DeutschAgainst the background of the headlines from the past few weeks, some investment-enthusiastic investors will be concerned with the question posed at the beginning of whether investing in cryptocurrencies such as Bitcoin (BTC) or altcoins from Ethereum to Zcash is worthwhile. There have indeed been some corrections. However, these can be understood as both a risk and an opportunity. Whether you should invest in a cryptocurrency depends, of course, on your idea of possible returns, holding periods and your own risk appetite. In addition, there is now not only the way via direct purchase to profit from the growing crypto market. How you answer the question “Investing in cryptocurrency and Bitcoin – is it worth it for me?” therefore depends on a number of factors.
Every Market is Characterized by Opportunities and Risks
You should know that better times always follow a decline. The high volatility of the crypto market in particular exerts its appeal on many investors. It is obvious that forecasts by self-proclaimed experts regarding medium-term price increases into six-figure ranges for Bitcoin should be treated with caution. However, there is also a reason why, according to surveys, Bitcoin has good prospects for further significant gains due to its system-related limited availability, and it may therefore be worthwhile to invest in Bitcoin.
Investors and industry experts have been discussing the pros and cons of investing in cryptocurrencies since the introduction of Bitcoin. Again and again, the central question here is the aforementioned risks on the one hand and the possible returns on the other. In any case, the past decade since the emergence of digital currencies has gradually led to a different assessment. Cryptocurrencies have left their niche existence.
In short: Coins are increasingly on their way into the so-called mainstream.
In the recent past, Bitcoin has recorded immense increases in value, but has also had to accept almost equally large losses in value. The question therefore arises whether Bitcoin and Co. have the potential to secure a reliable place on the financial market and thus also offer an investment alternative for newcomers and smaller investors. In view of the now clearly four-digit number of digital currencies that have emerged since the introduction of Bitcoin, a suitable offer is theoretically tempting for every type of investor. Not to mention the financial derivatives that are gradually emerging.
| Worth knowing:
At the beginning of March 2020, the portal coinmarketcap quantified the market capitalization of the leading five currencies Bitcoin, Ethereum, Ripples XRP, Bitcoin Cash and the Stablecoin Tether alone at well over 180 billion US dollars. |
Crypto Market Has Grown Steadily for more than a Decade
As clearly as the prices on the crypto market fluctuate, such payments are a clear indication that investing in cryptocurrencies continues to gain in importance for good reason. The increasing acceptance of the leading currencies also shows that after around a decade, it is no longer a temporary investment and speculation phenomenon. The fact that the BTC course in particular showed enormous highs at times and experienced massive corrections again a short time later should not hide the fact that the market offers a wide range of opportunities that also characterize established asset classes.
Anyone who is not afraid of the risk can draw plenty of profit from the sometimes significant fluctuations in crypto rates. As much as some more classically oriented investors shy away from the volatility of cryptocurrencies: It is precisely these sometimes serious fluctuations that can be an incentive. Investing in cryptocurrencies and Bitcoin: Is it worth it for me? Risk appetite plays a central role here.
Understanding of the Technical and Monetary Aspects is Indispensable
Understanding how cryptocurrencies work is an elementary aspect in order to be able to decide on the sense and nonsense of an investment. At the very least, you should know what is behind the term blockchain and how the various systems work. A clear advantage is the security against manipulation, the traceability of transactions and the more or less guaranteed anonymity of the various formats on the market. The fact that more and more retailers (both in online trading and in the “real” world) at least accept the first tier of coins as a means of payment suggests that investing in a cryptocurrency can be worthwhile.
How Can I Actually Invest in a Cryptocurrency and Bitcoin?
Particular attention should be paid to the consideration formulated in the headline of how you can invest in a cryptocurrency. Here, namely, different possibilities present themselves. Depending on which goal you are pursuing for yourself. This by no means only refers to Bitcoin as a kind of guiding currency of the industry.
The most common ways to invest are:
- Mining
- the trading via accounts on crypto exchanges
- the currency trading against other cryptocurrencies or fiat money
- investing in new cryptocurrencies via ICOs
- the purchase and sale of shares in connection with the crypto market
The current concerns in connection with the corona virus are even more likely to lead to investor questions as to whether investing in cryptocurrencies can be worthwhile in their own case. The reason for concern is of course the development on the crypto market worldwide. There, too, there were many setbacks that some owners of Bitcoin or Litecoin had to accept. Many experts refer here to the approaches “Buy-and-hold” or the “Cost-Average-Effect”. What is meant here is that you – in the first case when “buying and holding” – hold on to your inventory for the longer term after a direct purchase. A suitable term with a view to the situation would be: sit it out. The cost-average effect, in turn, calculates with average prices through the steady build-up of crypto assets in your own wallet.
And this is exactly where the situation can offer opportunities. At least if you follow the unwritten rule that better times will follow at the end of every crisis. In the meantime, you could buy coins as cheaply as you haven’t been able to for a long time. This is how you reduce losses as a result of earlier purchases at higher prices.
Investing in a Cryptocurrency and Bitcoin via Mining – the Market is Currently Weak
This approach is currently proving not to be lucrative. High electricity costs and an increased level of difficulty in the mining sector since the end of 2019 do not speak in favor of this entry, at least for the time being. Some industry experts consider the area to be “dead” for the time being. However, this does not mean that this cannot be worthwhile again soon, but rather for technically interested investors.
Crypto Trading via Crypto Exchanges and Trading Platforms as an Opportunity?
In the current phase, this seems to be a bad idea for many prospective investors. However, in view of the corrections caused by the spread of the corona virus, it should not be forgotten that every crisis is associated with the hope of future price increases. And this could be worthwhile for one reason alone. Should Bitcoin and Altcoins increasingly establish themselves worldwide as a safe haven and alternative to the precious metal gold, which otherwise stands for security, a rapid rise in prices is by no means ruled out. When choosing exchanges, you should always pay attention to trading fees and pricing. Exchanges are based on the official market prices; however, deductions or surcharges on purchase and sale prices vary.
These differences affect the rates at which investing in cryptocurrencies is worthwhile – trading costs also play a major role in loss-making sales. Fees are also essential on trading platforms that bring different market participants together. Which rates apply is primarily determined by supply and demand on the platforms.
For an overview of the most interesting exchanges and trading platforms for Bitcoin
Currency Trading Involving Cryptocurrencies
Increasingly, it can also be worthwhile – similar to the classic currency market – to trade currencies against each other. Due to the crisis, the prices of many prison currencies such as the euro, the franc or the British pound have also come under pressure. As a result of this development, an investment in Bitcoin and cryptocurrencies can prove to be a more profitable approach. Here, too, of course, it is important that you find the right provider and select the right currency pairs for trading.
How Sensible are Investments in Upcoming ICOs?
Precisely because of the crisis and the lack of regulatory provisions in many countries, Initial Coin Offerings (ICOs) have recently come under criticism. Because there are always black sheep on the market who are more interested in their own profit when they collect money from investors for supposedly worthwhile new projects and digital currencies in general. Against the background of the general economic crisis, it can be assumed that some governments will not deal further with the question of regulating cryptocurrencies for the time being and will put projects on hold. This is probably not conducive to greater investor security. This also applies to other financing models for new projects such as stablecoins or Initial Exchange Offerings (IEOs), which are carried out by or on exchanges in the industry.
For a long time, this was considered a promising path. Manufacturers of computer chips, graphics cards and other stock corporations important for the crypto world were also a popular way for crypto investors to spread the risk. The same applied to the securities of companies that themselves invested in the crypto industry, such as Google, Microsoft or IBM, which were considered promising. These days, however, the entire stock market worldwide is suffering from the consequences of the economic collapse caused by the spread of the virus. However: Anyone who believes in a rapid recovery of the markets through the numerous economic stimulus programs on all continents can currently (and for quite a while) acquire shares at very reasonable prices. Whether investing in cryptocurrencies in this way is worthwhile for you also and especially depends on one question: Do you have the necessary staying power until prices rise again? This is probably not a good way for beginners and investors who may soon need their money for other purposes.
CFDs and Co. – Betting on Price Fluctuations as an Investment
In addition to the aforementioned direct investment in Bitcoin in the form of a “physical” purchase of the preferred type, there is also an increasing selection of brokers and exchanges on the market that enable you to speculate indirectly on crypto rates. Many products have emerged over time that allow you to bet on price movements, so to speak. Contracts for difference (CFDs) are one model, but there are also products such as ETFs – so-called exchange-traded funds (ETFs) – options or futures that allow you to speculate at least on a selection of the leading cryptocurrencies. Of course: Many of these products require strong nerves. But you can often bet not only on rising, but also on falling prices of digital currencies. The advantage is not least that often even small stakes are sufficient and trading with leverage is possible with a correspondingly high risk of loss. As a customer, you can sometimes invest many times your own budget in positions of different terms in Bitcoin.
However, higher profits beckon if you are willing to take sufficient risks. Not to be forgotten. If you own currencies of the digital world and prices plummet, you can also hedge your wallet holdings by speculating on falling prices and, in the best case, turn losses into profits. However, this is of course a greater risk and requires prior knowledge.
Investing in Bitcoin – our Conclusion: it Can be Worthwhile for Many
With all the incentives mentioned for a worthwhile cryptocurrency investment, you should always keep an eye on the legal framework at your place of residence. Not all countries allow trading, in other cases there are clear guidelines for approved trading. The question of how the taxation of your crypto capital is is particularly important. There are sometimes significant differences between different countries. Be sure to find out whether and how income is taxed and whether losses can be claimed on the tax return. More and more states are introducing rules because they have recognized crypto income as an interesting source of income. Overall, crypto investments are suitable for anyone who can cope with a high degree of volatility and is sufficiently resilient. Because there can also be massive slumps that you have to be able to endure emotionally.
However, since time immemorial, the risk has been offset by enormous profit opportunities if the market breaks out significantly upwards again. You can get to know the trade with many providers with a demo account, so that you can first test the strategically sensible approach without risk and get to know the market.
Invest in Bitcoin? Here we explain how it works.
Invest in Bitcoin: the Best Options via Crypto Exchanges or CFD Brokers
Provider
Result
Bitvavo, one of the leading exchanges from Europe (Netherlands) with a large selection of cryptocurrencies. PayPal deposit possible. Extra: 10 Euro bonus when registering via CoinPro.ch
Trade many different cryptocurrencies without a wallet with our CFD broker test winner Plus500 - 7 days a week.
Regulated provider from Austria - specializing in trading Bitcoin, Ethereum, stocks and many other assets.
CFDs and real stocks in a trading platform with free deposits and no conditions - that's XTB.
OKX is one of the largest crypto exchanges in the world and combines numerous functions such as a wallet, staking, futures, margin, and spot trading in a single platform.
With several hundred thousand customers worldwide, Binance is one of the top 10 largest and most well-known exchanges. The use of the exchange is free of charge, with fees only applying to the purchase and exchange of cryptocurrencies.
CFDs are complex instruments and, due to leverage, carry the high risk of losing money quickly. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
