How to Buy Bitcoin—and the Pros and Cons of Each Option

Brokerage apps and payment platforms now allow millions of people to buy Bitcoin and other digital assets with a simple tap, and there are investment products that track the price of Bitcoin. They differ in several ways, including which ones allow customers to hold crypto in a “digital wallet,” an electronic payment system that allows them to transfer their assets off the platform.

[Read More: Bitcoin ETFs Are Changing the Game for Cryptos. But Investors Should Be Wary.]

Here are some of the ways to buy Bitcoin today:

1. ProShares Bitcoin Strategy ETF

Fees: 0.95% annually

Benefits: ETF structure is familiar, and allows people to hold all their investments in the same place.

Drawbacks: The ETF tracks Bitcoin futures, not spot Bitcoin. Taxes and the “roll cost” of buying new futures may weigh on results.

2. Coinbase Global

Fees: Up to 4%, depending on payment method.

Benefits: Coinbase Global (COIN) has wide crypto offerings and expertise. It’s expanding into areas like non-fungible tokens, or NFTs, that are growing quickly. The “pro” platform can have lower fees.

Drawbacks: High fees.

3. Bitcoin ATM

Fees: Averaging about 7%

Benefits: ATMs are familiar even to people who aren’t digitally savvy. Own Bitcoin directly.

Drawbacks: High fees. You still need to download a wallet app.

4. Robinhood Markets

Fees: No commission.

Benefits: Quick and easy.

Drawbacks: Robinhood Markets (HOOD) collects payment for order flow from market makers in crypto, possibly hurting trade execution. Robinhood users cannot yet remove their crypto from the platform, though the company says it will soon roll out wallets.

5. Square

Fees: Fees depend on the transaction size, decreasing as the trade size increases. As of October 2021, a $100 purchase would cost $2.26.

Benefits: Square (SQ) allows people to move crypto on and off the Cash App.

Drawbacks: Fees may be somewhat higher than other options. Other cryptocurrencies are not offered yet.

6. MicroStrategy

Fees: It’s a stock, so no fees if investors use a no-commission broker.

Benefits: MicroStrategy (MSTR) is a company that owns about $7 billion of Bitcoin, about as much as its entire market cap. Its stock moves with the price of Bitcoin. A benefit is that it is taxed as a stock, which is familiar to investors.

Drawbacks: The stock tends to trade at a premium to the Bitcoin it holds. Management could change the strategy and sell Bitcoin.

7. PayPal

Fees: Fee based on the size of a transaction, with a 2.3% fee for purchases of $25 to $100. Plus there’s a currency conversion spread.

Benefits: Crypto is part of a convenient “super app,” with services from direct deposit to peer-to-peer payments to shopping.

Drawbacks: Fees are higher than elsewhere, and you can’t take your crypto off the app into an outside digital wallet. PayPal is working on a wallet.

8. Grayscale Bitcoin Trust

Fees: 2% annually.

Benefits: Grayscale Bitcoin Trust (GBTC) sits easily in a brokerage account and has a long trading history.

Drawbacks: Higher fees, and it often trades at a premium or discount to Bitcoin. Currently it is at a discount, which some argue makes it a bargain.

9. Mining Bitcoin Directly

Fees: Mining rigs can cost $800 to $10,000.

Benefits: No recurring fees to outsiders, except the electric company.

Drawbacks: Extremely high electricity use, expensive upfront costs for the rig, increasing competition from sophisticated miners.

10. Interactive Brokers

Fees: 0.12% to 0.18%.

Benefits: Low fees, cryptocurrencies sit next to other assets like stocks and bonds in portfolios.

Drawbacks: As with any new product, clients will have to see how easy it is to use.

Write to Avi Salzman at avi.salzmanbarrons.com