How to Invest in Bitcoin 2021 ? BTC Investment Guide: Is it worth investing or not?
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The currency, based on so-called blockchain technology, set out to revolutionise a sector in the sense of its anonymous developer, in which there had been no fundamental innovation for centuries.
Infobox: Bitcoin Investments
- In 2019, the price of Bitcoin almost doubled (+93.2%). If you had invested €1,000 in January, it would have been worth €1,932 in December.
- With a little timing, even more would have been possible: In July you would have made a 221.6% gain, so €1,000 would have turned into €3,216.
- Also for 2020 the developments are good, currently one's investment would have gained approx. +40% compared to the beginning of the year (as of Sep. 2021).
- To invest, you need a broker or an exchange, as well as a wallet if necessary.
- eToro: is the best and most beginner-friendly broker.
- Libertex is also a very beginner-friendly exchange, our 2nd place in the broker test.
- Plus500: is a broker aimed at advanced traders.
- A wallet that is somewhat easier to manage is offered by eToro, for example.
- We show more wallet options here.
At first, many thought it was an elaborate gimmick. But over the years, a huge market has developed along the lines of the cryptocurrency. And while more than 2,100 cryptocurrencies vie for the favour of users and investors, Bitcoin still leads the pack.
Invest in Bitcoin: The best Bitcoin brokers and exchanges
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Pros & Cons Bitcoin Investment
Pros
Cons
One problem with any investment in Bitcoin is its high volatility: the price of Bitcoin can fall sharply within a very short time - or rise. This changeable movement has characterised the price behaviour of Bitcoin for years. Investors therefore need strong nerves:
It is not for nothing that the term HODL has become established in the scene. Because the price behaviour of cryptocurrencies is not driven by their applicability or quality. The decisive factor is investor psychology alone, which is naturally influenced by a large number of factors.
Those who were among the unlucky ones who invested in the cryptocurrency Bitcoin at astronomical prices in the winter of 2017/2018 would have been right to react quickly to the first price drops.
How do I invest in Bitcoin 2021? Investing money in Bitcoin Guide:
We have discussed the pros and cons around investing in Bitcoin and established that money can be made with Bitcoins - but this can be done in a number of ways:
How can I invest in Bitcoins? Which form of BTC investing suits me? What are Bitcoin shares? And how do you get Bitcoins in the first place?
First step: Registering with a broker or crypto exchange
First, you register with your broker or crypto exchange of choice. To buy Bitcoin, we use the broker eToro, as it offers the advantage that you can buy both real cryptocurrencies and CFDs - in other words, it combines the advantages of a broker and an exchange.
In the form we enter our username, email and password and accept the terms and conditions:
We then receive a verification email in which we click on the link to confirm the account.
Second step: fund our account
In the next step, we need to fund our account with money in order to be able to buy Bitcoin at eToro. To do this, we click on the "Deposit money" button at eToro:
We then click on the "Send" button to deposit the amount.
Other payment methods at our test winner eToro:
In our example we show the purchase with credit card. eToro also offers other ways to deposit:
Payment method | Possible |
|---|---|
Buy Bitcoin with bank transfer | ok |
Buy Bitcoin with a credit card | ok |
Buy Bitcoin with Neteller | ok |
Buy Bitcoin with Skrill | ok |
Buy Bitcoin with PayPal | ok |
Buy Bitcoin with online banking | ok |
Buy Bitcoin with Rapid Transfer | ok |
Buy Bitcoin with Sofort | ok |
Buy Bitcoin with a debit card | ok |
Third step: Buy cryptocurrencies
- Buy or sell: In our case, we have to set to "Buy".
- Trade or order: Here we can choose whether we want to execute the trade immediately (trade) or delayed (order).
- Amount: How much Bitcoin we want to buy.
- Stop Loss and Take Profit: At which loss or profit our position should be sold automatically.
- Leverage: With which leverage we want to buy Bitcoin. With leverage X1 we buy real Bitcoin, with leverage X2 we buy leveraged Bitcoin CFDs.
Types of Bitcoin Investments:
1. buy bitcoin directly
If you want to buy Bitcoin, you have to go to one of the many existing crypto exchanges. The choice is large. The editorial team has tested the best exchanges and guides you through the process step by step in a Bitcoin buying guide.
How do I get Bitcoin? Where can I pay Bitcoin in euros? Find out in our piece.
Buying Bitcoin often requires your own Bitcoin wallet. But there are also exchanges where you can hold your purchased Bitcoin. This is convenient, but subject to a risk: If the exchange closes down because it goes bankrupt or is hacked, you may lose your Bitcoin investment.
A separate wallet is therefore the better alternative when buying Bitcoin. This is explained in detail in our Bitcoin investing guide.
If you decide to buy Bitcoin when investing in Bitcoins 2021, you are completely dependent on the price movements of the Bitcoin. Investors must also consider the tax regulations for BTC investing. You can find more information on this on our overview page for cryptocurrency investments 2021.
2. trade bitcoin
If you just want to trade with Bitcoin without buying Bitcoin, you can turn to one of the numerous crypto brokers. The editorial team recommends trading with Bitcoin derivatives - CFD trading. Trading with CFDs has a simple advantage: regardless of the Bitcoin price, you can often achieve high returns here if you predict the price behaviour correctly.
Of course, this can also go wrong: With derivatives trading, it is possible for investors to lose their investment completely within just one trade. Therefore, when you start trading CFDs, you should initially only place smaller bets.
Our recommendation: Buy cryptos with eToro
- Incl. wallet
- Buy and sell cryptocurrencies directly in the wallet
- Paypal, credit card and instant bank transfer
- Regulated provider
- Real cryptos or CFD trades
3. buy bitcoin shares
When buying Bitcoin shares, investors also make themselves dependent on the Bitcoin price. The advantage: many investors are already familiar with share trading, and the barrier to entry is smaller. Fortunately, investing in Bitcoin 2021 is therefore easier than ever:
For those who do not want to bother with wallets and private keys, but still think in the medium to long term, Bitcoin shares are a particularly attractive alternative.
Moreover, in contrast to cryptocurrencies traded on the crypto exchange, share trading is strictly regulated. The Bitcoin investor therefore receives additional collateral when he invests in Bitcoin shares, but cannot use Bitcoin as a means of payment - because he does not buy Bitcoin directly.
There are now a large number of Bitcoin shares that investors can choose from. These include Bitcoin mining shares, blockchain services and Bitcoin investment trusts. We have compiled an overview of the possibilities of Bitcoin shares for you here.
4. bitcoin mining
The so-called miners are a supporting foundation for the Bitcoin network. This is because mining "digs" or creates new blocks on the Bitcoin blockchain. The new blocks are used to confirm the transactions recorded on the previous block. Therefore, without mining, there would be no more transaction confirmations and Bitcoin could no longer be traded.
To prevent this, the miners in the network are automatically rewarded for their efforts. They receive bitcoins for each new block. In addition, they receive the transaction fees that accrue on the block they found for further transactions.
Proof of Work (PoW)
In order for a new block to be found on the Bitcoin network, the miners have to complete so-called Proof of Work (PoW) processes. This involves the decryption of cryptographic algorithms, the difficulty of which varies depending on the network load.
After a successful decryption of a new block, the network checks whether the block actually exists.
Every ten minutes, a brand new block is created in the Bitcoin blockchain. As soon as 2,016 new blocks have been found, the difficulty of the mining changes. This is currently the case about every fortnight.
Because each block has the cryptographic key of the previous block, manipulation of the Bitcoin blockchain is virtually impossible.
Bitcoin falls: Is it too late to invest in Bitcoin?
The big hype is over, the Bitcoin bubble has burst. Nevertheless, many professional investors still believe that Bitcoin is yet to unfold.
Making an accurate prediction about the future of the market would be more than presumptuous. Instead, we look at which scenarios are conceivable - and weigh them against each other.
The hype around bitcoin has grown steadily over the years. The coins, originally available for pennies, suddenly reached prices of 300, 600 and even 900 euros on the crypto exchanges. However, each of these boosts was followed by recourse.
Finally, in the winter of 2017/2018, the Bitcoin price rose by several thousand percent within a few days. Suddenly, bitcoin was trading at over 17,000 euros per coin. The news overflowed with increasingly enthusiastic reports, Bitcoin dominated the headlines. More and more investors invested in Bitcoin, one of the other cryptocurrencies or in the Initial Coin Offerings (ICOs) of often unfortunately dubious companies.
When will the Bitcoin price rise?
It is possible that the Bitcoin has not yet reached the end of its slide. There are sceptics who believe that Bitcoin cannot achieve the necessary acceptance to establish itself socially as an alternative means of payment in the long term.
Some enthusiasts, on the other hand, assume that bitcoin will soon rise again, and then far beyond its previous record. Speculator and entrepreneur John McAfee even promised to eat his own penis on camera if the Bitcoin price did not reach the 500,000 US dollar mark by summer 2020.
In any case, Bitcoin development progressed a long way in recent years with the introduction of the Lightening Network and the Segwit update. Even if many investors are deterred for the time being after the Bitcoin bubble burst, it is likely that blockchain technology will find its way into our everyday lives sooner or later. The great advantages and possible uses of cryptocurrencies are too good.
Bitcoin acceptance is on the rise
Regardless of the heights to which bitcoin shoots up during the next run: The coin's still enormous market capitalisation of over 60 billion euros speaks a clear language. The investor base has no intention of saying goodbye to bitcoin any time soon. Many people still believe that the Bitcoin market is yet to unfold its potential and that the market is still only at its beginning.
Also in favour of new price rises are the many positive signals that have run through the news in recent weeks and months: the acceptance of cryptocurrencies is increasing - also among regulators. Bitcoin investment trusts are no longer a rarity. It is even possible that the next price rise is right in front of us.
Volatility: When a slump is followed by a rise and a rise is followed by the next slump
Experience shows, however, that a Bitcoin price slump is often followed by a new price rise. That's why many people struggled with the decision at the time. Today we know: that was fatal.
Since the market is now in a different phase, it is unclear what behaviour is appropriate here. As before, a price slump can be followed by a price increase at any time. The first impulse to sell one's investment quickly before the losses get out of hand is understandable:
However, it is not always advisable to follow the first impulse. Often it is even wise to go against the trend.
Bitcoin Investing Tips & Tricks
The following Bitcoin investment tips can help you become a good Bitcoins investor. First and foremost, there is one important sentence: You should explicitly invest only what you are willing to lose. It is best to start small and gradually familiarise yourself with everything. Mistakes are part of learning - and can cost you dearly.
A good tip: say goodbye to your investment internally. Then it will be easier for you to make neutral and tactical decisions. Investing in Bitcoin is risky, regardless of the type of investment you choose.
You should be fully aware of this before investing in Bitcoin 2021. Don't let others tempt you into an action that will ultimately harm you. Be humble, be patient. Start small.
Our recommendation: Buy cryptos with eToro
- Incl. wallet
- Buy and sell cryptocurrencies directly in the wallet
- Paypal, credit card and instant bank transfer
- Regulated provider
- Real cryptos or CFD trades
The cross with investor psychology
As mentioned above, the prices of cryptocurrencies are driven by one thing in particular: Investor psychology. The number of investors and the volume of their investments determines which cryptocurrency will last in the market.
Controlling oneself can be difficult when the investment suddenly falls. If a new hype starts the day after, even before you are on board, the perceived damage is double and triple.
Be aware of this and try not to fall for yourself. This is harder than it sounds and an art that especially those who want to earn with Bitcoins in the short term have to learn.
"What type of Bitcoin investor am I?"
Ask yourself which type of investor you are: the "gambler" type regularly deals with his investment and tries to make medium-sized profits in the short term in order to reinvest what he has won immediately afterwards.
The Bitcoin market offers this type an attractive investment option, especially through CFD trading. However, it may also be possible to earn good money with Bitcoins directly on the market with this strategy.
If you are less risk-averse, consider a medium- to long-term investment in Bitcoin instead. Not only will this make you feel better, but there's a good chance that investing in Bitcoins 2021 will pay off for you one day.
Plus, under current law, you don't have to pay tax on your gains if you hold your investment for at least a year. Alternatively, you could invest in Bitcoin shares to profit from Bitcoin development without having to deal with wallets or private keys.
An own wallet is - actually - mandatory
If you buy Bitcoin in your investment and bet on the Bitcoin development, you can keep your Bitcoin on your exchange account. However, this is not advisable.
Our tip: Make sure you have your own BTC wallet! Only then are you protected from eventualities such as hacks or insolvencies of your exchange.
Last but not least, we recommend that you do not limit yourself to one Bitcoin investment - but diversify your investment.
If you include at least five assets in your portfolio, you will be safer than betting on a single horse. It can also be advisable to include assets in your portfolio that are less risky than cryptocurrencies. For example, you could buy shares online.
Many ways to earn Bitcoins
There are now a multitude of ways in which money can be made using Bitcoins. Fortunately, investing in Bitcoin 2021 is possible in many different ways. For example, instead of buying Bitcoin, you could invest in a Bitcoin Investment Trust.
You could participate in banking on Bitcoin or trade Bitcoin derivatives. With these models, you don't have to buy Bitcoin. With derivatives trading, you can even earn money with Bitcoins when the Bitcoin falls. This is because you speculate on the price behaviour of the Bitcoin.
Conclusion
Bitcoin Investing Conclusion - What is the best way to invest in Bitcoin?
If the signs are right, investing in Bitcoin will still be worthwhile in 2021 - or: again. Because the perhaps only completely decentralised and at the same time most widespread cryptocurrency is still far from being a thing of the past.
And the Bitcoin development continues to advance. It is hardly conceivable that Bitcoin will lose its pioneering role, given its enormous lead over even the second-largest cryptocurrency, Ethereum.
The innovation factor in the Bitcoin market is more difficult to weigh: because a high-tech segment as young as this can change at lightning speed through innovation. That is why - and because of the still too low acceptance and spread of Bitcoin - BTC investing is still a risky game. Especially those who think short-term can lose a lot of money.
Our recommendation: Buy cryptos with eToro
- Incl. wallet
- Buy and sell cryptocurrencies directly in the wallet
- Paypal, credit card and instant bank transfer
- Regulated provider
- Real cryptos or CFD trades
FAQ
The most popular is probably the direct purchase of the cryptocurrency. However, trading in Bitcoin shares or via Bitcoin CFDs is becoming more and more popular.
There is no golden rule for this. However, one should always keep in mind that online currencies are highly speculative assets that are associated with a corresponding risk. It is therefore advisable to invest no more than 5-10% of one's portfolio in such trading.
With our test winner, getting started in Bitcoin is made easy. If you are interested in day trading, you can also use CFD derivatives.
There is no general answer to this question. Bitcoin is certainly one of the safest cryptos of all. The prices of other coins usually follow the BTC price to a certain extent. However, alt coins can offer a higher potential under certain circumstances, but this goes hand in hand with a higher risk.
