As far as currencies are concerned, Bitcoins occupies a special position. In Europe, the digital means of payment is recognised as a means of payment and therefore exempt from VAT, but it is not a legal means of payment or a currency or variety. Moreover, unlike other currencies, there are no physical Bitcoins in the form of coins or notes.
Nevertheless, Bitcoins are also on the advance here in Germany. In the meantime even the European Central Bank (ECB) has expressed its interest. Recently, the ECB had not promised the Bitcoins a great chance of survival.
So it’s no wonder that many small investors are now wondering whether it’s worth getting involved with Bitcoins. Especially since the ECB’s low interest rate ensures falling returns on classic investments. Profits in the two-digit range provide naturally for large interest. Investors should always remember, however, that Bitcoins also carry a large risk due to their special features.
How are Bitcoins produced and managed?
The digital currency is managed via a decentralised computer network with its own software. Unlike central banks, which print physical money, Bitcoins are produced using computer-based algorithms. What sounds very simple in theory, requires a lot of time and computer capacity in practice.
The payment process with Bitcoins
All transactions with Bitcoins are recorded in a database. If you want to pay with Bitcoins, you can register with one of the numerous service providers. Subsequently, a virtual wallet is set up for the customer. This does not initially include any credit. The virtual account can then be topped up with any amount, similar to a prepaid credit card. In the USA, there are already numerous terminals for this, which make a particularly simple top-up process possible. The first terminals have also been installed in Germany.
The payment participant remains completely anonymous at Bitcoins. Critics criticize this and associate the currency with illegal activities such as money laundering. Meanwhile Bitcoins are accepted with ever more dealers. This includes both the local coffee shop and shops on the Internet.
What should investors know before investing in Bitcoins?
In recent years, the Bitcoin rate has been characterised by extreme downward and upward swings. Even experts do not always find an explanation for the high volatility. You will also need a reliable exchange like Monfex. Read more about them in this Monfex review.
Where can market analyses be found?
Bitcoins are a virtual currency and are therefore not traded as a currency pair with USD or EUR. In addition, they are not linked to any government, key interest rate or other factors in the financial markets. Economic or political decisions therefore only have a limited influence on the Bitcoin and its price.
Detailed market information can therefore only be found on the relevant websites of the online Bitcoin exchanges and on specialised news sites. The well-known financial portals, on the other hand, tend to keep a low profile. All in all, the established financial service providers still seem to have difficulty with the digital currency.
Chart analyses are problematic
- Since the Bitcoin exchange rate does not develop in line with or contrary to other currencies, technical chart analyses are very difficult. Historical price developments do not indicate a repetition of the crypto currency.
- Investors therefore have no choice but to keep a constant eye on the price and develop their own feeling for the right time to buy or sell.
- It should also be noted that online exchanges are not regulated for Bitcoins. Although the price depends to a certain extent on supply and demand, an exact forecast cannot be made.
How do experts see the price development?
Financial experts primarily blame the threatening Brexit for the upswing in the Bitcoin share price. Uncertain developments in other currencies such as the pound are increasingly bringing more investors to Bitcoin.
On the one hand there is a high demand, on the other hardly any Bitcoins are sold. As with all goods that are not sufficiently available, this inevitably leads to rising prices. Demand has risen above all in China. This is partly due to the economic uncertainty in the Middle Kingdom. In addition, the country has been experiencing a flight of capital for quite some time.
Commercial sector shows growing interest
Bitcoins uses the so-called blockchain technology. A data block chain is extended by a miniature data block for each transaction. The technology has aroused the interest of commercial providers and central banks. They are hoping for high revenues through the granting of digital rights to the technology.
Difficult market environment for small investors
Due to the numerous special features and characteristics, Bitcoin Investment represents a major challenge for small investors. Extremely high yield opportunities are offset by an above-average risk. If you are not an insider, you can hardly understand the fluctuating price developments. Realistic forecasts are therefore not possible.
In view of the current high market value, it is not advisable for investors to enter the market at this time anyway. Whether the value for Bitcoins will rise still further, cannot be foreseen at present. It is very possible that there will soon be a strong downward movement in the price. At the moment there is simply too little experience to make a statement about the continuation of the trend. Therefore, speculation with Bitcoins is mainly reserved for gamblers.
Are there alternatives to Bitcoin with less risk?
If you are interested in Bitcoin trading but don’t want to invest directly in the digital currency, there are some alternatives such as binary options. The currency can also be traded through Forex & CFD brokers. Here no Bitcoin is acquired, but only speculated on the development of the price. This is already possible with small investment amounts.
How are Bitcoin traded as binary options?
Trading with binary options is becoming increasingly popular in Germany as well. This is due in particular to the fact that even small amounts can be traded. In addition, trading is very simple. The possible returns of up to 85 percent should also not go unmentioned. Of course, this investment is also associated with a risk. If the price does not develop as predicted, a total loss of the invested capital threatens.
The advantage of binary options is that you can bet on both rising and falling prices. The easiest way to trade Bitcoins is with classic call/put options. Here the trader only has to decide whether the price is above or below the current value at the time of expiration. If the assessment is correct, the stake is paid out plus an impressive return.
Trading Bitcoins via Forex & CFD Brokers
- Another alternative is Bitcoin CFDs, which are offered by brokers such as AvaTrade and IG Markets. You can trade around the clock, five days a week. Depending upon broker a lever of up to 1:20 can be used.
- CFDs also speculate on a rising or falling price. Since these are leverage products, a high profit can be achieved even with a small investment. The stronger the price movements, the higher the returns possible. However, the leverage used also ensures a greater risk.
Conclusion on the Bitcoin trade
Bitcoin is a digital currency that can be used as a virtual means of payment. Bitcoins are not subject to the same market conditions as traditional currencies. Due to the special features, reliable market analyses are not possible. For private investors, trading is therefore only recommended to a limited extent. As an alternative, trading with binary options or CFDs is possible.