There are many different trading venues on the Internet where investors can buy bitcoins. The respective crypto exchanges and trading places for digital assets have advantages and disadvantages
Crypto enthusiasts like to refer to bitcoins as “digital gold.” The fact that there are similarities between gold and bitcoins cannot be denied.
In contrast to state currencies, both are finite – gold is a raw material with limited reserves, and bitcoins are limited to 21 million pieces: the inventor of bitcoins, Satoshi Nakamoto, wanted to ensure their value stability. This, in turn, is particularly important in times of crisis.
At the beginning of the Corona crisis, however, Bitcoin seemed to need help to live up to its reputation as a crisis-proof currency: the price collapsed massively and fell below 5,000 US dollars.
However, bitcoin recovered relatively quickly, peaking at over $60,000. Since then, the price has fluctuated repeatedly, but Bitcoin has established itself as a fixed capital investment.
Three ways to invest in Bitcoin
In the meantime, not only daring private individuals are buying coins, but also institutional investors have discovered digital currencies for themselves. Many of them put their money into the two most popular cryptocurrencies, Bitcoin and Ethereum.
Taken together, their market capitalization corresponds to around 60 percent of all digital currencies. No wonder, then, that almost every trading place for cyber currencies has Bitcoin and Ethereum in their repertoire.
Even if the two can actually be bought on every crypto platform, the differences between the trading venues are enormous. Some offer real bitcoin, others offer ETPs from bitcoin on a securities exchange, and others use bitcoin derivatives.
1. Real Bitcoins
Investors can buy actual bitcoins on classic exchanges and marketplaces such as Binance. Exchanges sell the coins directly to the customer – the price depends on supply and demand. Marketplaces, on the other hand, are intermediaries, they only provide the platform for a transaction between buyer and seller. The price there also depends on the market, but the exact amount is determined by the seller.
If you buy actual Bitcoins, you own the digital coins. It is up to him whether he leaves it on the respective crypto platform or transfers the cryptocurrency to an external wallet, for example, to use it as a means of payment in an online shop.
Tip: Depending on the crypto exchange, the current prices for a bitcoin differ. Look for websites that help compare offers from different exchanges and find the best possible price.
But there is a catch: cryptocurrencies can be traded quickly and cheaply, but paying out Bitcoin to an external wallet is impossible. The private key, which grants exclusive access to the storage location of the crypto coins, remains in the hands of an external custodian.
Bitcoin is only suitable for speculation with these brokers. This is usually sufficient for most investors, as the options for paying with bitcoins are currently still limited. But if you want to keep this option open, you must look for another provider.
By the way, investors can buy a little piece of bitcoin – with values in the five-digit range, that should be difficult for many. If you want to invest less money, you can only buy fragments.
2. Bitcoin ETPs
So-called neo-brokers, such as Scalable Capital or Justtrade, offer to trade Bitcoin as ETPs. These securities are similar to stocks or ETFs. They are distributed via a stock exchange and can even be saved. They are, therefore, suitable for investors who regularly want to invest smaller amounts.
This form of investment also impacts the taxation of the profit: Instead of deducting the bitcoins via income tax, as usual, capital gains tax is due for them. This tax rate is usually lower and is automatically deducted from the broker.
Those who invest in the securities rarely have access to coins. Only a few issuers pay out the cryptocurrencies.
3. Bitcoin Derivatives
Bitcoin derivatives can be ordered from different providers. With derivatives, investors do not acquire the cryptocurrency itself but speculate on its performance – this is possible for both profits and losses.
If you also use leverage, you can multiply your chances of winning, depending on the size of the leverage – but the leverage affects the loss in the same way.
Caution: Derivatives such as CFDs are particularly suitable for advanced traders. A large part of the private CFD accounts slips into the lousy.
The right offer
The respective crypto platform, therefore, has a decisive influence on how investors can trade Bitcoin. But there are other differences: Some providers carry more coins than others, charge different fees, and are regulated differently. A comparison is worthwhile.
Regarding the sheer number of coins, Binance is an excellent place to go – over 150 cryptocurrencies can be traded here. In addition to Bitcoin and Ethereum, there is also the popular Dogecoin.
Exchanges such as Kraken or Coinbase also offer a wide range of cryptocurrencies but charge higher fees than Binance. On the latter, investors can trade shares and ETFs in addition to some cryptocurrencies.
In addition to their online version, many crypto platforms also offer an app for buying and selling Bitcoin. This has the advantage that active investors can react flexibly to price fluctuations. There are good apps for Bitcoin trading, from Bison, Coinbase, Justtrade, or Trade Republic.
In most cases, trading on a crypto exchange requires verification of the registered user. Individual providers use different methods for this – some even do without proof of their person up to a certain amount.
After the user has successfully registered and, if necessary, verified, he can transfer money to his exchange account. Traders should ensure that crypto exchanges cooperate with reputable partner banks, preferably providing deposit insurance.
The payment options are often limited – a standard bank transfer is almost always possible, but it usually takes a few days. Payments via credit card, instant transfer, or PayPal is available more quickly, but the fees are usually higher.
