Investing in bitcoin
For many investors, investing in bitcoin is a big step. Many are still unfamiliar with crypto currencies. But a growing group thinks crypto can be a good addition to an investment portfolio. Also, investing in bitcoin is becoming increasingly easy. Online crypto platforms are a big part of this.
Content:
- Buying bitcoin
- The history of bitcoin
- Why invest in bitcoin?
- Bitcoin ETFs
- Blockchain technology
- Altcoins
Investing in bitcoin or other digital currencies comes with great risks, you can (partially) lose your deposit.
Investing in bitcoin
Bitcoin has no underlying value and it does not seem particularly suitable as a digital currency. Yet the number of people investing in crypto currencies like bitcoin has continued to grow in recent years.
The cryptocoin offers an interesting new take on inflation, as a decentralized value outside the control of central banks or currency restrictions.
Buying bitcoin through crypto platforms
To get started with bitcoin, you need a crypto account. You can open a digital wallet through mobile apps or special usb sticks for physical storage. You can also invest in it through online brokers. On these platforms, you can easily create an account and store your crypto . Well-known platforms for this are:
Bitvavo started in 2018 and is the leading crypto exchange platform in the Netherlands and active in 27 European countries. You can invest in more than 250 cryptocurrencies. The platform offers low trading fees, a very complete exchange and easy-to-use staking program.
If you want to trade and invest all by yourself eToro is currently Europe’s online brokerage champion. You can trade in stocks, commodities, crypto and other currencies. Templates allow you to invest directly in a variety of sectors. Don’t invest unless you’re prepared to lose the money you invest.
We also have a comprehensive overview of cryptocurrency brokers.
What is bitcoin?
On October 21, 2008, a Satoshi Nakamoto posted the idea for bitcoin in a pdf online. Who Nakamoto is, is still not clear. This pdf describes the idea for a decentralized digital currency.
This ‘cryptocurrency’ serves as a medium of exchange that uses blockchain technology to control its creation and management.
The blockchain as a logbook
Blockchain technology is the decentralized network that makes bitcoin possible. With no central authorities, such as the Central Bank, for example, bitcoin transactions are tracked by a large digital network. This is a kind of decentralized logbook. Transactions in the book can not be changed by anyone.
In this, logbook everyone can see the same thing, but no one has control over the blockchain log. No one can modify it, nor is it possible to accidentally duplicate a transaction in it. When two parties make a transaction, that block is added to the chain and stays in there forever. Anyone can look up and view that transaction, but not modify it.
Why are investors getting into bitcoin?
Over the years, more and more people have started investing in bitcoin. The demand for bitcoin first arose among the more technically savvy. This was also because it was more difficult to buy bitcoin at the time. For example, you had to create your own wallet and the platforms that sold them were not yet as well-known or secure.
Investing in crypto coins is a lot easier now. Platforms have taken all kinds of security measures. Crypto currencies have also been covered a lot in newspapers, magazines and TV shows, making bitcoin more mainstream.
Famous people like Elon Musk, Ashton Kutcher or Kanye West have invested in it, and that too is attracting new investors. Large companies from the financial sector have also stepped in, such as Mastercard, Visa and PayPal. This makes it clear that bitcoin as a digital currency is fundamentally different from existing solutions.
Bitcoin ETFs
In early 2024, Bitcoin ETFs were approved in the United States. This made it even easier for Americans to invest in bitcoin. It is now similar to buying a share of Tesla or Amazon. There are similar products for bitcoin in Europe. For example:
- VanEck Bitcoin ETN DE000A28M8D0
- CoinShares Physical Bitcoin GB00BLD4ZL17
- WisdomTree Physical Bitcoin GB00BJYDH287
- 21Shares Bitcoin ETP CH0454664001
- ETC Group Physical Bitcoin DE000A27Z304
With it becoming easier and easier to buy them, more and more people and companies are investing in bitcoin. As a result, the bitcoin price has risen significantly over the past decade.
Scarce (as long as there is sufficient demand)
Currencies like euros and dollars are reprinted to influence the economy. With many crypto currencies, this is also possible, but not with bitcoin. Because of this, many people compare investing in bitcoin to investing in gold. The crypto currency is a digital commodity that is scarce as long as demand is maintained. This is because there is an agreed upon cap on the number of bitcoins.
As long as investing in this crypto currency remains popular, bitcoin is expected to increase in value due to inflation. Many bitcoin investors believe much more is possible. But beware: in many countries, bitcoin is not regulated. There is no oversight and no legal protection for investors.
Bitcoins are scarce and, in time, inflation may cause the price to rise.
Bitcoin is the new digital gold
Bitcoin has also had large price declines, but if you look over a long period of time, this cryptocoin has significantly increased in value over the past decade. That largely explains why investing in bitcoin is so popular. It can serve as a stable value asset, similar to gold.
In theory, as with gold, inflation can positively influence the bitcoin price in the long run. Although that is also where the main risks of bitcoin’s value lie: current increases in value are still hardly attributable to inflation. The price of bitcoin depends entirely on supply and demand.
If the number of people trading or investing in it grows, scarcity occurs. But that could change one day, of course. No one knows when the tipping point will be reached here.
The price of bitcoin is highly volatile and highs and lows regularly make headlines in the media.
Blockchain and bitcoin
Another reason why investing in bitcoin is so popular has to do with what it stands for and the technology on which it is based. As mentioned, bitcoin runs on blockchain technology.
The technology that allows transactions to be tracked in this new way brings all kinds of new possibilities to different industries and economies.
With blockchain, you can do numerous things much faster, more efficiently and fraud-free.
With blockchain, you can handle a lot of things much faster, more efficiently and fraud-free. Think not only of transactions, but also recording contracts or other agreements. It is not for nothing that investing in blockchain is also very popular.
Recent developments
Recently, there have been many developments in the crypto world that have been positive for bitcoin and other virtual cryptocurrencies.
The biggest development is the introduction of bitcoin ETFs in the United States, in early 2024. Interest in these products turned out to be much higher than expected.
In April 2021, Coinbase, the largest trading platform for cryptocurrencies in the United States, held an IPO. This allows you to profit from rising bitcoin prices without buying bitcoin yourself. Because if bitcoin, Ethereum and other cryptocurrencies are doing well, Coinbase often does too.
Bitcoin as a foundation
When people talk about cryptocurrencies, more often than not, they are (also) talking about bitcoin. This coin was the first and has always been the most valuable and most traded until now.
However, that does not mean that as an investor you should be blinded by only this cryptocoin. There are numerous different crypto currencies besides bitcoin that you can invest in. They all come with their own strengths and weaknesses, their own story and their own price trends.
Investing in other cryptocurrencies
Besides bitcoin, there are many other coins you can invest in. Perhaps the best known is ethereum. Where bitcoin’s blockchain is often thought of as a “first-generation blockchain,” you can think of Ethereum as second-generation. On this blockchain, you can process much more than just financial transactions.
For example, a lot is possible in terms of programming. Any calculation or data operation that can be programmed, can theoretically be recorded in Ethereum’s blockchain. Investing in ethereum can be done by buying ether, the cryptocurrency of this technology.
Ethereum, or rather the coin associated with this technology, has the largest total value (market cap) after bitcoin. Other popular coins (partly based on market cap) are tether, BNB (the proprietary currency of trading platform Binance), XRP, cardano and stellar.
In addition to bitcoin, you can invest in other popular cryptocoins, such as ether, XRP, tether, cardano and stellar.
If you want to invest in crypto, look closely at the story behind each coin. Download the accompanying white papers to see what the creators want to achieve with the coin, what the roadmap looks like and how the coins differ from competitors.