How to Invest in Bitcoin: A Beginner's Guide

Bitcoin was originally envisioned as a technology for payments. Today, however, most people consider it to be an investment asset—something to save in a Bitcoin IRA

Bitcoin was first created as a payment technology, but today, most people see it as an investment asset—something to save in a Bitcoin IRA, for example.

As a decentralized, digital asset, the top cryptocurrency is a popular investment option for people who want to add alternative assets to their portfolios. Many find cryptocurrency appealing as a hedge against inflation or as a way to better diversify their investments. Bitcoin has experienced astronomical growth and has outpaced recent gains on major stock market indices, making it an attractive alternative. 

Historical price of Bitcoin

Bitcoin is relatively young, especially in comparison to blue chip stocks like Pfizer, Nike, or Nestle. It was launched in 2009, and its price has skyrocketed. 

In 2010, Laszlo Hanyecz, a software developer and an early believer in Bitcoin’s value, paid 10,000 Bitcoins for pizza. Today, those coins would be worth over $580 million. 

Since then, Bitcoin’s price has continued to climb. At the beginning of 2024, its price was $44,187. By March 2024, its price reached its highest level ever, surpassing $73,079. 

“The potential benefits of investing in crypto are potentially higher returns than a more traditional stock and bond portfolio may yield on its own,” said Drew Feutz, a certified financial planner (CFP) with Migration Wealth Management. 

However, Bitcoin often experiences price fluctuations and dips. As of September 2024, its price had dropped to about $58,000. 

Bitcoin price is influenced by various factors 

Bitcoin’s prices rise and fall for a number of reasons. While the price of stocks can fluctuate based on company performance or industry news, Bitcoin is affected by other factors:

How to invest in Bitcoin

Investing in Bitcoin can take different forms.

Buy Bitcoin directly through a cryptocurrency exchange

Buying Bitcoin directly is one of the most popular ways to invest in cryptocurrency. You can buy Bitcoin by opening an account with a cryptocurrency exchange. You can sync the account with your bank account and use your money to buy Bitcoin. 

Invest in a Bitcoin IRA

Another way to invest in Bitcoin is to open a Bitcoin IRA. A Bitcoin IRA is a tax-advantaged retirement account that allows you to invest in Bitcoin and other cryptocurrencies. Bitcoin IRAs have the same tax benefits and contribution limits as traditional or Roth IRAs, but you can invest in alternative assets. 

Consider cryptocurrency ETFs

A relatively new way to invest in Bitcoin is through a crypto exchange-traded fund (ETF). With these ETFs, you don’t directly own Bitcoin, but the performance of the ETF will reflect Bitcoin’s performance. 

Crypto ETFs allow you to buy and sell shares through an investment brokerage account, without the need to worry about storage for cryptocurrency or opening a separate cryptocurrency exchange account. 

Invest in cryptocurrency-related stocks

For those wary of investing directly in Bitcoin, another option is to invest in cryptocurrency-focused stocks. Potential options include publicly traded cryptocurrency exchanges, technology firms, and payment processors; these companies may use Bitcoin or use it in their operations, so you’ll indirectly benefit from Bitcoin’s performance. 

Is it a good time to invest in Bitcoin?

Bitcoin is still a relatively new asset, but it has displayed impressive past performance, and more and more companies are using it or accepting it as a payment method. As Bitcoin becomes more established, it may experience fewer fluctuations in price too. 

“Bitcoin’s price volatility is steadily decreasing over the years,” said Brady Swenson, co-founder and head of product marketing at Swan Bitcoin. “As a far more liquid asset, its price volatility is lower than relatively illiquid cryptos.”

If you plan on holding onto your investment for the long haul, investing money into Bitcoin could be a good choice. 

“It’s always a good time to invest in Bitcoin with a long-time horizon, [such as] 10 or more years,” said Swenson. “Cryptos are for gambling, not investing.”

Current cryptocurrency prices

Although Bitcoin is the most well-known cryptocurrency, it’s not the only investment option you have. When deciding where to invest your money, consider these alternatives: 

The takeaway 

Despite some severe dips, Bitcoin’s performance has been impressive. Over the past 15 years, Bitcoin’s price has skyrocketed and, as companies adapt to the technology and it’s a more commonly accepted payment method, there’s the potential for even more growth. 

However, cryptocurrencies like Bitcoin can be volatile and risky. Since Bitcoin is so new, it’s hard to gauge how it will truly perform over the long term. Only invest what you don’t need in the short term and diversify your portfolio so that the performance of your other