At the time of writing, the bitcoin (BTC) price is hovering around the £8,000 mark. Astounding when you consider that when it entered the investment arena on the 20th of July 2010 the value of a single bitcoin was a mere £0.05. What's more, the bitcoin market price has increased with a staggering 794 per cent over the past twelve months, regardless of a number of significant drop-offs early in the year.
As a comparatively new form of money, bitcoin and the technology behind cryptocurrencies are revolutionising the way we construct our financial systems. The technology that underlies Bitcoin, the Blockchain, has disrupted the way in which we transfer monetary value, removing central institutions from the equation and as a result lowering or eliminating transaction fees. Thus, many financial institutions, venture capitalist and banks are investigating cryptocurrencies, investing their time and money. If anything, this is a clear indicator, that as investors, we should be looking to follow suit.
But how can you, as an individual or perhaps a representative of an institution, acquire and secure cryptocurrency for investment? There are essentially 3 options available, and your preferred method will depend on your risk appetite. Let's have a look at your choices.
High Risk / Most Control
This is the cheapest way to buy low quantities of cryptocurrency. This method attracts the lowest fees as you are transacting directly and not paying for 3rd party broker commissions or fees.
You simply create a cryptocurrency wallet, visit a cryptocurrency exchange site and purchase the desired amount of the currency you would like to invest in. You can either hang onto your coins for the long-term or sell them as soon as your investment has generated a satisfactory profit.
While you have the most control when buying cryptocurrency directly, this is the approach that poses the most risk, most especially on a security front. If you're buying and selling cryptocurrency as an individual you are solely responsible for the storage of your coins. With increasingly advanced tactics being used by cybercriminals to hack digital wallets, this is a major concern for independent investors and most will lack the knowledge or tools to sufficiently secure their investment.
Medium risk / Moderate control
This option is most viable for an investment enthusiast, or beginner, as the entire investment process is simplified and tailored to the individual's investment objectives.
Bitstocks is an example of a company that offers a market advisory service. Our qualified market advisors are knowledgable in the field of cryptocurrency as an investment and offer their expertise to put together an appropriate selection of cryptocurrencies in your portfolio. Certain control is relinquished to the advisor in terms of the processing of buy or sell positions, but with a transparent and secure process, investors face less risk than trading themselves. They can sleep easy in the comfort of knowing their new found digital wealth is being secured via the industry's best security practices and their coins are never compromised.
Highest Risk / Moderate Control
Spread Betting companies such as IG Index have added a bitcoin trading option to their platforms. Spread betting lets you gain exposure to the price volatility of bitcoin by betting “long” or “short” on the price. While this is a great way to get price exposure to bitcoin, you will not own the underlying asset, therefore exposing yourself to ‘margin calls’ and losses that can far exceed your initial investment.
As an ever-growing cryptocurrency, seeing significant traction in the investment market, the process of acquiring, trading in and betting on cryptocurrency is becoming more mainstream and there are a few options available to get started. Evaluate your risk personality against each of the options to decide the best approach for your individual goals and comfort level with cryptocurrency.