Cryptocurrencies are now mainstream investment products, just like stocks, foreign currencies, and exchange traded funds (ETFs). This asset class is growing in popularity, so much so that as many as 3 in 10 Canadians now own cryptocurrencies. At the time of writing, Bitcoin, a cryptocurrency that was worth less than a cent when it was launched in 2009, costs $54,000 Canadian. So here are 20 ways to invest in Bitcoin.
Centralized cryptocurrency exchanges (CEX)
There are many centralized cryptocurrency exchanges offering the ability to buy and sell Bitcoin. Centralized crypto exchanges allow you to buy your cryptocurrencies directly from the platform, and most of them transfer your cryptocurrencies to a cryptocurrency wallet linked to your account by default. Most of these cryptocurrency exchanges, however, allow you to transfer your Bitcoins to an external wallet. Even so, some purists still consider these platforms more vulnerable to fraud, since customers trust the exchange with their Bitcoin holdings.
When comparing different crypto exchanges, you should pay attention to the fees you pay. These fees usually come in two forms. The first form of fee is the transaction fee, which is a percentage applied to each transaction, and the second is the difference between the actual Bitcoin price and the price offered to buyers and sellers by each platform. The latter is called a spread.
Thus, all exchanges charge a fee. Indeed, even cryptocurrency exchanges that claim they do not charge any fees make a profit by manipulating the buy and sell prices of their listed cryptos when compared to market prices. They increase the buy price and decrease the sell price. The exchanges pocket a percentage of each transaction that corresponds to the difference between the actual price and the one offered by the platform.
So here are the main centralized cryptocurrency trading exchanges available in Canada:
This Canadian cryptocurrency exchange allows you to buy Bitcoin and about twenty other cryptocurrencies, including Ether, Litecoin and Dogecoin. Bitbuy’s fees are 0.2% of both buying and selling transactions. Bitbuy has very high buy and sell limits and is able to handle large transactions with its over-the-counter (OTC) trading service.
CoinSmart is a Canadian cryptocurrency exchange that, as of November 2021, trades on the NEO stock exchange under the symbol SMRT. The platform not only allows you to buy Bitcoins, but also, a dozen other cryptocurrencies. It stands out by offering a simple interface for beginners, as well as a wide variety of payment methods, including Interac transfers, credit cards and bank transfers. Coinsmart’s fees are 0.2% for Bitcoin transactions, and 0.3% for other types of transactions.
The Canadian cryptocurrency exchange MyBTC.ca is not so much a trading platform as an online Bitcoin ATM. Indeed, unlike other Canadian crypto exchanges, MyBTC.ca only allows you to buy one cryptocurrency: Bitcoin. Moreover, the exchange does not offer a cryptocurrency wallet, so Bitcoins purchased on the exchange are immediately transferred to your external wallet.
The platform also stands out by offering a large number of payment methods, including Interac transfers, credit cards, and even cash by purchasing Flexepin coupons, which are offered at over 4000 outlets in Canada. Thus, this platform is mostly used by investors wishing to buy Bitcoins to trade on platforms that do not accept the Canadian dollar. MyBTC.ca does not charge any transaction fees, but charges a fairly high deposit fee ranging from 7.75% for Interac transfers to 9.75% for credit card payments.
Shakepay is a cryptocurrency trading mobile app that features only two cryptocurrencies: Bitcoin and Ether. The crypto exchange does not charge any deposit or withdrawal fees, or even transaction fees. Of course, nothing is free in life and Shakepay is not the exception that proves the rule. In fact, like most exchanges, Shakepay generates revenue by marking up the purchase price of cryptocurrencies by about 1%.
Launched in 2014 in Vancouver, Netcoins is one of the oldest Canadian cryptocurrency exchange. Netcoins charges no deposit or withdrawal fees, but does charge a 0.5% buy and sell transaction fee, which is in addition to the markup on the sale price of cryptos, which is about 1%.
NDAX.IO is a Canadian cryptocurrency exchange that lets Canadians buy and sell Bitcoin as well as 30 other coins quickly and easily in a safe and regulated environment. Traders will pay 0.20% for buying and selling and that’s it. What makes NDAX stand out it its stance on safety and security. It has multi-signature failsafes for its hot wallet and stores most of its clients assets in off-line cold wallets that also require multi-sginatures for access. NDAX is also registered with Financial Transactions and Reports and Analysis Centre of Canada (FINTRAC), Revenu Quebec as a Money Service Business (MSB). The exchange conforms to the Terrorist Financing Act (PCMLTFA) and other applicable laws and regulations in addition to having insurance policies that can cover fraud.
Virgo CX is another Canadian regulated cryptocurrency exchange where you can buy and sell Bitcoin. However, the platform stands out by offering several metaverse-related cryptocurrencies, as well as a marketplace for buying and selling NFTs. The platform does not charge trading fees, but does charge a 0.5% fee on Canadian dollar withdrawals. They have a great referral program as well as support for retail trading and institutional trading.
8. Wealthsimple Trade
Wealthsimple Trade, which encompass Wealthsimple Crypto, is the online brokerage and cryptocurrency trading mobile app from Canadian online investment giant Wealthsimple. Unlike other Canadian cryptocurrency exchanges, Wealthsimple Trade allows you to both buy stocks and a selection of a few dozen cryptocurrencies, including Bitcoin. The exchange does not charge any trading fees, but does mark up the price of cryptocurrencies by 2%. Also, it should be noted that it is impossible to transfer cryptocurrencies purchased on Wealthsimple Trade into one’s own cryptocurrency wallet.
Decentralized cryptocurrency exchanges (DEX)
Decentralized crypto exchanges, also known as peer-to-peer platforms or P2P, allow you to buy and sell Bitcoins to other users, without the exchange being involved in the transaction. These crypto exchanges are like the eBay of cryptocurrency. Since the operators do not have access to their customers’ money or cryptocurrencies, their users argue that the fraud risk is lower.
However, a user new to the world of cryptocurrencies can fall victim to a scam by another decentralized exchange user, since many of these platforms support trades. Nevertheless, for experienced traders, it is possible to trade without much risk, since these crypto exchanges provide their users with an escrow system, where the cryptocurrencies and money are deposited while waiting for the transaction to be completed. Another feature of decentralized exchanges is that sellers can choose how they want to be paid. P2P marketplaces give users more payment flexibility.
9. Binance P2P
Cryptocurrency giant Binance is best known for its centralized exchange of the same name. However, it also operates a decentralized crypto exchange, Binance P2P, where hundreds of cryptocurrencies, including Bitcoin, are traded without paying any fees, making it a cheaper option than trading on Binance, where transaction fees are 0.1%.
Launched in 2017 as LocalEthereum, the P2P exchange renamed itself to LocalCryptos in 2019, to reflect the fact that Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) are traded there. It is, however, a more limited cryptocurrency offering than most of its competitors. Its fees are 0.25% for sellers and 0.75% for buyers.
The cryptocurrency exchange Paxful stands out mainly because of the 350 payment methods it supports. In Canada, people purchase Bitcoins on Paxful via Interac transfers, PayPal or bank transfers. However, only the exchange only buys and selles three cryptocurrencies: Bitcoin (BTC), Ethereum (ETH) and Tether (USDT). The platform charges a transaction fee of about 1% to sellers.
There are several ETFs with exposure to Bitcoin or the cryptocurrency market in general that are available through a Canadian online broker. By purchasing an ETF with exposure to Bitcoin, you do not take ownership of any Bitcoin, but you do become the owner of an investment product that owns Bitcoins or interests in Bitcoin-related businesses. The disadvantage of going through an ETF to invest in Bitcoin is that you will have to pay an annual management fee, which you avoid when buying Bitcoin directly. Even so, the advantage of ETFs exposed to Bitcoin is that they can be held in a registered retirement savings plan (RRSP) or Tax Free Savings Account (TFSA), unlike Bitcoin. Here are a few ETFs with exposure to Bitcoin worth mentioning:
12. Amplify Transformational Data Sharing ETF (BLOK)
This US ETF holds no Bitcoin in its portfolio but does own stakes in companies that have made significant investments in the coin, such as Block, formerly known as Square, and MicroStrategy. The ETF also invests in companies whose technology is critical to the smooth functioning of the cryptocurrency ecosystem, such as NVIDIA, whose processors are essential to mining bitcoin. The management expense ratio for this ETF is 0.71%.
13. Purpose Bitcoin ETF (BTCC)
The Purpose Bitcoin ETF is the first ETF holding Bitcoins to launch. It started in February 2021. Buying this ETF is equivalent to buying bitcoins. However, keep in mind that this ETF’s management expense ratio of 1% is uncompetitive.
14. CI Galaxy Bitcoin ETF (BTCX)
CI Galaxy Bitcoin ETF, another Canadian ETF, began trading on the TSX in March 2021, just one month later than Purpose ETF. Like its Purpose competitor, CI Galaxy Bitcoin ETF buys Bitcoin. However, this ETF stands out with a much more reasonable management expense ratio of 0.4%.
Actively managed cryptocurrency funds
Actively managed cryptocurrency funds are another way to invest in Bitcoin. As the name suggests, these funds are actively managed, which means that their composition is likely to change over time, depending on market conditions.
The managers of these funds may decide to sell some of their Bitcoins when they feel the cryptocurrency is due for a correction, may invest in other cryptocurrencies, or may keep some of their capital in dollars in order to be ready to take advantage of future opportunities in the cryptocurrency market. Of course, since managing these funds is more work than managing an ETF whose composition never changes, their fees tend to be higher. Here are two actively managed crypto funds:
15. Rivemont Crypto Fund
The Rivemont Crypto Fund, started in 2017, is the first actively managed crypto fund in Canada and the only one of its kind in the country. The fund holds Bitcoin but also Ether and Canadian dollars. The fund charges fees comparable to those of hedge funds and venture capital funds: 2% on assets under management and 20% on returns. In practical terms, if the fund makes no return, or even a negative return, clients will pay 2% of the assets invested in the fund each year. On the other hand, if the fund achieves a return, a fee of 20% applies on the returns generated by the fund each year, in addition to the 2% fee on the assets under management. The minimum investment to become a client at Rivemont is $150,000, although it is not necessary to invest this $150,000 entirely in the crypto fund at the firm.
16. Pantera Liquid Token Fund
The Pantera Liquid Token Fund is an actively managed US cryptocurrency fund that trades several cryptocurrencies. As the name suggests, the fund specializes in cryptocurrencies that generate enough trading volume to offer a good level of liquidity, meaning that it is easy to buy or sell large amounts of them. The fees charged to investors in this fund are similar to those charged by the Rivemont Crypto fund, which are 2% on assets under management and 20% on returns. The minimum investment for this fund is $100,000.
Bitcoin mining companies listed on the stock market
When a Bitcoin changes hands, the transaction is recorded in a decentralized accounting ledger called the blockchain. It is not an accountant who records the transaction on the blockchain. Indeed, the blockchain is governed by algorithms. However, these algorithms must be executed by computers, and this is where the role of Bitcoin miners comes in, who make their powerful computers available to the Bitcoin network in order to receive Bitcoins in exchange for their service.
A decade ago, it was possible for an individual to install software on their computer and mine Bitcoins. Today, however, to have any hope of mining Bitcoins, not only do you have to buy specialized computers, but you also have to have many of them to have any chance of being awarded Bitcoins. In short, it is no longer individuals who mine Bitcoin, but rather new kinds of mining companies, whose mines are data centres.
Several companies that specialize in mining cryptocurrencies are listed on the stock market. So, since the share value of these companies is correlated to the price of the cryptocurrencies they mine, investing in these companies via an online broker allows you to gain exposure to the cryptocurrency market indirectly. This is the same principle as an investor choosing to invest in gold mining companies rather than investing in gold directly. Here are some of these publicly traded companies.
17. Bitfarms (BITF)
Founded in 2017, Bitfarms is a Bitcoin mining company that operates five data centres in Quebec and one in Washington State in the US. The company derives its competitive advantage from low electricity prices in Quebec. Indeed, one of the most important costs of mining bitcoins is electricity, as the specialized computers required for this activity are very energy intensive. The company is listed on the TSX Venture Exchange (TSX-V) and NASDAQ and has a market capitalization of $814 million.
18. HIVE Blockchain Technologies (HIVE)
Hive is a Canadian Bitcoin and Ethereum mining company that, like Bitfarms, started in 2017. The company operates one data centre in Quebec, two in Iceland and three in Sweden. The locations Hive chooses for its cryptocurrency “mines” allows it to save electricity, as cold climates allow the company to use less power. In fact, a significant portion of a cryptocurrency miner’s electricity expenses come from the cooling system installed in these data centers, without which the expensive computer equipment would melt or catch fire. The colder the climate, the lower the cooling bill. Hive, which has a market cap of $1 billion, trades on the TSX Venture Exchange (TSX-V), NASDAQ and the Frankfurt Stock Exchange (FSE).
19. Riot Blockchain (RIOT)
Riot Blockchain started in 2017 but the company has a storied history, originally known as Bioptix and operating in the biotech space. After adopting the name Riot Blockchain in October 2017 and announcing plans to shift its focus to cryptocurrencies, its stock price quickly rose from $8 to $38, before subsequently crashing. This suspicious turn led to an investigation by the Securities Exchange Commission (SEC), the US financial markets watchdog. It concluded, however, that the company’s name change did not constitute fraud.
Initially, the company wanted to launch an online banking and cryptocurrency exchange and invested in several cryptocurrency startups, including Canadian crypto exchange Coinsquare. However, its mission refocused around Bitcoin mining in 2019 and it now operates data centres in New York State and Texas. The company trades on NASDAQ and has a market valuation of US$1.9 billion.
20. Marathon Digital Holdings (MARA)
Founded in 2010 as Marathon Patent Group, this U.S. company was originally a specialist in intellectual property valuation. These companies, colloquially referred to as “patent trolls,” buy patents and generate money by suing companies whose technology infringes on their patents. It wasn’t until 2021 that the company made a shift to cryptocurrencies and began buying bitcoin and cryptocurrency mining equipment.
Unlike other cryptocurrency mining companies that sell the Bitcoins they produce, Marathon Digital Holdings keeps its Bitcoins and even buys them on the market. This lets them profit from the rising price of Bitcoin. At the time of writing, the company has 8,595 Bitcoins in its portfolio, which are worth nearly C$430 million at the time of writing. The company has a market valuation of US$2.37 billion and trades on the NASDAQ.
Investing in Bitcoin: a risky proposition
You can buy bitcoin directly through a cryptocurrency exchange, by investing passively via ETFs or actively managed crypto funds, or invest in a company that specializes in cryptocurrency mining. However, you should understand that investing in this asset class is a high-risk proposition, given the lack of regulation and the volatility of cryptocurrencies. While institutional investors have entered the crypto space, retail investors must limit themselves to investing money in it that they can afford to lose.