How can one invest into Bitcoins?

Dear friend of AQUMON, 

Cryptocurrencies especially Bitcoin are hotly talked about recently so we addressed in our last blog article:

• What exactly is Bitcoin?
• Why should investors buy Bitcoin?
• What risks do investors need to pay attention to when investing in this asset class?
• What are the benefits of adding Bitcoin to the investment portfolio?

Naturally we had a lot of questions from investors about how they can invest in Bitcoin so we wanted to address that this week. There are 4 main investment methods: 

Method #1: Obtain Bitcoins by mining

Bitcoins are similar to commodities like gold where new Bitcoins need to be ‘mined’ before they can be released into general circulation. There are a finite amount of Bitcoins set at 21 million in total but currently there are already over 18.7 million Bitcoins in circulation so the mining potential is not what it used to be 5-10 years ago: 

Mining Bitcoins can be quite out of reach for normal investors because the process behind it requires using very sophisticated computers to solve complex computational math problems that helps verify the legitimacy of everyday Bitcoin transactions. When these ‘miners’ have verified 1 megabyte worth of transactions (known as a “block”) and they are the first person to do so (or most accurate) these people are rewarded with a payout in Bitcoin.

The upside is if you mine Bitcoins you don’t need to put up any money upfront (if you already have the sophisticated computer equipment) but the downside is over time since there are less and less Bitcoins left to be mined, so the payout obtained through mining has gradually decreased as well:

Method #2: Direct trading on an online/offline platform

Investors can buy Bitcoin directly on the exchange, and trade on online trading platforms (such as Binance or Coinbase, which got listed on the Nasdaq just a few days ago). A number of these exchanges now allow you to buy Bitcoins with just a simple bank account or even a credit card versus the need to first buy a stablecoin (cryptocurrencies where the price is pegged to a traditional currency, gold or other assets). But also because it is not regulated investors need to be aware there is minimal to no protection if things go wrong like the exchange going out of business.

Investors also can find Bitcoin ATMs to buy Bitcoins with their cash. Bitcoin ATMs can be a quick and easy way to buy bitcoins and they're also private. The convenience and privacy unfortunately comes with a price where most ATMs have fees of 5-10% for Bitcoin (could be higher for other alternative cryptocurrencies).

Interested readers can read this blog: What risks do you need to pay attention to when directly investing in Bitcoin?

Method #3: Purchase Bitcoin via a traditional investment product e.g. Bitcoin Funds and Exchange Traded Funds (ETFs)

There are several reasons for investing into Bitcoin using a fund or an ETF. The main benefit for investors is they don't have to bother with the security procedures associated with holding Bitcoin and can also save on a number of related costs. Furthermore, there is no need to deal directly with cryptocurrency exchanges and investors can just buy and sell the ETF through traditional stock exchanges that they are already familiar with. The minor downside is the fees associated with the ETFs are a bit higher (1% vs 0.5% with a traditional stock ETF). 

There are multiple exchange traded funds (ETFs) right now in Canada with the Purpose Bitcoin ETF launching as the world’s largest Bitcoin ETF. That ETF has accumulated over US$1 billion (~HK$7.8 billion) in assets under management in just 2 months which is almost 10 times greater in size than the 2nd ETF launched, Evolve Fund Group’s Bitcoin ETF. So being a first mover made a big difference.

On the fund side, the US’ Grayscale Bitcoin Trust is currently the most popular Bitcoin fund surpassing US$50 billion (~HK$388 billion) in assets under management and is also considering converting into an ETF (when US financial regulators allow). If this happens they will immediately become the world’s 2nd largest commodity ETF (only US$8 billion behind SPDR Gold Shares which is a physically backed gold ETF). 

Method #4: Invest in cryptocurrency related stocks

In addition, investors can also invest indirectly into stocks related to cryptocurrency and blockchain technology such as companies related to crypto mining and payments. For example, the share price of Canaan Technology (a well-known crypto mining machine manufacturer) and Coinbase (the largest cryptocurrency exchange which just listed) are ways investors can get exposure to cryptocurrency.

The heightened interest in Bitcoin may impact non-cryptocurrency companies as well. For example, after Paypal announced the launch of its cryptocurrency payment service (shooting for Q4 of 2021), the news positively stimulated both the price of Bitcoin and Paypal’s stock price as well.

Investors need to be aware that investing in these companies’ stocks may not allow one to get direct exposure to Bitcoin’s movement in pricing and the stock’s volatility may also be impacted by other factors as well. 

Comparing the advantages and disadvantages of the three types of investment methods that ordinary investors can access, investing into Bitcoin via ETFs or funds are the relatively most convenient and simple investment method:

Asia's first Smart Bitcoin* Portfolio will be launched soon!

For investors looking to invest into Bitcoin in a risk controlled manner, AQUMON is proud to launch its new SmartGlobalX portfolio at the end of April! The investment portfolio will integrate AQUMON's flagship multi asset, globally diversified SmartGlobal portfolio and will be updated with exposure to a Bitcoin Exchange Traded Fund (ETF)*, offering investors a hassle-free way to invest in Bitcoin!

AQUMON understand investors may be concerned about risk associated with investing in such a new asset class so after assessing their risk tolerance in our mobile app, AQUMON will automatically recommend clients invest into an investment portfolio with no more than 4% exposure to Bitcoin as systematic way to control the investment risk while offering the benefits of investing into Bitcoin (only suitable for growth and aggressive risk profile clients). 

To gain exclusive early access and learn more click here: https://h5.aqumon.com/applanding-20210404/

Even though Bitcoin and cryptocurrency is hotly talked about, at AQUMON we continue to communicate to all our investors the need to not only chase returns but also be aware of the amount of investment risk you are taking. Hope this article helped you out! Happy investing!

Ken

*Risk warning: Investors will invest in virtual currency assets through Bitcoin ETF (Exchange Traded Fund), indirect transactions or holding Bitcoin. Certain kinds of the underlying assets including but not limited to Bitcoin ETF contained in the portfolio might be traded in overseas markets and are not authorized by the Securities and Futures Commission of Hong Kong. Investors should carefully read the Risk Disclosure to learn relevant risks. The SmartGlobalX portfolio can only be purchased by users with growth and aggressive risk types.

?About us

AQUMON is a Hong Kong based award-winning financial technology company. Our mission is to leverage smart technology to make next-generation investment services affordable, transparent and accessible to both institutional clients and the general public. Through its proprietary algorithms and scalable, technical infrastructure, AQUMON’s automated platform empowers anyone to invest and maximise their returns. AQUMON has partnered with more than 100 financial institutions in Hong Kong and beyond, including AIA, CMB Wing Lung Bank, ChinaAMC, and Guangzhou Rural Commercial Bank. Hong Kong University of Science and Technology, the Alibaba Entrepreneurs Fund, affiliate of BOC International Holdings Limited, Zheng He Capital Management and Cyberport are among AQUMON's investors. 

The brand is held under Magnum Research Limited and is licensed with Type 1, 4 and 9 under the Securities and Futures Commission (SFC) of Hong Kong. AQUMON is also licensed by the U.S. Securities and Exchange Commission (SEC) and the Asset Management Association of China (AMAC). 

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