Originally, Satoshi Nakamoto wanted Bitcoin to be an alternative payment method. Ideally, Satoshi created a digital peer-to-peer payment system that allows users to transact directly, eliminating intermediaries. This system doesn’t have a single administrator or central repository. Instead, it’s a decentralized digital currency running on a blockchain network. Bitcoin usage as payment for services and products has increased significantly since its introduction.
In 2021, Bitcoin hit its new all-time high price, exceeding $60,000 per token. This value gain has captured many investors’ attention. Consequently, many people have registered with crypto exchanges like the bitcoinsmarter.org to purchase Bitcoins. These digital platforms allow people to exchange fiat money for Bitcoin. But how does Bitcoin work as an investment tool?
Understanding Bitcoin as an Investment Vehicle
Many people consider Bitcoin an investment vehicle, even though some through the term around loosely. Early adopters bought Bitcoin when its price was low, hoping it would increase. And this description alone fits an investment tool.
Since its introduction in 2009, this virtual currency has grown in value, attracting more people to invest in it. While some people considered Bitcoin worthless, others saw potential in it. Consequently, they bought and held tokens in their digital wallets. With the growing interest in this virtual currency, its value grew too. Thus, people who bought Bitcoins early sold them at a price higher than they bought it.
Ideally, Bitcoin can be an investment vehicle for people who can practice patience and invest long-term. Crypto wallets are not going anywhere. Therefore, you can buy Bitcoins, leave them in your crypto wallet, and eventually sell them to reap some investment returns.
Invest in Bitcoin via Other Companies
Some people don’t want to face the risk of holding Bitcoin in their crypto wallets. Ideally, you could lose your investment if you lose access to your Bitcoin wallet. Also, you can damage your cold wallet, meaning you also lose your Bitcoins. If that’s your worry, you can invest in firms that hold the cryptocurrency on your behalf.
Alternatively, you can buy the stocks of a firm that provides crypto-related products or services. For instance, you can invest via a publicly-traded company with Bitcoin in its balance sheet. You can also find a business with services for paying with Bitcoin or storing the cryptocurrency.
Invest via Bitcoin-Based Companies
You can also find a company based on Bitcoin or underlying technology. For instance, PayPal and Square allow users to trade Bitcoin on their platforms. What’s more, companies like Galaxy Digital and Riot Blockchain focus on blockchain and Bitcoin. IBM, Microsoft, Amazon, and SAP are also big tech names that use blockchain in various business aspects.
You can also invest in underlying hardware if seeking exposure to Bitcoin investment without holding the tokens. For instance, you can invest in a company that creates graphic processing units for computers that solve math problems for blockchain technology.
Overall, investing in the stocks of such companies is more accessible and safer than purchasing and holding cryptocurrency in your digital wallet. And you can do this via a regular brokerage account if you have it with a financial institution. That way, you get added security and simple usage. Ideally, you can reset your brokerage account’s password if you forget it, an option you don’t have with a crypto wallet.
Also, you can invest in a fund that holds Bitcoin. Although few companies create Bitcoin trusts, companies like Osprey and Grayscale help retail investors that want to take this route. When you invest through a Bitcoin fund, you deal with the firm that manages it for information and account questions. However, such services bring additional costs.
Crypto enthusiasts can use Bitcoin as an investment tool. However, understanding different ways to invest in Bitcoin is vital to maximizing your returns. Therefore, take your time to investigate and understand Bitcoin as an investment vehicle before starting.