How To Invest In Bitcoin And Make Money?

Many people believe that Bitcoin is the future, and those who endorse Bitcoin believe it facilitates faster and lower-cost international payments. One of the primary reasons behind the growth of digital currencies such as Bitcoin is that people can use them to substitute for national fiat money and traditional commodities. While most governments or central banks do not recognize Bitcoin, it can be exchanged for conventional currencies. Its exchange rate against the US dollar attracts potential investors and traders.

Three Ways to Invest in Bitcoin:

In the past decade, Bitcoin’s popularity has skyrocketed, gaining the support of many institutional investors. Retail investors, however, continue to be dazzled by how they should invest in digital assets. Investing in cryptocurrencies without actually owning them is possible in various ways. It would be a better approach for those who want to learn more about the crypto market without diving in headfirst.

1. Invest In Cryptocurrency-Holding Companies

Investing in companies that hold Bitcoin or provide digital currency-related services can indirectly benefit from Bitcoin. Investors may choose from a variety of publicly-traded companies that meet these criteria. Both MicroStrategy and Tesla are well-known companies that have invested in this field and have achieved notable results.

✔ MicroStrategy

Known for its Bitcoin investments, MicroStrategy is a Virginia-based business analytics company. Its stock price closely tracks the price fluctuation of Bitcoin, and the company has spent more than $2 billion on Bitcoin.

✔ Tesla

Tesla has announced that it will accept Bitcoin as payment for its products after purchasing $1.5 billion in Bitcoin. However, the company has recently stopped accepting Bitcoin as a form of payment and has also sold most of its Bitcoin holdings. Also, Elon Musk speculated that Tesla may have sold its entire Bitcoin holdings. He no longer supports Bitcoin due to the negative environmental impact of Bitcoin mining. Since he consistently tweets in favor of dogecoin, speculations have arisen that dogecoin maybe his currency of choice.

✔ Coinbase

Coinbase is the first cryptocurrency exchange listed on the New York Stock Exchange. Coinbase’s price is directly related to Bitcoin. It provides investors with another way to get exposure to Bitcoin without dealing with wallets or walking through the complicated purchasing process.

2. Invest in Companies that Deal with Cryptocurrency-Related Technology

Investors can also profit from digital currencies by investing in companies that deal with blockchain technology. For example, Galaxy Digital and Riot Blockchain are firms focused on developing the underlying technologies that support digital currencies.

Similarly, some household names, including Microsoft, Google, IBM, and Amazon, utilize or consider blockchain technology in various areas of their operations.

Investors may also invest in companies that produce the underlying hardware used by cryptocurrency miners, such as those that make digital graphics processing units to solve complex mathematical equations for blockchain technology.

3. Invest in Cryptocurrency-Related Investment Funds

Investors can also invest in a Bitcoin mutual fund by buying shares of the Grayscale Bitcoin Trust (GBTC), where they will gain indirect exposure to digital currencies. The fund is currently only available to accredited investors who invest at least $200,000 or possess a net worth of at least $1 million. It enables investors to purchase cryptocurrencies without the use of a digital wallet. However, the fund charges a 2% management fee, an expense that investors would not incur if they held the cryptos directly. If this investment threshold is too high, investors may consider blockchain ETFs that invest in cryptocurrencies’ technology.

Despite offering some diversification and decreasing risk, crypto-based funds still carry considerable risk and charge much higher fees than broad-based index funds with consistent returns over time. Index-based mutual funds and exchange-traded funds (ETFs) may be better if investors seek steadily growing wealth.

Are There Taxes On Bitcoins?

Internal Revenue Service (IRS) of the United States announced in March 2014 that virtual currencies such as Bitcoin would be considered property rather than currencies for taxation purposes. When Bitcoin is held as a capital asset, it will incur capital gains or losses, whereas when Bitcoin is held as inventory, it will incur ordinary gains or losses. Therefore, IRS can impose a tax on the sale of Bitcoins you mined or purchased from another party or on the use of Bitcoins to pay for goods and services.

The Bottom Line

Instead of holding Bitcoin itself, it is safer and easier to invest in Bitcoin through the methods discussed above. A traditional brokerage account can benefit investors since it provides additional security and ease of use while participating in the crypto market.

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