invest in Bitcoin

What is the best approach to invest in Bitcoin?

If you want to acquire Bitcoin, you need first figure out why you’re doing it and what kind of investment strategy you want to use. We can basically differentiate three choices here: Bitcoin as a long-term investment, a trading instrument (trading), and a payment method.

1.) For beginners, buy Bitcoin as a long-term investment.

Bitcoin is seen as a valuable store of value by many investors. They believe Bitcoin will continue to thrive and are betting on its long-term growth. This has financial benefits as well: any sale transaction between persons held for longer than one year is tax-free, according to current case law (as of November 2021).

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The following elements support a Bitcoin investment for the long term:

Long-term evolution: If you look at Bitcoin’s historical price evolution, you’ll notice that the digital currency has only one long-term path: north! Who would have guessed that with the hoopla in 2018 and a price above $20,000, the price would already be trading above $60,000 in 2021? Long-term investors, to be precise.

Demand and supply:

There will be a total of 21 million BTC available. The halving reduces the offer even further. You can expect a rise in the price of Bitcoin if demand continues to rise. The network effect, among other things, helps to support this. As a result, the value of a network rises as the number of users rises — in the case of Bitcoin, the price rises as the number of users rises.

Consolidation and Hype:

In the so-called hype cycles, as the accompanying Bitcoin price chart shows, the price develops strongly higher. A consolidation frequently follows such a cycle, with the price dropping or moving sideways for a long time before rising again in a new round of hype. As a result, a Bitcoin investor must have a steady hand and be patient. It takes time to gain social acceptance and establish trust.

Bitcoin is also known as «digital gold» because of its function of storing value and scarcity. Major multinational banks, asset managers, and stock exchanges have recently discovered this potential and are using their assets to profit from price changes. Digital gold is used as a long-term investment by even early pension plans and life insurers.

Recommendation:

We recommend using a Bitcoin broker like Coinbase or eToro if you want to invest in Bitcoin for the long term and expect a price gain. Purchasing Bitcoin is simple and straightforward here (also via app). The investor has the option of storing his bitcoins in the built-in wallet or transferring them to his own hardware wallet, such as one from Ledger.

2.) Purchase Bitcoin as a trading instrument: Professionals and advanced users

The cryptocurrency’s short-term price changes (volatility) make it particularly appealing to traders. You can take advantage of declining prices in a short period of time if you keep a watch on the market, react swiftly, and purchase and sell at the proper times. The rule is that the more volatile a market is, the more appealing it is to traders.

Price changes in the double digit % range are not uncommon when looking at the volatility of digital currency, especially on a daily or weekly basis. This is primarily due to the fact that the market capitalisation is still not as big as, say, gold.

Recommendation:

If a trader wishes to profit from Bitcoin’s volatility, we recommend using a Bitcoin exchange with many vital features for daily trading, such as Stoploss, such as Coinbase, Digital Exchange Stuttgart, or Binance. A CFD provider like Plus500, on the other hand, is the greatest choice if you wish to wager on growing or decreasing prices and maybe use leverage.

3.) Purchase Bitcoin as a form of payment

Bitcoin was created with the intention of providing a decentralized alternative to existing central monetary systems such as the US Dollar and Euro. A currency that operates without the interference of a central authority (e.g., a central bank) and is available to anybody in the globe, even if they do not have access to a bank account.

Acceptance points: Bitcoin is now accepted as a form of payment in numerous shops, bars, hotels, and other businesses. Payment can be made relatively easily, for example, with a mobile wallet (wallet) on the phone. Scan the QR code, send Bitcoin anywhere in the world, and you’re done.

Every bitcoin payment (transaction) may be viewed on the blockchain, making it anonymous or pseudonymous. Although you can’t see the person’s name, you can see the respective sender and recipient wallet addresses, but you can’t tell who (as a person) is behind it. As a result, Bitcoin payments are not completely anonymous, but rather pseudonymous.

Bitcoin debit/credit card: Debit or credit cards linked to a broker’s wallet are another way to pay (indirectly) with bitcoins. You can use such a card to pay practically anywhere that accepts credit cards.

Recommendation:

We recommend buying bitcoins from an internet broker like Coinbase if you wish to make local or online payments. Following your bitcoin purchase, you can transmit your bitcoins to a mobile wallet such as BRD and make payments through QR code from there. You can also use the Coinbase debit card, which is linked to the broker’s wallet directly.

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