Since its invention in 2009, Bitcoin has experienced steep growth: from October 2013 to early June 2021, its value has risen by almost 30,000 percent. Analysts say that the value of Bitcoin could rise even further. Cryptocurrencies and the blockchain technology behind them are becoming more and more mainstream, i.e. part of daily life.
Anyone considering buying Bitcoin, however, must be careful: Because the value of the cryptocurrency has reached enormous highs, but has also slipped sharply.
After a record value of just under 17,000 euros in 2017, the Bitcoin crashed and remained under 10,000 euros until 2020. Even if the Bitcoin price has risen again afterwards, the cryptocurrency remains a very volatile investment.
Sometimes a tweet from a prominent entrepreneur like Tesla CEO Elon Musk is enough to fuel speculation on the coin within a few days and influence the price too significantly. Experts therefore advise investing at most a small percentage of your assets in Bitcoin, and only the part that you do not need for retirement provision.
If you still want to get in, you can find out here how you can buy Bitcoin yourself.
Cryptocurrencies available for trading
*CFDs are complex financial instruments and, due to leverage, carry a high risk of quickly losing a multiple of the money invested. 68% of retail investors lose money when trading CFDs via eToro. **Investments in cryptocurrencies are not regulated in most EU countries and the UK. No consumer protection. There is a risk of total loss.How to buy Bitcoin: 4 steps1. Choose a crypto exchange
To buy Bitcoin or another cryptocurrency, you need to open an account with a crypto exchange, where buyers and sellers meet to exchange US dollars or euros for coins.
There are hundreds of exchanges, but as a beginner, you should opt for one that offers a good balance between ease of use, low fees and high security.
Take a look at our comparison of the best crypto exchanges. For German investors, for example, Coinbase, Kraken, Bitpanda or the Stuttgart Digital Exchange are well suited. Most exchanges store your coins in an offline wallet that is separated from the Internet and thus much better protected against hacker attacks.
Alternatively, you can also use crypto currencies as a beginner via suitable crypto apps, such as those offered by some exchanges, but also by securities brokers. Even then, the coins are usually held offline by a trustee. However, you can’t easily get them out again, usually you can’t pay with them or make transfers with them. 2. Choose a payment option
To invest, you must first deposit money into the account at the exchange or broker. Usually you can deposit by bank transfer from a current account, by PayPal or credit card.
Keep in mind, however, that the platforms may charge transaction fees for certain deposit options. Often the online transfer from the current account is free of charge. For payments by PayPal or card, on the other hand, the exchange charges 2.5% of the transfer amount.
Because the fees directly reduce your invested amount, it makes sense to choose the free transfer. Even if the credit here can sometimes take a bank working day.3. Order your buy order
Once you have funds in your account, you can place your first buy order for Bitcoin. Depending on the platform, you can start the purchase directly via a button or have to enter the ticker symbol of Bitcoin (BTC). Enter the amount you want to invest.
When the transaction is complete, you own a part of a Bitcoin. As a beginner, you will probably not afford a whole Bitcoin right away. For this you would have to pay almost 46,000 euros in March 2022. Let’s say you invest $1,000 instead. Then you own 1/46 Bitcoin, which is around 2.2 percent. 4. Choose a safe storage option
Many crypto exchanges have an integrated Bitcoin wallet, but it is connected to the Internet. Some investors are not so comfortable with this. Because if the Bitcoins are “online”, hackers can access the coins more easily, steal them.
Most major stock exchanges have therefore now taken out private insurance that compensates customers in such cases. Increasingly, however, they also store the majority of crypto customer funds offline in so-called cold storages.
If you want to be on the safe side, you can store your Bitcoin in a private offline Bitcoin wallet. However, then you have to withdraw the coins from the account of the exchange, which can cost you fees.
Also make sure that you always keep your key – a long combination of letters – in a safe place for a private offline wallet. If the key is lost, you can no longer get hold of your coins. This has already deprived some Bitcoin millionaires of their fortunes. If someone else gets the key, he can deduct your coins. Sell Bitcoin
If you want to sell Bitcoin, you can place a sell order through your exchange or broker, similar to what you did when you bought your BTC. Most exchanges offer multiple order types. You can then decide whether to sell only when the Bitcoin has reached a certain price, or whether to place an order that will be executed immediately.
You can also choose to sell your entire Bitcoin inventory or just a certain amount. Once the sale is complete, the money will be credited to the account of the exchange or broker and you can transfer it to your bank account.
Sometimes you have to wait a bit before you can transfer the money to your bank account.
If you sell Bitcoins, you may be taxed, namely if there is less than a year between buying and selling your Bitcoin and you have earned at least 600 euros. The 600 euros is a so-called exemption limit, which means: From the 601st euro you pay income tax on the entire profit. The rule also applies if you do not exchange your cryptocurrency for euros, but for another cryptocurrency or a commodity.
The income is then regarded as a “private sale transaction”, not as investment income. So it is your personal income tax rate, not withholding tax.Should you buy Bitcoin?
Especially when the Bitcoin price skyrockets, it may sound tempting to get into the popular cryptocurrency. But even if you think the timing is good, you should be careful: Bitcoin is incredibly volatile. Experts advise to invest a maximum of a small portion of your assets in crypto assets – and only the part that you certainly do not need for your retirement provision.
Cryptocurrencies available for trading
*CFDs are complex financial instruments and, due to leverage, carry a high risk of quickly losing a multiple of the money invested. 68% of retail investors lose money when trading CFDs via eToro. **Investments in cryptocurrencies are not regulated in most EU countries and the UK. No consumer protection. There is a risk of total loss.