Cryptocurrencies are becoming increasingly popular. In times of hyperinflation, the increasing loss of confidence in governments, banks and the financial system in general, but also as a financial instrument for pure speculation, Bitcoin and co have already attracted great attention – and amazed but terrified many a traditional investor.
The Bitcoin price has risen strongly since the Corona crisis but still fluctuates extremely. The most important cryptocurrency has been able to multiply its value since March 2020, reaching a new record high of over 60,000 US dollars. This price development was reminiscent of the Bitcoin hype a few years ago: Anyone who bought Bitcoins for a few hundred dollars back then is now a millionaire.
How can you as an individual investor invest in Bitcoin, where can you buy Bitcoin and other cryptocurrencies, and why can Bitcoin trading be interesting for both investors and speculators? We have selected providers where buying Bitcoin is quite easy. We also tell you how you can alternatively buy Bitcoin on a marketplace or cryptocurrency exchange.
BUY AND SELL BITCOIN
In principle, there are three ways to trade Bitcoins and other cryptocurrencies.
- A Bitcoin CFD makes it particularly easy for you to participate in the Bitcoin price.
- Alternatively, you can also profit from the bitcoin value trend via certificates.
- Somewhat more cumbersome but especially interesting for long-term investors, and the only way to “really” buy and own digital assets: buying Bitcoin on a marketplace or via a Bitcoin exchange / cryptocurrency exchange.
1. Bitcoin CFD
Investors who are primarily interested in participating in the performance of Bitcoin can trade Bitcoins relatively easily via a CFD broker. Opening an account is particularly quick, and deposits can be made by credit card, PayPal, bank transfer and sometimes other means as well.
You can think of a Bitcoin CFD as a form of security that reflects the Bitcoin price at any given time. As an investor, you participate directly in the price development of Bitcoin, but you do not physically own any Bitcoins. Cryptocurrency CFD trading comes with pros and cons. On the one side, you can bet on a rising or falling Bitcoin price, for example, and not just buy the underlying asset. Another benefit is that trading Bitcoins CFDs is often more cost-effective and immediate than buying and selling actual coins on a digital exchange. If you want, you can also add leverage to the Bitcoin CFD, which means that you can buy or sell Bitcoins with more money than you actually invested. Please bear in mind that this also poses significant risks. These and other benefits and risks of crypto CFD trading is further explained in our guide. Please also note that CFD trading has been more heavily regulated since August 2018.
2. The Bitcoin certificate
Another very convenient way to participate in the Bitcoin price is to buy Bitcoin certificates. The selection on the market is currently still relatively limited, but one attractive offer is provided by the Swiss bank Vontobel.
With an Open End Participation Certificate on Bitcoin, you can invest in the price development of the most important digital currency. A Bitcoin certificate tracks the performance of Bitcoin, but you do not own a real Bitcoin but a derivative on the cryptocurrency. The product enables participation of almost 1:1 in price gains and losses of the Bitcoin against the US dollar – and without a predefined redemption date. In addition, you can also buy mini futures on Bitcoin.
If you want to buy Bitcoin, then a certificate and an ETP on the cryptocurrency are also very convenient options in addition to the Bitcoin CFD; you only need a securities account as a prerequisite for this.
By the way, you can also invest in the little Bitcoin brother Bitcoin Cash via a certificate. By buying an Open End Participation Certificate on Bitcoin Cash, you participate almost 1:1 in the performance of the Bitcoin Cash price.
What is a Bitcoin ETP?
Deutsche Börse groups ETCs and ETNs together under the product class Exchange Traded Products (ETPs). Bitcoin ETPs, however, are very strictly speaking always ETNs, i.e. Exchange Traded Notes. ETNs are exchange-traded notes that track the performance of underlying reference indices. Unlike ETCs (Exchange Traded Commodities), ETNs are based on indices outside the traditional commodities sector. ETNs offer any investors the opportunity to invest in a new asset class such as cryptocurrencies at a low cost.
Investors can use the product to participate in the performance of Bitcoin in a simple way without having to turn to unregulated crypto trading venues for this purpose. Separate infrastructures such as crypto wallets (digital wallets) are also not required for trading. Trading and holding Bitcoin is thus done through a regulated security.
For some years now, investors have also been able to buy Bitcoin ETPs in Germany, for example, the CoinShares Physical Bitcoin (BTC) (ISIN GB00BLD4ZL17/WKN A3GPMN). The ETP replicates the performance of Bitcoin and enables participation of almost 1:1 in the value fluctuations of the most important cryptocurrency. The Coinshares ETP was developed to offer investors a way to invest in Bitcoin without purchasing Bitcoins themselves – allowing investors to buy and sell a Bitcoin security on a regulated European exchange.
3. Buying real Bitcoins
If, in addition to the asset performance, your anonymity is also important to you when trading Bitcoins, there is no way around buying “real” Bitcoins, i.e. buying Bitcoins in the form of “digital money” or the form of data. The essential prerequisite for this is the possession of a wallet. This electronic wallet can be compared to a personal current account for your pocket; you can use it to make transfers and send or receive Bitcoins and other digital assets.
Transferring Bitcoins is no different from making a bank transfer: instead of an account number, a wallet address is simply a receiving address. Because the digital currency / value is sent directly from account to account without an intermediary, the fees incurred are typically lower than for transactions via banks. However, please note that Bitcoin and Ethereum, currently the two largest and best-known cryptocurrencies, imply very high fees, unlike most other alternative cryptocurrencies.
If Bitcoins are purchased on several portals, such as cryptocurrency exchanges or Defi networks, all Bitcoins can be transferred to and combined in a single Bitcoin wallet. For everyday use, a Bitcoin wallet on the smartphone is suitable, but it is also possible to have a digital wallet only for online payments on a PC or tablet. After downloading and installing a digital Bitcoin wallet, it should be secured with a strong password, a so-called passphrase. This passphrase must then be entered before every transaction in the future.
Buying Bitcoins on Cryptocurrency Exchanges
The most common way to buy “real” Bitcoins is through Bitcoin exchanges. Currently, the best-known trading exchanges for cryptocurrencies include Coinbase, Bitstamp, Binance or Kraken. It should be noted that opening an account or verification can take a few days.
It should also be noted that the Bitcoin rates on the various trading platforms can vary greatly. The buying and selling prices are set by the exchanges and are a form of fee.
If you want to buy Bitcoins, you only have to specify how many coins you want to buy at which rate (traditional fiat currencies such as US dollars or euros can be exchanged for Bitcoins there at any time). If the Bitcoin exchange finds a matching offer, it buys the Bitcoins on behalf of the customer and then credits them to the customer’s account.
On some exchanges, such as Bitstamp, the process is straightforward, especially since credit cards such as VISA and MasterCard are also available as payment methods. This means that you can directly exchange fiat currency for the desired cryptocurrency without waiting for a successful bank transfer first. Suppose you already hold cryptocurrency and want to exchange it for another digital asset or fiat money. In that case, you can send them to a cryptocurrency exchange and then trade them on the platform.
Please note that you should check the crypto exchange you want to use for the transfer first to understand which assets are available for trade. Typically, you can only send and receive cryptocurrencies to and from cryptocurrency exchanges, which are supported on the platform / exchange in question.