Bitcoin is going through a big roller coaster right now – private investors in particular are surrounded by great uncertainty. Is an investment still worth it? How to buy bitcoin What are the risks associated with buying bitcoin? Everything a beginner needs to know about Bitcoin.
1. Bitcoin – what is it?
Bitcoin is a decentralized global cryptocurrency and at the same time a payment system. Unlike other currencies such as the euro or the dollar, bitcoin does not exist in the form of banknotes or coins, but only as a pure digital means of payment. The unit of cryptocurrency is called “Bitcoin”. 1 Bitcoin corresponds to approximately 19,600 euros (status October 2022). Bitcoins can be used to purchase goods and services, but can also be used purely as an investment.
2. Where can I buy Bitcoins?
Bitcoins can be purchased on so-called crypto exchanges. A stock exchange is a marketplace where buyers and sellers of cryptocurrencies meet. The best-known German crypto exchange is Coinbase, one of the largest Bitcoin providers in the world, headquartered in San Francisco/USA. In the Bitcoin2Go crypto exchange comparison you will find suitable trading platforms for cryptocurrencies. To buy bitcoins, you must first register on the platform and then deposit your bank account or credit card.
As soon as the payment method has been confirmed, you can start: All you have to do is enter the desired amount in euros or vice versa – depending on the currency currently used for the purchase – and you have already purchased the desired amount of Bitcoin.
3. How does a bitcoin wallet work?
A bitcoin wallet is like a bank account, only digital. This is where bitcoins are managed and sent. To buy bitcoins, you must first register on the platform and then deposit your bank account or credit card. As soon as the payment method has been confirmed, you can start: all you have to do is enter the desired amount in euros or vice versa – depending on the currency used for the purchase – and you have already purchased the desired amount of Bitcoin.
In principle, we distinguish between hardware and software wallets. Software wallets offer better usability because they are quick to use. However, these are “more susceptible” to cyberattacks. Investors should be aware of this (unlikely) risk. Hardware wallets store private keys offline on a memory (e.g. USB stick). The level of security is therefore significantly higher.
4. What are the risks of buying Bitcoins?
As with all investments, buying Bitcoin involves some risk. Because cryptocurrency is very volatile and its rate often fluctuates a lot. In addition, not all regulatory framework conditions have yet been clarified. This makes Bitcoin attractive for some investors, but less so for others.
Cryptocurrencies only make limited sense for risk-averse investors when it comes to private retirement provision. Investors should focus more on classic asset classes such as stocks or real estate, as they allow for more stable asset accumulation.
5. Conclusion – is it worth buying Bitcoins?
Whether or not buying Bitcoin is worth it entirely depends on the investor’s individual goals and expectations. As mentioned above, cryptocurrencies are very volatile. This means that their price often fluctuates wildly and can both go up and down in a short time. So, if you are planning to buy bitcoins and hold them for a long time, you should do your research and think carefully about whether cryptocurrency is really an investment option.
In times of high inflation and volatile markets, broad diversification is undoubtedly a smart move for private investors. Crypto assets are an attractive commodity due to their low correlation to conventional asset classes. However, the risk should not be underestimated and should only be taken to the extent that it is tolerated. For these reasons, investors have a responsibility to carefully consider the level of risk they can bear before making an investment.