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How does one invest in cryptocurrencies? Would it be like investing in other stocks (say Google, Microsoft), or would the investor actually have to install the program on their computer and purchase the cryptocurrency.

Please clarify.

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    :%s/invest/speculate/g – Chris W. Rea Jan 6 '17 at 1:53
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    Agreed; this isn't investing. There is nothing inherently driving crypto currency values in any particular direction, and no guarantee that any particular version won't lose popularity and crash hard at any moment. – keshlam Jan 6 '17 at 2:43
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    Since this question was asked BTC has fallen ~20%. It's not for the faint of heart. – quid Jan 6 '17 at 21:56
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    Since this question was asked BTC as gained a 10x. I hope you invested :-) – Anthony Russell Feb 15 '18 at 17:56
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The folks who got rich in the California gold rush were the ones who sold supplies to the prospectors. If you really believe cryptocurrencies have a significant future, the investment play would be in companies which supply the users.

  • I like your answer – Rhonda Jan 7 '17 at 23:32
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How does one invest in cryptocurrencies?

It is not a settled principle that dealing in crypto currencies is investment.

Would it be like investing in other stocks (say Google, Microsoft),

No. This is not like regular stock trades.

would the investor actually have to install the program on their computer and purchase the cryptocurrency

Depending on crypto currency, you would need to have some kind of small software / vault installed to store the keys. There are different exchanges that allow you to buy or sell crypto currencies. These are all virtual market places, some reputed others not much ... there is very poor regulatory framework for these exchanges. In past such market places have gone down without much recourse.

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    If they work at all, cryptocurrencies would be like other currencies. You can't really invest in currencies. You can hope to find arbitrage opportunities, or hope their value relative to other things happens to move in a direction that lets you buy low and sell high, but since these produce no income themselves there is no inherent bias toward their value increasing, and no guarantee that their value doesn't crash next week. Gambling, not investing. An investment in this area would be to buy into a company which profits from this market. – keshlam Jan 6 '17 at 16:58
  • @keshlam fully agree. It is gambling to an extent. However every one remembers happy stories... Like record high price... But not the crash in price or bankruptcy of crypto exchanges – Dheer Jan 6 '17 at 17:25
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    Selective memory, right. The bane of many. – keshlam Jan 7 '17 at 0:18
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Crypto currencies are more a speculative gamble then an investment. A traditional equities investment like Microsoft is marked by a longer history. It may be that in the future crypto currencies gain enough acceptance to be on par with other currencies like the British pound. The 'Forex' market is built around exchanging one currency for another.

There are a bunch of places where you can buy bitcoins. You can checkout Coinbase. Do not 'invest' any more than you can afford to lose! There have been multiple scandals where bitcoin holders lost the full amount.

I'm holding 1.5 bitcoins myself just to see what it does. It is more for fun than an investment.

  • After the crash, I am telling everyone it is for fun as well. :'( – Prodnegel Jan 6 '17 at 22:15
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    What crash, it's up ~300% this year... – quid Jan 6 '17 at 23:07
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While cryptocurrency is new and unusual, there is a similar instrument which is much older more familiar: Gold. Obviously it's not exactly the same, but we can make useful analogies.

How does one invest in gold?

  • Buy and sell chunks of gold itself
  • Trade shares of a fund (ETF) that holds gold for you
  • Trade shares of gold producers (miners)
  • Trade shares of gold users (jewelers, electronics manufacturers)
  • Produce gold for profit

I trust all of these will be self-explanatory by virtue of the fact that gold has captured humanity's imagination since time immemorial. But how does the analogy apply to cryptocurrency?

  • Buy/sell crypto can be done in three ways:
    • Find a cryptocurrency exchange such as bitfinex, load some money into it, and buy crypto through there
    • Search on the internet (eg. local bitcoins) for someone who is willing to meet you and exchange cash for their crypto
    • Sign up with a broker that lets you hold crypto (eg. Robinhood)
  • ETFs: Currently, pure crypto ETFs are facing some regulatory hurdles, although there are some funds that do provide exposure to crypto like BLOK
  • Producers: Building crypto mining facilities is a big business nowadays, and occasionally they may solicit investors to buy shares in their mining operation. I don't believe any are publicly traded, though, you would have to track them down through forums and other channels.
  • Users: Many companies these days have in whole or in part shaped their business around crypto. Although their shares may not represent quantities of cryptocurrency, their use of blockchain tech obviously means they have exposure to the market.
  • Producing: You can usually buy your own equipment, set up the mining software, and accumulate units of the cryptocurrency. You can then sell these at an exchange at will and withdraw the cash. You would want to look specifically for ASIC-resistant cryptos to mine, otherwise big players with mining farms will easily outcompete you to the point where you can't meaningfully mine anything.

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