How to Invest in Bitcoin (BTC)

Although Bitcoin was originally envisioned as a technology for payments, today most people consider it to be an investment asset—something to save

Bitcoin began as a technology for payments, but today most people use it as an investment asset. You can save in a Bitcoin IRA or add it to your portfolio as an alternative asset. Many people use cryptocurrency as a hedge against inflation or to get diversification in their portfolios. Bitcoin has experienced astronomical growth and has outpaced recent gains on major stock market indices, making it an attractive alternative.

Compared to blue chip stocks like Pfizer, Nike, or Nestle, Bitcoin is quite young. 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, famously 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.

What factors impact the price of Bitcoin?

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

Bitcoin halving events: Every four years or so, the number of new Bitcoins created is cut in half. This event can impact the supply and demand of Bitcoin in the market and influence its price.

Demand and supply in the market: The price of Bitcoin is largely determined by how much people want to buy it in relation to how much of it is available on cryptocurrency exchanges. Higher demand usually leads to higher prices, while less demand can cause prices to fall.

Relative strength index (RSI): This technical analysis indicator measures the magnitude of recent price changes to evaluate whether an asset is overbought or overvalued. Higher RSI values can indicate that an asset is due for a price decrease, while lower RSI values may suggest that an asset is undervalued.

Fear and greed index: The crypto fear and greed index tracks traders’ emotions and sentiments towards Bitcoin and other cryptocurrencies on a scale of 0 to 100. Higher values on the index indicate greater bullishness in the market, which may be linked to higher prices.

How to invest in Bitcoin

There are a few different ways to invest in Bitcoin.

Buy Bitcoin directly through a cryptocurrency exchange

One of the most popular ways to invest in cryptocurrency is to buy Bitcoin directly. You can do this by opening an account with a cryptocurrency exchange. Once your account is created, you can sync it 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,”