On Thursday, March 11, 2021, President Biden signed the $1.9 trillion American Rescue plan into law. Included in the bill is the much-anticipated $1,400 stimulus checks, which most Americans have received throughout this week.
As a result, many Americans now have some extra cash to spend. If you’re considering investing in Bitcoin or other digital assets, keep reading to learn how to invest in cryptocurrencies with your stimulus check.
What are Cryptocurrencies and How Do They Work?
Cryptocurrencies are digital currencies that operate on the blockchain. The blockchain is a decentralized technology that records transactions in Bitcoin and other cryptocurrencies in what is known as ‘blocks.’ These blocks of data are verified by crypto miners, who are compensated in cryptocurrency for their efforts.
Step 1: Open an online account.
The first thing you need to do before buying Bitcoin is to open up your own account with an online cryptocurrency broker. As the popularity of cryptocurrencies continues to increase, so do the number of brokers to choose from.
When deciding between crypto brokerages, keep in mind the cryptos they offer, any social trading features available, and if they have any promo offers.
Step 2: Buy a wallet (optional).
Once you have an online account setup with a crypto broker, you should strongly consider buying a crypto wallet. A crypto wallet does just as its name suggests, it allows you to store your cryptocurrencies.
There are both hardware and software wallets to choose from, with each offering something different in terms of convenience, security and usability.
Best Hardware Wallet: Trezor One
Hardware wallets provide you with more control over your crypto assets by storing them on a portable device akin to a USB-drive. There are numerous hardware wallets to choose from, but you can’t go wrong by choosing the Trezor wallet. The Trezor One wallet was created by SatoshiLabs, with the first version released back in 2014.
One of the main perks of using hardware wallets is security, and the Trezor One is certainly no exception. This wallet offers PIN access and 2-factor verification, while also allowing you to store over 500 different cryptos!
Best Software Wallet: Coinbase
Coinbase is one of the largest crypto exchanges in the world with over 40 million users as of 2021. Out of their trading services, Coinbase also offers their very own software wallet.
As opposed to hardware wallets, software wallets are encrypted apps that you download in order to store your cryptocurrencies on. The Coinbase wallet provides users with an easy-to-use and convenient way to store their cryptocurrencies.
Step 3: Make your purchase.
Once you have an online account and wallet created, it is now time to make your crypto purchase. These days, there are numerous cryptocurrencies to choose from, whether it be Bitcoin, Ethereum or Dogecoin.
Once you decide which crypto you want to invest in with your stimulus check, start looking for an favorable price point to buy at.
Pros and Cons of Buying Cryptocurrencies with Your Stimulus Check
Potential for upside gains: One reason that so many people have gotten onto the cryptocurrency train is the incredible gains over the least year. In a year, Bitcoin has gone from its March 2020 low of around $4,000 to a March 2021 high of over $60,000. In 2021 alone, Doge has seen gains well over 500%.
If these trends can continue, it will make the crypto space an enticing place to invest your stimulus check in.
A hedge against inflation: One of the main narratives surrounding Bitcoin and other cryptocurrencies is its utility as a hedge against inflation. As the Federal Reserve continues printing money into 2021, it may be worth it for investors to convert some of this helicopter money from fiat currency into cryptocurrency.
Risk of a correction: With Bitcoin and most other crypto currencies reaching all-time highs in 2021, there is an upside-risk of a correction. When cryptocurrencies experience a correction, it tends to be sudden and severe. If this were to happen, investing in cryptocurrency with your stimulus check may not be the best idea.
Government regulation: While cryptocurrencies offer numerous advantages over fiat currencies, this could all go away if the government were to step in. Any currency that threatens the strength of the dollar poses a risk to the federal government’s control over the financial system. In addition, the U.S. government has a track record of banning alternative currencies, having banned private gold ownership in the past. If governments around the world starting regulating or flat out banning the use of cryptocurrencies, this could change the crypto investing thesis entirely.
Best Cryptocurrency Exchanges
Now that you know the basics to investing in cryptocurrencies, you need to decide which cryptocurrency exchange you will use to place your trades.
There are many different cryptocurrency exchanges to choose from, with each best serving different types of crypto investors.
Current Crypto Prices
What Will You Do With Your Stimulus?
Most Americans have now received their $1,400 stimulus checks, and it is crucial for each individual investor to put this money to work wisely.
While the crypto market is potentially extended being near all-time highs, so is the stock market. As a result, investing in cryptocurrency with your stimulus check may offer you the best bang for your buck.
Frequently Asked Questions
Q. Is it safe to invest in Cryptocurrency?
Yes, although like any investment you should only invest money that you can afford to lose.
Q. Is crypto real money?
Yes! Crypto is real money, with its adoption going more and more mainstream by the day.
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