purchases of BTC are the most expensive.
The mechanics of purchasing BTC involve entering a USD amount or a BTC amount. The website will then convert the other currency.
For example, if you enter in 500 USD, the website will fill in the BTC side with 0.0357 (or what ever the current BTC exchange rate is).
Once you have the amount filled in, click to purchase your BTC. While credit card transactions cost the most, they are also the fastest to complete BTC transactions.
Bank accounts can take up to a few days. Keep in mind that you will get the exchange rate at the time you purchased BTC.
If BTC goes up 1000 by the time your transaction completes three days later, you’ll miss out on the rise.
Where exactly does the BTC you’ve purchased go? After all, you haven’t invested it yet. Your BTC sits in what’s called a digital wallet. Most all exchanges have their own wallet that you use to contain your BTC.
Going back to the brokerage example, your cash balance is used to trade stocks. BTC in your wallet is used to trade BTC.
What about your USD?
Your wallet has a space for BTC and USD. If you deposit 10,000 USD and buy 5,000 USD of BTC, your wallet will look like this:
Wallets are a big topic of discussion when talking about cryptocurrencies. We won’t go into depth with them but you can use a stand-alone wallet if you don’t want to use the exchange’s wallet. Electrum.org is one example of a stand-alone wallet. This can be desktop, mobile or website based.
You can even use a hardware wallet such as LedgerWallet.com.
Once you’ve deposited funds with the exchange of choice and purchased BTC, you’re ready to invest. Trading platforms on the exchanges look very similar to brokerage platforms.
You’ll have a chart and buy/sell buttons with the amount of BTC to trade.
When trading in BTC, you can exchange into other cryptocurrencies, which is another method for selling BTC. Or you can exchange out of another cryptocurrency and into BTC, which is the same as buying BTC.
Direct Deposit Of BTC
In the case that the exchange doesn’t allow purchasing BTC by transferring funds or using a credit card, you can deposit BTC from another exchange.
This is done by getting your wallet address from the target exchange. Then enter it on the source exchange along with the amount of BTC to transfer to the new exchange.
The transaction takes a few minutes for the exchanged BTC to appear in the target wallet.
Top 10 Most Popular Bitcoin And Crypto Investing Sites
1. Coinbase - As we mentioned above, Coinbase is by far the most popular because you can invest directly with USD. However, you can only currently purchase Bitcoin, Ethereum, and Litecoin on the plaform. Get started with Coinbase here.
2. Bitconnect.co - Allows direct deposit of Bitcoin. You can also earn daily interest. Try Bitconnect here.
3. BitStamp.net - Allows direct deposit of Bitcoin. Try BitStamp here.
4. Bitfinex.com - Multiple cryptocurrencies. Trade on margin. Try Bitfinex here.
5. Hitbtc.com - Advertised as the most advanced Bitcoin exchange. Try Hitbtc here.
8. Kraken.com - Allows margin trading. Try Kraken here.
9. Coinmama.com - Bitcoin and Ether. Buy with a credit card, Bitcoin or Ether. Try Coinmama here.
10. Gdax.com - Very low transaction fees. Try Gdax.com here.
** I'm adding Robinhood Crypto to the bottom of this list because, on January 25, 2018, they announced that they would be offering free cyrpto trades on their platform. They are starting in just a few states, and with just Bitcoin and Ethereum, but they plan on expanding this quickly. This could be a game changer.
Investing in BTC isn’t much different from investing in stocks. With BTC, you need to open an account with an exchange. With stocks, you open an account with a brokerage. Then you deposit funds.
The only difference with investing in BTC is that you have to purchase BTC, first using deposited funds, before you can trade BTC. Although, your initial purchase of BTC is your first opening trade.
Have you ever used any of these sites?