Buying Bitcoin: 7 reliable and secure options for investors

Buying Bitcoin: 7 reliable and secure options for investors

7 Reliable Options for Investing in Bitcoin.

 Bitcoin is subject to strong fluctuations, but it has now established itself as an alternative investment among professional investors. Since January 2023, the price of Bitcoin has more than doubled, with current increasing momentum. The current drivers of the price are hopes for the soon approval of BlackRock's Bitcoin spot ETF. The question that all investors who want to buy Bitcoin ask themselves is: Where and how can one buy Bitcoin best? We have compared all options, reputable providers, and trading options, and listed their advantages and disadvantages.

BUYING AND SELLING BITCOIN - RECOMMENDATIONS & TIPS

There are many ways to buy Bitcoin. The different options, crypto exchanges, and trading platforms for digital assets all have their advantages and disadvantages.

you can participate in the Bitcoin price through Bitcoin CFDs. This allows you to bet on both rising and falling prices. With the online broker finanzen.net zero, you can trade real Bitcoins without fees.

Note: Choose the trading option that is closest to your investment goals. Do you want to participate in the long-term price development of Bitcoin or speculate on price fluctuations in the short term? Do you want to buy real Bitcoins or invest in Bitcoin securities?

BTC TRADING - THE MOST IMPORTANT INFORMATION

In general, there are three ways to trade Bitcoin:

• You can buy real Bitcoin through crypto exchanges like Binance or Coinbase. You can also trade Bitcoin through online brokers like finanzen.net zero and Justtrade. A slightly outdated option is buying Bitcoin through marketplaces like bitcoin.de.
• Bitcoin ETPs are securities that track the BTC price. Online brokers like finanzen.net zero or Scalable Capital offer the option to trade Bitcoin in the form of exchange-traded products.
• You can trade Bitcoin derivatives with crypto brokers and other providers.

WHAT OPTIONS ARE THERE TO TRADE BITCOIN?

CRYPTO EXCHANGES:

 Crypto exchanges provide an automated platform for trading Bitcoins and other digital currencies. Unlike marketplaces where trades are manually executed, crypto exchanges allow investors to buy and sell coins directly without the need for individual searches. It is important to distinguish between crypto exchanges and crypto brokers, as brokers only act as intermediaries. Well-known trading exchanges include Binance, KuCoin, Kraken, and Coinbase.

ADVANTAGES OF CRYPTO EXCHANGES:

• Automated Trading: Unlike manual marketplaces, crypto exchanges enable fast and efficient trading as purchases and sales are automatically executed once the predefined criteria are met.
• Liquidity: Crypto exchanges typically offer high liquidity, meaning that large amounts of cryptocurrencies can be traded quickly and with minimal price movements.
• Variety of Trading Options: Many crypto exchanges provide a wide range of cryptocurrencies, trading pairs, and even advanced trading options such as margin trading or futures.

DISADVANTAGES OF CRYPTO EXCHANGES:

• Security Risks: Despite advanced security measures, crypto exchanges are still susceptible to hacks and security breaches. In the past, there have been several incidents where large amounts of cryptocurrencies were stolen from exchanges.
• Price Discrepancies: Due to price fluctuations and varying trading volumes, the prices of cryptocurrencies can vary across different exchanges, leading to arbitrage opportunities or confusion for investors.
• Regulatory Concerns: Crypto exchanges may be subject to strict regulatory requirements or even banned in certain jurisdictions, limiting access to and trading for investors.

BUYING BITCOIN: STEP-BY-STEP GUIDE

1. REGISTER:

 Before trading Bitcoin, you need to register with a crypto exchange and, in most cases, verify your identity. This can be done through various methods, such as the post-identification or video identification process, uploading an identification document, or providing proof of address or confirmation of residence.

2. MAKE A DEPOSIT:

 After successful registration and verification, the next step is to deposit into your account on the exchange. It's important to ensure that the exchange works with trusted banks and offers deposit insurance. Deposits can be made via bank transfer, credit card, instant bank transfer, or PayPal, with the latter options typically being faster but may incur higher fees.

3. SELECT INVESTMENT OPTIONS:

 Once the funds are in your account, you can get started. Here, you have the choice of either acquiring the actual coin—this can also be done partially, so you don't necessarily have to buy a whole coin—or speculating on its value through CFD trading or certificates. However, caution is advised when trading derivatives such as CFDs. 

  Leverage is often used to increase the investment volume, which can lead to quick profits but also equally fast losses. Therefore, it is recommended that beginners first thoroughly familiarize themselves with the mechanisms and pros and cons of leveraged trading. 

4. COMPLETE THE PURCHASE PROCESS:

 If you decide to purchase Bitcoin, you set the amount of money you want to invest and wait for a suitable price. After completing the purchase, you own the Bitcoin, and you can store it in your wallet. It is advisable to use an external wallet, either in digital form as an app or as a hardware wallet (cold wallet), to minimize the risk of theft in case of a hacker attack. 

 Your wallet contains a receiving address and a private key, ensuring secure transfers. Transfers between different wallets usually take a few minutes, and there may be small fees involved.

ONLINE BROKERS:

  Some online brokers now offer the purchase and sale of actual Bitcoins, such as Justtrade, Trade Republic, and finanzen.net Zero. It is important to know that you don't have to acquire a whole Bitcoin, especially considering that the price of a Bitcoin often reaches five figures. This is a significant investment for many people. 

 Instead, there is the option to buy only a fraction of a Bitcoin. This allows investors with a smaller budget to invest in cryptocurrency. However, it is recommended to invest at least 500 to offset some of the volatility in cryptocurrencies. With this amount, you often avoid a minimum quantity surcharge that some providers impose.

ADVANTAGES OF ONLINE BROKERS:

• Easy Entry: Crypto brokers often provide user-friendly platforms that make it easier for investors to enter the cryptocurrency market without having to deal with the technical aspects.
• Fractional Trading: Many crypto brokers allow the fractional purchase of cryptocurrencies, enabling investors to invest in a variety of digital currencies with small amounts.
• Centralized Trading Platform: With crypto brokers, investors can often not only invest in cryptocurrencies but also in traditional asset classes such as stocks or ETFs, allowing for comprehensive portfolio management in one place.

DISADVANTAGES OF ONLINE BROKERS:

• No Withdrawal to External Wallets: Typically, crypto brokers do not offer the option to withdraw cryptocurrencies to an external wallet. This limits the control and use of the coins.
• Limited Utility: Since investors usually cannot directly access their cryptocurrencies, they mainly depend on positive price movements and cannot use the coins for transactions or payments.
• Fee Structure: Some crypto brokers may have higher fees or hidden costs for the purchase, sale, or custody of cryptocurrencies, which can affect profitability for investors.

BITCOIN MARKETPLACES:

 Trading real BTC on a Bitcoin marketplace is one of the most popular options among crypto enthusiasts. 

 The price for Bitcoins on these platforms is determined by supply and demand. Users place their buy or sell offers, and transactions occur when one user accepts an offer from another user. After the transaction is completed, the buyer transfers the purchase amount to the seller's bank account and receives the Bitcoins in return to their digital wallet.

ADVANTAGES OF BITCOIN MARKETPLACES:

• Direct trading: On P2P marketplaces, users trade directly with each other, often leading to more transparent prices determined by real supply and demand.
• Anonymity: Many crypto marketplaces offer higher anonymity compared to centralized exchanges or brokers, as they often have less strict KYC (Know Your Customer) procedures.
• Lower fees: Since transactions are conducted directly from person to person without intermediaries, transaction fees can often be lower than on centralized platforms.

DISADVANTAGES OF BITCOIN MARKETPLACES:

• No fractional trading: Unlike crypto exchanges or brokers, it is not possible to trade fractions or shares of cryptocurrencies on many P2P marketplaces.
• Security risks: As trading occurs directly between users, there is a higher risk of fraud or misconduct, especially if the marketplace does not offer escrow services or dispute resolution mechanisms.
• Complexity: For beginners, direct trading on P2P marketplaces can be more complex and less user-friendly compared to trading on centralized platforms or brokers.

BITCOIN ETP:

 Neo-brokers, including Scalable Capital and finanzen.net Zero, enable the trading of Bitcoin ETPs (Exchange Traded Products), specifically in the form of Exchange Traded Notes (ETNs). 

 ETNs are exchange-traded debt securities that track the performance of specific reference indices. Unlike exchange-traded commodities (ETCs) that focus on the commodity sector, ETNs are based on other indices. They provide investors with a cost-effective way to invest in new asset classes.

ADVANTAGES OF BITCOIN ETPs:

• Regulation and security: Bitcoin ETPs are traded on regulated exchanges, providing investors with a higher level of security and trust compared to direct trading on unregulated crypto platforms.
• Simplicity: Trading and owning Bitcoin ETPs do not require crypto wallets or other specific infrastructure, making it easier for traditional investors to enter and manage their investments.

DISADVANTAGES OF BITCOIN ETPs:

• Indirect exposure: Investors do not directly own Bitcoins with Bitcoin ETPs; instead, they own a security that tracks the performance of Bitcoin. This can lead to deviations in performance under certain scenarios.
• Fee structure: Similar to other exchange-traded products, there may be fees associated with buying, selling, or holding Bitcoin ETPs, which can impact the overall return on investment.

BITCOIN DERIVATIVES:

 Another convenient way to participate in the price movement is through the purchase of Bitcoin derivatives, such as Bitcoin certificates or Bitcoin CFDs (Contracts for Difference). These derive their value from the underlying cryptocurrency, Bitcoin. Derivatives allow crypto investors to speculate on the price performance of the underlying asset without actually owning it. Derivatives are typically traded on exchanges and offer various opportunities to profit from price movements or hedge risks.

BITCOIN CERTIFICATES:

 Certificates are among the popular derivatives. They are issued by financial institutions or issuers and traded on traditional exchanges. Bitcoin certificates are usually structured debt securities that either track the value of Bitcoin or are based on it.

ADVANTAGES OF BITCOIN CERTIFICATES:

• Easy access: Bitcoin certificates allow investors to invest in the price performance of Bitcoin without the need to buy, store, or manage actual Bitcoins. This facilitates entry through traditional exchanges and securities accounts.
• Diversification: For investors already involved in traditional financial markets, Bitcoin certificates provide a way to diversify their portfolio and gain exposure to the cryptocurrency without going through the usual process of trading cryptocurrencies.

DISADVANTAGES OF BITCOIN CERTIFICATES:

• Fees and costs: Buying, selling, or holding Bitcoin certificates may involve fees and other costs that can impact the overall return on investment.
• Issuer's credit risk: Since Bitcoin certificates are debt securities, there is a credit risk associated with the issuer of the certificate. If the issuer encounters financial difficulties or declares bankruptcy, it could affect the value of the certificate.

 Tip: The selection of crypto certificates in the market is not extensive, but a compelling offering is provided by Swiss bank Vontobel. With the Open End Participation Certificate on Bitcoin, you can easily invest in the price development of the most important digital currency.

SPECIAL FORMS OF BITCOIN TRADING:

 Now you know the options available to investors to participate in the value development of digital currencies. However, you may not be aware of how to pay for your coin purchases, whether you can trade Ripple, Monero, Cardano, and others at your regular bank, and what special forms of Bitcoin purchases exist. Let's fill in this knowledge gap now!

BUYING BITCOIN OFFLINE:

 There are various ways to purchase cryptocurrencies offline with cash. The cheapest and fastest way to buy Bitcoins is through direct transactions with private individuals. Platforms like Bitcoin-Treff.de facilitate meetings with local traders for this purpose.

Caution: It's important to note that such transactions are highly anonymous and unregulated. Therefore, you should choose your trading partner very carefully. In some cases, there are even Bitcoin ATMs where you can buy Bitcoins on-site.

SETTING UP A BITCOIN SAVINGS PLAN:

 Savings plans are among the most popular investment options for investors. So why not have a Bitcoin savings plan as well? A Bitcoin savings plan can provide a convenient way to regularly invest small amounts into digital coins. Additionally, a savings plan offers strategic advantages. Cryptocurrencies are subject to significant market fluctuations, and it's nearly impossible to find the perfect entry point.

 By using a savings plan, you can bypass this problem as you regularly buy BTC, benefiting from the cost-average effect. However, this effect only occurs if you save continuously, for example, with Coinbase, the most well-known provider of Bitcoin savings.

BUYING BITCOIN WITH PAYPAL:

 In the United States, PayPal customers have been able to buy and sell Bitcoin since March 30, 2021. In August 2021, the payment service provider finally expanded its services to the United Kingdom. However, it is not yet possible to buy Bitcoin with PayPal in  European countries.

BUYING BITCOIN WITH CREDIT CARD:

 One of the most popular methods for trading cryptocurrencies is using a credit card. Visa, Mastercard, and American Express are widely accepted by both buyers and sellers. Buying Bitcoin with a credit card offers several advantages. It is fast and convenient, and the fees are relatively low. Once you have provided your information to an exchange like Coinbase or a CFD broker, you will have an easier time purchasing your cryptocurrencies with just a few clicks.

BUYING BITCOIN WITH INSTANT BANK TRANSFER:

 Investors interested in cryptocurrencies often seek efficient payment methods to invest in Bitcoin. While traditional bank transfers are still a common method for investing in Bitcoin, the long waiting times associated with them can be a significant drawback. For those who value both security and quick transactions, buying Bitcoin with an instant bank transfer is a good option.

 The instant bank transfer is an online payment system provided by the Munich-based company Sofort GmbH. It is now also known as Klarna since it belongs to the Swedish company Klarna, a competitor of PayPal. The system works by providing merchants with immediate payment confirmation, ensuring the security of the transferred funds.

BUYING BITCOIN THROUGH BANKS:

 Traditional banks such as Sparkasse or Volksbank do not yet offer investors the opportunity to trade cryptocurrencies. This is usually due to regulatory requirements, but many of the well-known banks are also skeptical about Bitcoin. However, some banks and no brokers still offer Bitcoin financial products such as CFDs, ETNs, ETPs, or certificates, although they may not always be directly backed by Bitcoin on a 1:1 basis.

BITCOIN PRICE DEVELOPMENT:

  The value of any good or asset depends on supply and demand, that's clear. If the demand for Bitcoin increases, the Bitcoin price and value also rise. But how is the Bitcoin price determined? The total available supply of Bitcoins is capped at 21 million. This limitation is designed to avoid inflation and generate value appreciation for the cryptocurrency. However, it is generally assumed that the demand for Bitcoin will continue to rise, for example, by improving trading conditions and making it increasingly attractive as a means of payment.

  Like any other currency, the Bitcoin exchange rate is subject to fluctuations and may vary slightly depending on the trading platform. Investors who want to trade Bitcoin should consider the strong volatility of the cryptocurrency.

FREQUENTLY ASKED QUESTIONS ABOUT BITCOIN:

What is Bitcoin?

 Bitcoin is a decentralized digital currency based on blockchain technology. It was developed in 2009 by an individual or group of individuals using the pseudonym Satoshi Nakamoto and has since become the most well-known and widely used cryptocurrency. Bitcoin allows users to send payments directly to each other without the involvement of a third party, such as a bank.

Is buying Bitcoin illegal?

 No, buying Bitcoin is not illegal in Germany, Austria, or Switzerland. However, unlike the Euro, Bitcoin and other cryptocurrencies are not considered legal tender. There is no legal obligation for businesses or companies to accept Bitcoin as a form of payment.

How do I buy Bitcoin?

 Bitcoin can be bought and sold through brokers, exchanges, or derivatives. There are numerous online trading platforms where you can trade Bitcoin using PayPal, credit card, instant bank transfer, or SEPA. The choice of the right trading platform depends on whether you want to invest directly in real Bitcoin or a Bitcoin-based financial product, such as Bitcoin CFDs, ETPs, ETNs, or certificates.

How is Bitcoin taxed?

 If you hold cryptocurrencies like Bitcoin for more than one year before selling, you don't have to pay taxes, regardless of the profit amount. However, there is a tax exemption threshold of 600 euros for the sale of cryptocurrencies within one year of purchase. It's important to note that this threshold applies not only to Bitcoin but also to all other private capital gains.

How do I buy a Bitcoin stock?

 There are no Bitcoin stocks in the conventional sense, as Bitcoin represents its asset class and cannot be traded on stock exchanges like traditional stocks of companies. However, there are many financial products such as CFDs, ETPs, ETNs, or certificates based on Bitcoin that can be traded on regular exchanges. Stocks of companies whose business models are based on Bitcoin, such as Bitcoin mining stocks, Bitcoin services stocks, or Bitcoin investment stocks, can also be traded on exchanges.

What is a Bitcoin savings plan?

 A Bitcoin savings plan is a way to regularly invest in Bitcoin by transferring a set amount to a broker or cryptocurrency exchange. These funds are then converted into Bitcoin at a predetermined time and stored in a wallet. The advantage of a Bitcoin savings plan is that you don't have to worry about the optimal timing of purchases and can build your investment over the long term.

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