Bitcoin has been through several boom-bust cycles over the last few years.
If you believe the cycle could be repeating right now, this could be an ideal opportunity to make your first investment in Bitcoin.
Fortunately, investing in Bitcoin has become much easier in recent years.
The industry has matured and regulations have improved, which means there are several convenient ways to add this asset class to your portfolio.
Here’s how you can get started.
1. Choose a Crypto Trading Platform
The most important step is to pick the right crypto trading platform.
Bitcoin was designed to be a peer-to-peer network, which means the traditional way of investing in it is to buy it from someone directly.
However, these direct transactions have become rare as trading platforms and crypto exchanges have stepped in to simplify the process.
Much like a stock trading platform, these crypto exchanges allow you to buy and sell cryptocurrencies easily through your smartphone or laptop.
They offer access to a marketplace of buyers and sellers, which means you can easily execute your trade.
There are currently 463 crypto exchanges across the world.
As such, there are plenty of options to choose from.
However, it is highly recommended that you pick an exchange in your country that is well-regulated, secure, and price-competitive.
Here’s a closer look at three of the most recognizable crypto trading platforms for Canadians to get started with.
Toronto-based Bitbuy has been around since 2016 and currently serves over 350,000 Canadian users.
- Trading is relatively cheap with fees as low as 0.2%
- Offers enhanced security for digital assets via cold storage
- A limited selection of digital assets. Currently offers only 15 coins including BTC, BCH, ETH, LTC, XLM, EOS, AAVE, LINK, DOGE, DOT, ADA, UNI, SUSHI, MATIC and SOL
Canadian investment platform Wealthsimple launched a crypto trading feature in 2021.
- Well-known and well-regulated platform
- Allows you to trade stocks, ETFs, and crypto from the same platform
- Digital assets are held in cold storage and covered by institutional insurance.
- A limited selection of digital assets. Currently offers only ~30 coins
- Offers the widest selection of digital assets and financial products.
- Users have access to over 500 cryptocurrencies and dozens of futures, options, and leveraged products.
- Not available to users in Ontario
Bitbuy, Wealthsimple Crypto, and Binance are some of the most popular options for new investors, but they’re not the only ones.
Investors now have a wide selection of crypto exchanges from across the world.
To pick the perfect platform, consider its trading fees, security features, local regulations, and reputation.
Cryptocurrencies are still a relatively new asset class, which means regulatory protection is limited.
This is why it’s essential that you dig into the details and pick the most trustworthy and time-tested platform for your first trade.
Another factor to consider is cybersecurity.
Early Bitcoin exchanges were targets for cybercriminals who drained the funds of investors.
This vulnerability still exists today.
However, exchanges can offer enhanced security.
Often, the best security features are cold storage and two-factor authentication.
Cold storage means the Bitcoin you buy and hold on the platform is actually stored on a device that is disconnected from the internet.
This makes it less vulnerable to cyber-attacks.
Meanwhile, two-factor authentication means you have to prove your identity every time you access your trading account.
This could involve an authenticator app or a one-time password sent to your mobile device when you try to log in.
Some platforms like Wealthsimple Crypto go a step further and try to insure the funds or digital assets they hold in custody for investors.
Wealthsimple uses the services of Gemini Trust Company LLC to hold Bitcoin and other digital assets in cold storage.
These assets are insured up to $200 million via Gemini.
Finally, investors should also consider the trading fees.
Some platforms have hidden fees that cut into profits or gains and lower overall performance.
Picking the most cost-effective crypto trading platform is essential.
2. Deposit Funds into Your Account
Once you’ve identified the perfect crypto trading platform, the next step is to create an account and add funds to it.
Most mainstream crypto platforms adhere to local regulated, which means you will have to submit documentation to prove your identity before you can deposit funds.
Once you’ve passed this stage of compliance, you generally have the option to fund your account with a credit or debit card payment, an e-transfer, or wire transfer from your bank.
3. Purchase Bitcoin
With the funds ready, you can purchase your first digital asset.
Placing an order for Bitcoin should look very similar to placing an order for stocks or exchange-traded funds (ETFs) on your stock trading app.
It’s important to note that you do not have to buy a full Bitcoin.
Bitcoin is divisible up to eight decimal places, which means you can buy as little as 0.00000001 BTC.
At the time of writing, the smallest unit of BTC (also known as a satoshi) is worth 0.00048 Canadian dollars.
4. Decide How to Store Your Bitcoin
Once you’ve purchased your first Bitcoin, you need to consider how to store it.
Most crypto trading platforms have built-in software wallets that allow you to store your BTC on their platform.
However, if you’d like to assume full control of your digital assets, you could transfer these tokens to a software wallet on your phone, computer, or even a physical hard drive.
Alternative Ways to Invest in Bitcoin in Canada
All the crypto trading platforms discussed above are centralized exchanges.
However, there are several other ways you can buy Bitcoin.
Here’s a brief overview of some alternative crypto investing options.
Bitcoin ATMs are similar to traditional bank ATMs.
However, instead of using a payment card to withdraw or deposit cash, these ATMs allow you to use cash or cards to purchase Bitcoin.
You will need an active crypto wallet to complete the transfer.
You might also face a steep cost for buying crypto this way.
However, depending on your circumstances this could be the most convenient and anonymous way to purchase Bitcoin.
The world’s first Bitcoin ATM was launched inside a coffee shop in downtown Vancouver in 2013.
Since then, these machines have spread across the world.
Currently, there over 34,000 BTC ATMs.
Another way to buy Bitcoin is to reach out to someone who owns the digital asset and purchase it directly.
This method is the one that comes closest to Bitcoin’s core tenet of peer-to-peer online transactions.
The first few BTC transactions, conducted by Satoshi Nakamoto, were done on niche online forums and message boards.
Today, users can sign up on peer-to-peer platforms like LocalBitcoins to connect with sellers.
This method is usually the fastest and easiest, but could also be the riskiest.
If you’re trying to buy Bitcoin directly from other users, it’s important to look for the ones with the best reputation and highest scores on LocalBitcoin.
A decentralized cryptocurrency platform (sometimes called a DEX) is a hybrid between centralized exchanges and the peer-to-peer platforms mentioned above.
These platforms are based on the same blockchain and smart contract technology that the cryptocurrencies use.
They automatically connect buyers and sellers without the need for a corporation or intermediary to facilitate the transactions.
These platforms tend to be much cheaper and faster than regular crypto exchanges.
However, there are no features and conveniences that you would expect from a mainstream crypto platform.
For instance, you can’t access margin trades, call customer service, or deposit funds in fiat currencies.
A Decentralized Exchange may not be the ideal way to buy Bitcoin for the first time, but could be a helpful tool for sophisticated investors looking to add niche assets.
Uniswap is an example of a popular DEX.
Frequently Asked Questions
- Is it worth investing in Bitcoin?
Like any other asset, Bitcoin’s suitability for your portfolio depends on your risk appetite and financial objectives. If you’re looking for a safe asset with reliable cash flows and significant regulatory protection, Bitcoin may not be the best option for you. However, if you’re looking for a growth opportunity or a bet on the innovative future of the digital economy, you could consider adding some exposure to this asset.
- Can I invest $100 in Bitcoin?
You can certainly invest $100 in Bitcoin. Each BTC is divisible up to eight decimal places. That means $100 could buy you roughly 0.0021 BTC at the moment.