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Since its invention in 2009, bitcoin has experienced steep growth: from October 2013 to early June 2021, its value increased by almost 30,000 percent. Analysts say Bitcoin’s value could continue to rise. Crypto currencies and the blockchain technology behind them are becoming more and more mainstream, i.e. part of everyday life.
However, anyone considering buying Bitcoin must be careful: the value of the cryptocurrency has reached enormous highs, but has also slipped sharply.
After a record value of almost 17,000 euros in 2017, Bitcoin crashed and remained below 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 boss 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.
If you still want to get started, you can find out here how you can buy Bitcoin yourself.
Buy Bitcoin in 4 steps
Choose a Crypto Exchange
To buy bitcoin or any other 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 out there, but as a beginner, you should choose one that offers a good balance of ease of use, low fees, and strong security.
Check out our comparison of the best crypto exchanges. Coinbase, Kraken, Bitpanda or the Stuttgart Digital Exchange, for example, are well suited for German investors. Most exchanges keep your coins in an offline wallet that is separated from the internet and is therefore much better protected against hacker attacks.
Alternatively, as a beginner, you can also use cryptocurrencies via suitable crypto apps, such as those offered by some exchanges, but also by securities brokers. The coins are then mostly offline with a trustee. But you can’t easily get them out again, usually not pay with them or make transfers with them.
Decide on a payment option
In order to invest, you must first deposit money into the account at the exchange or broker. You can usually deposit by bank transfer from a checking account, PayPal or credit card.
Note, however, that platforms may charge transaction fees for certain deposit options. Online transfers from the current account are often free of charge. For payments with PayPal or card, however, the exchange sometimes 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 can sometimes take a bank working day.
Submit your purchase order
As soon as 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 with a button or you have to enter the Bitcoin (BTC) ticker symbol. Enter the amount you want to invest.
When the transaction is complete, you own part of a bitcoin. As a beginner, you will probably not be able to 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 euros instead. Then you own 1/46 Bitcoin, which is around 2.2 percent.
Choose a secure storage option
Many crypto exchanges have an integrated bitcoin wallet, albeit connected to the internet. Some investors aren’t comfortable with that. Because if the bitcoins are “online”, hackers can access the coins more easily and steal them.
Most major exchanges have therefore now taken out private insurance that compensates customers in such cases. Increasingly, however, they are also storing 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, you then have to withdraw the coins from the exchange account, 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 access your coins. This has already deprived some Bitcoin millionaires of their fortune. If someone else gets the key, they can withdraw your coins.
If you want to sell Bitcoin, you can place a sell order through your exchange or broker, similar to when you bought your BTC. Most exchanges offer multiple order types. You can then decide whether to only sell when the bitcoin has reached a certain price, or to place an order that will be executed immediately.
You can also choose whether you want to sell your entire Bitcoin inventory or just a certain amount. Once the sale is complete, the money will be credited to the exchange or broker’s account 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 subject to tax. 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 proceeds are then considered a “private sales transaction”, not capital gains. So your personal income tax rate applies, not the final withholding tax.
Should You Buy Bitcoin?
Especially when Bitcoin price is skyrocketing, it might sound tempting to jump into the popular cryptocurrency. But even if you think the timing is good, you should be careful: Bitcoin is incredibly volatile. Experts advise investing a maximum of a small proportion of your assets in crypto assets – and only the part that you certainly do not need for your retirement provision.