Which Bitcoin exchanges have liability insurance

This is how you can buy, sell and trade bitcoins

How can I buy bitcoin?

There are basically two ways to benefit from the strong increase in value of Bitcoins, BTC or XBT for short. You can:

  • Buy, sell, trade or use bitcoins as digital money on online marketplaces and bitcoin exchanges or as a means of payment. You need a wallet for this.
  • Use bitcoins with securities as an investment. For this you need a depot (e.g. from our depot comparison).

In the following we will show you both variants, explain how they work and what is important.

Variant 1: Buy bitcoins as digital money

You can buy bitcoins in two places. On the one hand on a Bitcoin marketplace and on the other on a Bitcoin exchange. You need a wallet as a basis for this. This is nothing more than an electronic wallet. With one difference: you carry your wallet around in your pocket as a real item. The wallet, on the other hand, is virtual, you download it to a storage medium. This can be a PC, laptop, tablet, but also a smartphone.

Why do I need a wallet?

You use the Bitcoin wallet to carry out all transfers. It works in a similar way to a bank transfer. However, the digital money flows directly from person to person as the business is carried out without an intermediary bank. The Bitcoin wallet serves as an interface to the blockchain, i.e. the Bitcoin data network. Access to the wallet is secured with several keys and passwords. There are four ways to use a wallet.

  • You can download a wallet for mobile use as an app from the Play Store or App Store.
  • If you would like the wallet for your computer, you will find many different wallets online for every operating system.
  • You can also register with an online wallet and use it like an online account.
  • The hardware version is a bit more secure. This is a physical device, e.g. a special USB stick that you use to manage your bitcoins. However, there is a cost to buy, while online wallets are free.

You can also compare a wallet to a deposit that you need if you want to buy and sell stocks.

Direct trading on a Bitcoin marketplace

You can buy, sell and trade bitcoins cheaply and easily on special internet marketplaces. As a registered user, you are actively looking for offers from other marketplace users. The purchase process takes place in four steps:

  1. The seller offers a certain amount of bitcoins (it doesn't have to be a whole, parts such as 0.432 bitcoins are also possible) at a fixed price.
  2. If you want to buy the bitcoins at the suggested price, you have to accept the offer. The price is only negotiated between the two parties involved.
  3. Then transfer the purchase price in a traditional currency such as euros or US dollars to the provider's bank account.
  4. In return, you will receive the digital currency for your wallet.

The best-known German Bitcoin marketplace is bitcoin.de, other popular ones are eToro, Coinbase and Bitwala. In many cases, a transaction fee of almost 1% of the purchase price is due, which the operator of the platform receives and which the buyer and seller share.

Automated purchase on the Bitcoin exchange

Bitcoin exchanges are another option for buying bitcoins. The difference to the marketplaces described above lies in the automated trading. They do not search for the best offers on their own, nor do they carry out the purchase process themselves. Instead, you specify a specific course. If a suitable offer is available within a specified period, the purchase will be carried out automatically by the exchange. You will receive the bitcoins, for which the purchase price will be debited from your account.

The use of a Bitcoin exchange is associated with higher transaction fees and is therefore more expensive than buying via a marketplace, as this is more work for the operator.

Well-known crypto exchanges in Germany include Bitfinex, Kraken and Binance. But there are many more Bitcoin exchanges, which can differ greatly from one another in essential points:

  • Bitcoin course
  • Number of tradable bitcoins
  • Offer of other cryptocurrencies
  • fees
  • Payment method
  • Ease of use and service

Due to the large differences, it is worthwhile to compare the various platforms before choosing an exchange. You can also sign up to multiple exchanges and buy bitcoins if you want.

Variant 2: Buy bitcoins as securities

You don't necessarily have to buy bitcoins. You can also benefit indirectly from the increase in value and invest your money in bitcoins. In most cases, this can be done easily via a broker or your bank and you do not need a Bitcoin wallet for this. The following financial products are available to you:

  • Bitcoin CFD: The abbreviation CFD stands for Contracts for Difference. These securities belong to the group of derivatives. If you purchase a Bitcoin CFD through a broker, you will not become the owner of a Bitcoin, but rather speculate on the future course of the cryptocurrency.
  • Bitcoin certificate: Another way to participate in the performance of the digital currency is to buy Bitcoin certificates. There are only a few offers on the German market; the first comes from the Swiss bank Vontobel. Certificates do not offer a fixed interest rate, they replicate the value of bitcoin: if the value increases, you make a profit.
  • Bitcoin ETP: A Bitcoin ETP (Exchange Traded Product) is an exchange traded product that tracks the value of the cryptocurrency. It is traded similarly to a share or an ETF. In Germany, you have been able to purchase Bitcoin ETPs on the stock exchange since June 2020.

The financial products described offer good chances of winning, but are also associated with high risks. You do not receive fixed interest rates, as with overnight money or fixed-term deposits, but are dependent on the further development of the Bitcoin value. And there are both upward and downward swings possible. This can result in high losses.

How to choose the right investment for your financial goals is shown in our “Investment Tips” guide.

How much is a bitcoin worth?

This is different, because the value is constantly changing and can vary from Bitcoin exchange to Bitcoin exchange. At the end of February 2021, the price averaged just under € 40,000 (a little more than $ 50,000) per Bitcoin. It has grown many times over within a year and is more valuable than ever before.

The following table shows the development of the price for 1 Bitcoin in the past 3 years, each at a rate of 6 months. It becomes clear that the value rose by leaps and bounds at the turn of the year 2020/2021. It can also be seen that there is a large difference between the highest and the lowest values ​​in each month and therefore large fluctuations. This underlines the very changeable performance.

Bitcoin price development in euros over 3 years

 highest price for 1 bitcoinlowest price for 1 bitcoin
January 2018 17.000 €6.937 €
July 20188.570 €4.500 €
January 20194.285 €2.700 €
July 2019 13.333 €7.500 €
January 202010.500 €5.809 €
July 202011.109 €6.170 €
January 202140.000 €23.888 €

Source: bitcoin.de, as of February 2021

Many experts expect a further increase in value, as the interest and thus the demand seem to be constantly increasing. Very optimistic forecasts assume a value of over € 80,000 and in the long term even just under € 250,000 for 1 Bitcoin. Nobody knows if these predictions will come true or if Bitcoin will lose value.

How is the Bitcoin rate determined?

The value of bitcoin is determined solely by supply and demand and is constantly changing. If there are many people interested in buying, the sellers can ask for more, a Bitcoin becomes more expensive and its value rises. An example: When the US company Tesla bought Bitcoins worth $ 1.5 billion in January 2021, the price exploded for a short time. It rose from around $ 35,000 to over $ 50,000 per bitcoin. In general, extensive positive media coverage on the subject of Bitcoin leads to more interest and increased demand. And thus to an increase in value. Conversely, negative reports can lead to many sales with low demand and falling prices.

Bitcoin has many imitators

Bitcoin is just one of several hundred cryptocurrencies. Other well-known and valuable ones are e.g. Ethereum, Binance Coin, Tether and Polkadot. Bitcoin has a market share of more than 60% of all cryptocurrencies. By the way: The term "crypto" stands for the cryptographic methods of encrypting the data.

How high is the risk with Bitcoins?

Both the use of bitcoins as a means of payment and investing in bitcoins are associated with risks. Owners and investors should know these in order to be able to weigh the chances of profit and the risks before buying or investing.

  • Risk of price and exchange rate fluctuations: Since its introduction in 2009, the price of Bitcoin has risen sharply and then has fallen sharply. For owners of bitcoins, this means that in the worst case there can be a significantly lower real value. For investors, this means a very high risk of loss.
  • Payment risk: The possibilities to use Bitcoins as a means of payment are still limited. Many companies do not accept cryptocurrency, you can neither pay for your rent nor at the supermarket around the corner with Bitcoins. The payment options are increasing, however, as companies and banks want to share in the advantages and win customers. However, a comprehensive network does not yet exist.
  • Risk of loss due to a defective storage location: The Bitcoin files are in a physical location. This can be a hard drive or some other piece of hardware. If this is destroyed, e.g. by malware or an accident, and there are no backup copies, then there is no access to the bitcoins. It's like losing your wallet of coins and bills: the contents are gone.
  • Risk of hacker attacks and cyber crime: The Bitcoin network with the blockchain technology is considered to be very secure. Nevertheless, it cannot be ruled out 100% that fraudsters could steal your data with crypto phishing or that hackers could break into the network and empty your wallet.

FAQ on buying bitcoins

Many investors who want to buy bitcoins or use it as an investment have questions. That is why we have answered the most frequently asked questions here.

  • What are bitcoins?

    Bitcoins are the oldest and most valuable digital currency. They do not exist as a physical object, but are stored as data on many computers around the world. Due to the decentralized structure of the underlying blockchain technology, transactions can be carried out anonymously and without banks. On the one hand, bitcoins are used as a means of payment. On the other hand, they are interesting for investors who want to participate in a possible increase in value. Since its market launch in 2009, the value of this crypto currency has increased many times over, but it has also been subject to strong fluctuations.

  • How are bitcoins created?

    Bitcoins are created through a process called "mining". The term is based on the prospecting for gold in gold mines. The already existing chain of data blocks is supplemented with further blocks using a worldwide network of many computers using a complicated mathematical process. This process requires large amounts of electricity, powerful computers and special graphics cards, which makes mining very expensive for those involved. The participants receive newly created bitcoins as a reward for providing the capacity. The question of how long it takes to generate a Bitcoin cannot be answered unequivocally. It depends on the total available computer capacity.

  • How many bitcoins are there left?

    At the beginning of 2021, there were around 18.5 million Bitcoins in circulation. This number changes whenever new blocks are generated. However, since the production rate is steadily decreasing, the maximum number of 21 million will only be reached in around 100 years.

  • Can you track bitcoins?

    Yes, because all transactions are stored on the blockchain and can be viewed transparently. In this way, the virtual path of a bitcoin can be traced from the very first moment. However, there is anonymity because it is not known who is behind a transaction.

  • Do I have to pay taxes on Bitcoins?

    Yes, in principle you have to pay tax on profits from the sale of a cryptocurrency. But there are exceptions: On the one hand, no taxes are due if you have owned the Bitcoins for more than 1 year. On the other hand, profits within the 1st year are tax-free up to a limit of € 600. It does not have to stay that way. The tax treatment of Bitcoins has not yet been conclusively clarified, as various legal proceedings on the subject of "Bitcoins and taxes" are ongoing.

  • Who Invented Bitcoins?

    The idea comes from Satoshi Nakamoto. He wrote the concept for Bitcoins in 2008 in response to the financial crisis at the time. A new means of payment should be created independently of central banks and intermediaries. To this day it is unknown who is behind this name or whether it is a group. On January 3, 2009, the first Bitcoin was created and the associated software came into circulation. Gradually, more people took part in the project and made computing power available. This is how the Bitcoin network that still exists today came into being.

Summary: Buying bitcoins has advantages and disadvantages

You can buy, trade or use bitcoins as a virtual means of payment via exchanges and marketplaces. You can also use Bitcoins as an investment, e.g. by investing in Bitcoin certificates. This has advantages but also disadvantages.

Benefits of bitcoins

  • Buying bitcoins is possible worldwide
  • decentralized trading and independence from banks and financial markets
  • strong increase in value possible
  • can be used by anyone
  • Anonymity is preserved
  • Transparency is guaranteed

Disadvantages of bitcoins

  • Bitcoin's value fluctuates greatly, there is a high risk of loss
  • Securing bitcoins is technically complex
  • Can only be used as a means of payment to a limited extent
  • no regulation by financial supervision
  • Possibility of cyber crime

The process of registering with a Bitcoin exchange also includes choosing a payment method. Some exchanges only accept wire transfers. With others, you can also pay with your credit card. You can also buy Bitcoins with PayPal from more and more operators. This customer-friendly form is becoming more and more popular. Choose a bitcoin exchange with the method that is most convenient for you.