Table of contents:
- 1 Investing in Bitcoin – Does investing in Bitcoin make sense?
- 1.1 A direct investment in Bitcoin is often cumbersome
- 1.2 HIGH FEES ON CRYPTO EXCHANGES
- 1.3 INVEST IN BITCOIN WITHOUT WALLET
- 1.4 Investing in Bitcoin via Contracts for Difference (CFDs)
- 1.5 BUY CRYPTO CFDS
- 1.6 Buy Bitcoin CFDs in three steps
- 1.7 Bitcoin forecast: Is it still worthwhile investing in Bitcoin?
- 1.8 A LOOK AT THE EXCHANGE RATE DEVELOPMENT
- 1.9 Bitcoin value depends on benefit and trust
- 1.10 TRANSACTION TIME STILL A PROBLEM
- 1.11 Increasing acceptance of Bitcoin
- 1.12 Invest Bitcoin: New Financial Instruments
- 1.13 Conclusion: Invest in Bitcoin in different ways
Investing in Bitcoin – Does investing in Bitcoin make sense?
Bitcoin is the oldest and most important crypto currency in the world and is increasingly being considered by private investors as an investment opportunity. Many ask themselves thereby the question whether they can profit from the value development of the Bitcoin, without having to buy “genuine” Bitcoins. The answer is: Yes, that is possible. Meanwhile there are different financial instruments, with which investors can participate in the price development of crypto currencies like Bitcoin. This is possible for example with CFDs (contracts for difference), futures or options. The good thing about it: even if the Bitcoin price falls, a trader can make a profit. How Bitcoin investing via CFDs works is described in this guide.
- Investing Bitcoin is possible in several ways
- Traders can buy “real” Bitcoins on online marketplaces and exchanges
- Who would like to speculate on the value development of the crypto currency, can do this over CFDs
- Trading Bitcoin CFDs in particular is becoming increasingly popular with traders
A direct investment in Bitcoin is often cumbersome
On a crypto marketplace it is possible to buy coins directly from other Bitcoin owners. The problem: The buyer must accept the offered amount and the price of the respective seller. This often has nothing to do with the actual price. Also, the transaction sometimes takes several days until the coins finally become the property of the buyer. Because they are credited to the buyer only when the seller has received the equivalent value by bank transfer.
With the Bitcoin course, however, a lot can happen in the meantime. That means that the just acquired Bitcoins cannot be sold again immediately, because they were not credited to the account of the buyer yet. In a buy order the adjustment of the coin quantity does not take place automatically if the exchange rate changes in the meantime. With Bitcoin sales it looks similarly complicated. So an investor usually has to verify himself first. In addition, fees (e.g. 0.5%) are incurred for each transaction.
HIGH FEES ON CRYPTO EXCHANGES
On international crypto exchanges, investors can trade with Bitcoins more quickly in comparison. However, the fees for a transaction are about 1.49%, depending on the exchange. Furthermore, investors must first create a Bitcoin account or a Wallet before they can buy and sell “real” Bitcoins.
INVEST IN BITCOIN WITHOUT WALLET
Anyone who wants to invest in Bitcoin via a broker does not have to set up a wallet. Trading with the famous crypto currency is easier and cheaper here. This is made possible by CFDs. In addition, licensed and regulated online brokers must meet high security standards.
Investing in Bitcoin via Contracts for Difference (CFDs)
Investing in Bitcoin via CFDs – what does that mean? With Contracts for Difference (CFDs), investors can participate in the performance of the digital currency Bitcoin without actually owning the underlying asset. CFDs allow investors to profit from both rising (“long” go) and falling (“short” go) prices.
BUY CRYPTO CFDS
CFDs on Bitcoin are a highly speculative investment that can bring an investor high profits due to the leverage effect. Already with a small amount it is possible to speculate on the price development of the crypto currency. A running time is not given, as for example with options. However, it is recommended to close an open position every trading day so that it is not exposed to any interest and overnight risk. This is especially true if an investor uses leverage, which can drive up profits, but also possible losses. For this reason, it is primarily an instrument for day trading.
If you want to enter CFD trading, you should first familiarize yourself with the basics. First of all, a strategy is needed, i.e. a plan, which the trader then strictly adheres to. It is also important to hedge the trades, for example by “stop loss”, if the market develops in the other direction than predicted. Last but not least, good money and risk management plays an important role in CFD trading. Basically, a trader should only use the money for his trading that he can completely do without in the worst case.
Buy Bitcoin CFDs in three steps
STEP 1 – OPENING AN ACCOUNT
First of all, the trader needs an account with a broker who offers to trade Bitcoin via CFDs. For this it is advisable to carry out a broker comparison in advance to compare the offer and the conditions of the providers. A reputable broker should also be state-regulated, offer a very good trading platform and display all costs and fees transparently on his website.
The account is then opened online and can be completed within a few minutes. To open a Bitcoin account for trading Bitcoin CFDs, the empty fields in the login screen on the homepage of the respective broker must be filled in. Usually, users can get there directly by clicking the “Register” or “Log in” button.
STEP 2 – THE DEPOSIT
After the trading account is registered, further data is requested, for example, about the existing trading experience. The personal data must then be verified, for example by uploading an identification document. The trader then loads his trading account with real money. To do so, he or she selects the “Deposit” option in the corresponding menu, chooses a payment method, for example bank transfer or credit card, and makes the deposit.
STEP 3 – THE PURCHASE OR CFD TRADING
In order to be able to invest now Bitcoin, the Trader enters the term “Bitcoin” into the search mask or filters accordingly after the crypto currencies. Subsequently, all current data appear to the crypto currency. Then the desired settings can be made, such as the purchase price, and the Bitcoin CFDs can be bought.
Bitcoin forecast: Is it still worthwhile investing in Bitcoin?
Is it worth investing in Bitcoin or not? In particular after the renewed slump in the share price from its high for the year in June 2019 over 12,159 euros to under 8,000 euros, many investors have asked themselves just this question. How the Bitcoin share price will develop in the future and whether a Bitcoin crash occurs again, no one can predict with certainty. The course fluctuates too strongly. Further questions that arise in this context are Is the acceptance of the currency growing in everyday life and can it thereby gain confidence? Or is Bitcoin increasingly becoming an object of speculation?
A LOOK AT THE EXCHANGE RATE DEVELOPMENT
In order to find out whether also in the future the Bitcoin invest is meaningful, a view of the course development is worthwhile. Fact is that also in the future supply and demand will affect the Bitcoin course. The supply side can be defined quite clearly. The amount of Bitcoin is limited. The digital currency is therefore a scarce commodity. The inventor of Bitcoin, Satoshi Nakamoto, limited the number of Bitcoins to a maximum of 21 million units. When demand changes, extreme exchange rate fluctuations are the resultant impact.
For this reason, it is worthwhile to focus primarily on the demand side. Different aspects and influences play a role here. The most important points include trust in the crypto currency and acceptance as a means of payment. In this context, the security of Bitcoin, the practical benefits and the competition with other digital currencies also come into play.
Bitcoin value depends on benefit and trust
In terms of trust, the market leader is just as much at risk as any other crypto or Fiat currency. The difference is that crypto currencies, unlike fiat currencies, have the stated aim of eliminating intermediaries (e.g. central banks) and enabling direct transactions between participants.
TRANSACTION TIME STILL A PROBLEM
The success of a currency, however, requires that these transactions are executed quickly and without restrictions. If there is a boom in demand for Bitcoin, the confirmation time can be very long. This makes Bitcoin rather impractical for everyday payment transactions compared to other crypto currencies that are not based on the block chain or use more powerful algorithms. However, it is particularly important for these that payment confirmations are made immediately. Crypto currencies like Ripple or IOTA have more to offer at this point.
Beyond that these crypto currencies have apart from the quite short transaction time still another further use, which Bitcoin does not exhibit. For example, IOTA could be used for automatic payment processes in the Internet of Things. Ripple could be suitable for international financial transactions as a bank-independent confirmation system.
What all crypto-currencies have in common is a certain awkwardness in the handling when exchanging into fiat-currencies via stock exchanges or when storing on crypto-wallets. From this again hurdles result, which inhibit a more active use of the Coins in the everyday life. Conversely, and this is a great advantage of Bitcoin, the market capitalization of the familiar digital currency is still the largest. Bitcoin would thus have clear advantages over other crypto-currencies in establishing itself in everyday life.
Increasing acceptance of Bitcoin
One aspect that speaks in favor of Bitcoin and an investment in the well-known crypto currency is its growing acceptance through increasing adaptation to everyday life. That means that the demand off all speculations on the Bitcoin course is increasing world-wide.
In neighboring France, for example, 25,000 acceptance points are already being set up in the form of Point of Sales (POS) terminals in stores, which are to be usable from 2020. Bitcoins will thus also be accepted by large chains such as Sephora or Decathlon in the future. This is made possible by a cooperation between the payment platform Easy2Play, Point-of-Sales Global POS and the app operators of the Easy Wallet App. Payments are made with Bitcoins, but are converted directly into euros via partners Savitar and Deskoin.
Bitcoin has also already found its way into everyday life in Japan and some other countries. In Germany, crypto currencies are still a “playing field” in terms of acceptance for crypto-fans, speculators and “users” in the industry. On the other hand, the general population regards digital currencies primarily as a risky object of speculation and prefers to rely on cash or, against their better judgment, to park savings in badly-interest-bearing accounts or the good old savings book. In times of permanently low interest rates, however, it is hardly possible or even impossible to increase money in these accounts.
Invest Bitcoin: New Financial Instruments
Meanwhile there are numerous financial instruments that allow traders to invest in Bitcoin. As mentioned, they have the possibility to speculate on the price of Bitcoin without physically owning the crypto currency.
The demand, tradability and especially the fulfillment of obligations from such derivatives can significantly drive the Bitcoin price and the prices of other digital currencies. Although the stock exchanges and the supply of Bitcoin derivatives such as
- certificates or
still limited. However, a clear development and formation of the market can be seen. Announcements by well-known banks and investment houses such as Morgan Stanley to enter the market may offer great opportunities. In addition, there are also very large market participants who can bring high volatility to the market simply because of the size of the transactions. In addition to large investment houses, which are primarily focused on speculation, this also includes the so-called whales, which, when prices rise, can liquefy a significant number of crypto coins in euros or US dollars and thus cause prices to plummet immediately.
Of course, nobody can predict exactly how the crypto market will develop in the future. Experts predict crypto-currencies like Bitcoin however a positive development. Traders interested in a Bitcoin investment should constantly observe the market, expand their knowledge and gain new Bitcoin experience.
Conclusion: Invest in Bitcoin in different ways
Bitcoin is still a popular investment opportunity. However, anyone who decides to invest in Bitcoin must answer a few questions in advance. First, a trader should always ask himself why he wants to invest in Bitcoin. Then he should consider where he wants to buy or trade Bitcoins. Finally, the question naturally also arises: How should I invest in Bitcoin? Experience and sound knowledge are prerequisites for this. Prospective traders can gain this experience by first opening a demo account with a broker to test trading Bitcoin and other currencies without risk. Only those who have the appropriate background knowledge should finally use real money for trading.
There are several ways to invest in Bitcoin. Investors can buy and sell the crypto currency directly for example over on-line stock exchanges and market places. But in particular the trade with Bitcoin CFDs offers numerous advantages to traders. Regardless of the Bitcoin price, investors can achieve high returns if they correctly predict the price trend or a Bitcoin bubble or not. Due to the leverage effect, high volumes can be moved in the market with a small investment. The possible profits are considerable. But beware: a lever always works in both directions. The higher chances of winning are thus offset by a higher risk of loss. It is therefore advisable to invest only small amounts at first and to use only money that is dispensable in everyday life.