PayPal recently began allowing customers to purchase some cryptocurrencies as part of a growing movement to make investing in crypto easier. But be careful whose advice you take when investing. “There seems to be no shortage of self-styled crypto investment ’experts’ offering advice on social media and forums, all promising to know the secret formula to crypto investment success,” David Janczewski, co-founder and CEO of crypto software firm Coincover, said in an email interview. “But they don’t really know.”
Flocking to Crypto
A lot of people are getting into cryptocurrency, encouraged by soaring prices. According to a recent report by Crypto.com, there’s been a 15.7% increase in crypto users from December 2020 (92 million) to January 2021 (106 million). Ease of use is another reason many are investing in crypto. As of last fall, PayPal users in the US can trade cryptocurrencies on its platform, including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. “I would describe the type of user on our platform right now as more of the crypto-curious,” said John Rainey, PayPal’s chief financial officer, during an earnings call. “We’re not getting these heavy day traders in crypto—it’s more a casual customer that is somewhat intrigued by this.” Opening an account with a big exchange like Coinbase or Binance is the easiest way to get started in investing, Harumi Urata-Thompson, chief financial officer of Bitcoin transaction service Celsius Network, said in an email interview. “Once you go through the Know Your Customer (KYC) process, which is much easier than opening a physical bank account, and open an account, it is a matter of selecting a coin you like to buy and follow the prompt to get you to the ‘buy’ screen,” he said. But buying cryptocurrency wasn’t always a relatively painless process. Edmund McCormack, founder and CEO of cryptocurrency education website Dchained, explained in an email interview that Bitcoin didn’t always have a trustworthy, easy-to-use marketplace. “With PayPal and Square stepping in to make crypto easy to buy & sell, the process couldn’t be simpler for consumers,” he added.
Bitcoins on Your Visa Card
It soon could get even easier to invest in cryptocurrencies. McCormack said financial institutions have started lining up to lobby for approval to offer Bitcoin ETFs to their customer bases. Credit cards also could soon be an option, with Visa recently announcing its Bitcoin Rewards Visa card. “From BlackRock to Fidelity, investing in Bitcoin at your favorite bank will be as easy as opening a CD,” McCormack said. There are a bewildering variety of cryptocurrencies to navigate, however, from Ethereum to Litecoin, and they aren’t all the same. Some may be more popular, but they also have serious issues. “Dogecoin, for example, although highly meme-able, is not a scarce currency like Bitcoin is—in that an infinite number of dogecoins can be minted,” Aubrey Strobel, head of communications at Bitcoin shopping site Lolli, said in an email interview. “One should thoroughly research the differences between different coins before making a decision to invest.” And don’t forget about security when investing. Janczewski says there are more than a few horror stories about people losing access to their high-value investments because they simply forgot their password. “So when evaluating options,” said Janczewski, “check if the service you are considering offers any safety features, such as secure key storage, so your keys can be recovered or replicated should you lose access, or insurance to reimburse you if you were the victim of theft or fraud.” Despite how easy it is to get into crypto, don’t let stories of investors making a lot of money fool you. Janczewski says there’s still no guarantee of significant returns. “Instead, like any other investment, people buying into crypto should focus on long-term gains, diversification,” he added. “They should understand—and be comfortable with—the fact that prices can fluctuate over time.”
