How To Invest in Bitcoin in 5 Simple Steps

Investing in Bitcoin has been compared to investing in “digital gold.” Setting aside the inflation-hedge claims of Bitcoin enthusiasts, comparing it to gold is a good analogy when considering the myriad ways to invest in Bitcoin. 

Each of these methods has different advantages and disadvantages, and which you choose depends on your goals and ultimate risk tolerance. 

Invest in Companies That Utilize Blockchain Technology

One example of this investing strategy is the Amplify Transformational Data Sharing ETF and actively-managed ETF trading under the ticker BLOK. According to its prospectus, the fund's purpose is to “invest in equity securities of companies actively involved in the development and utilization of blockchain technologies.” 

Invest in a Bitcoin ETF

An ETF is a specialized investment vehicle that tracks the performance of a particular asset without the investor having to own the actual asset itself. It takes away the hassle and security risks of owning Bitcoin directly and opens the doors for anyone with a brokerage account to invest in Bitcoin. 

Participate in Bitcoin Mining

Most Bitcoin miners own special hardware optimized for the mining process. These machines come at a cost that can run into thousands of dollars. In addition, these computers consume a significant amount of power, so the cost of electricity has to be factored in when considering whether it is a better investment to mine Bitcoin rather than buy it directly. 

Purchase Bitcoin Directly

If you are new to cryptocurrencies, owning Bitcoin differs from holding other assets. Investors can buy Bitcoin from an exchange such as Coinbase and take ownership in an encrypted wallet. More technically, the wallet stores the private keys that you use to access your coins and prove they belong to you.