How to Start Trading Bitcoin

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Everyone wants to trade bitcoin. It’s not a secrete anymore. Everyone form the Chicago Mercantile Exchange to high school investors are looking to get in on the action.

Bitcoin is undeniably attractive. With bitcoin (BTC) being up more than 850% year-to-date, everyone wants to get in on the action.

Key Points

  • For those who don’t want to trade futures contracts, buy/sell GBTC to go long or short bitcoin
  • GBTC tracks the price of bitcoin
  • For those who like futures trading, buy/sell XBT bitcoin futures to go long or short bitcoin
  • Don’t trade on an unregulated cryptocurrency exchange
  • Ally Invest is one of the few brokers who let clients trade GBTC
  • tastyworks is one of the few brokerages who let clients trade XBT bitcoin futures

Select a Cheap Broker that Permits GBTC Trading

Ally Invest is the best online broker for stock, ETF, and ETN trading due to their tiered pricing structure. Plus, right now, Ally is running an incredible offer where all stock and ETF trades are FREE for 90 days!

Without the free trade promo, stock and ETF trades cost $3.95 with Ally Invest.

For traders looking to buy or sell GBTC (the go to investment instrument that mimics the performance of Bitcoin besides futures) it is free for three months for new Ally Invest accounts! It can’t get any better than that.

How to Start Trading Bitcoin

Although many traders prefer to trade Bitcoin by opening an account with Coinbase or a similar online cryptocurrency broker, this is actually not the most cost effective or simplest way.

If you are a traditional equities of DIY investor, you’ll have to open up a digital wallet and deposit your money with an unregulated broker who will facilitate you BTC to USD trades.

The Simple way to Trade Bitcoin

The easiest way to trade Bitcoin is to trade the Grayscale Bitcoin Investment Trust (ticker symbol: GBTC). GBTC tracks the price of Bitcoin, although it can often trade at a premium to GBTC itself due to stretched Net Asset Value ratios.

Because the fund managers of GBTC hold a basket of Bitcoins (around 170,000), GBTC’s performance closely mimics the price of Bitcoin but it is not exact. GBTC is theoretically supposed to represent 1/10 of a Bitcoin, but the ETF often trades at a premium to the the digital cryptocurrency.

GBTC Offers Easy Exposure

Regardless of your cryptocurrency outlook, a cryptocurrency ETF like GBTC is by far the easiest way for traditional investors to get in on the Bitcoin hype. Whether you’re looking to go long or short, the Grayscale Bitcoin Investment Trust makes it possible.

Long holders of GBTC be warned: the holdings are uninsured and trade at 70x the net asset value of Bitcoin. This is one of the more convincing arguments to be short GBTC as noted by short seller Andrew Left of Citron Research.

XBT Futures Offer Nearly 24/6 Bitcoin Trading

For investors who are comfortable trading futures, XBT bitcoin futures trade 6 days a week almost 24 hours a day.

Although not many brokers allow their clients to trade bitcoin futures, tastyworks lets clients trade bitcoin futures and only charges $1.25 per contract. 1 XBT futures contract equates to one bitcoin. And since it only costs $1.25 to trade one contract, opting to trade bitcoin futures is actually one of the least expensive ways to trade bitcoin, besides getting free trades for 90 days and trading GBTC.

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