Tesla no longer wants to accept payments in Bitcoin - although the price plummeted after the news and what happened throughout 2021, it is still several hundred percent higher than some years ago - a dream return.
But how risky is the business with Bitcoin, Ethereum, and other coins? And what should you know if you want to be part of the crypto hype?
Over eleven years ago, the first payment was made with a cryptocurrency: 10,000 Bitcoin for two pizzas. What was equivalent to about 35 dollars back then would be worth hundreds of millions of dollars today - the most expensive pizzas ever!
It is stories like this that fire the imagination of crypto investors: If only you had bet on the right digital currency with a Kucoin trading bot, you would be rich now! But first things first:
How Do You Get Cryptocurrencies in the First Place?
Basically, you can get digital currencies through crypto exchanges, crypto brokers, or neo brokers (also called online or smartphone brokers). With crypto exchanges, you trade cryptocurrencies directly with other market participants, without intermediaries.
In crypto and neo-brokers, brokers take on the role of intermediaries. Among the well-known crypto exchanges are, for example, Binance, or Coinbase. Among crypto brokers, there are providers such as the Bison app of the stock exchange.
Recently, some Neobrokers, such as Revolut or Traderepublic, have also included cryptocurrencies in their range. With Neobrokers, you can trade not only crypto assets but also stocks and ETFs.
In the described ways, one usually has to confirm one's identity, for example, via the Videoident procedure.
Once you have been successfully registered, you can send fiat money (i.e. conventional currencies such as euros or US dollars) to your own account on the crypto platform via bank transfer - and use it to buy cryptocurrencies. The effort involved is comparable to operating a share account.
Mining: The Computer Does the Work While You Earn?
Unlike traditional money, cryptocurrencies do not have a central issuing authority such as the European Central Bank. Bitcoin, for example, is backed up and generated decentrally on millions of computers.
In theory, a powerful PC is all that is needed to "mine" cryptocurrencies yourself. In reality, however, this is not worthwhile for private individuals in most countries because a large proportion of cryptocurrencies are now created in purpose-built data centers in specific regions, where the available computing power is gigantic and electricity is cheap.
How Do You Store Cryptocurrencies?
A distinction is made between private and public keys. The latter is something like the public address of your own coins, which you can make public without worry. Access to the coins is only possible in combination with the private key.
If you lose your private key, your digital money is also inaccessible - so it is important to keep the (private) keys to your cryptocurrencies safe.
This works in so-called "wallets", i.e. software that enables cryptocurrencies to be received, sent, and managed.
Important: In any case, you should note the private key in addition to the wallet so that you can find it again. The best way is the old-fashioned way on a piece of paper.
If you want to park your cryptos with the trading platforms, you don't have to worry about storing them. You do not transfer the coins to your own wallet, but have them stored by the provider.
What to Look for in a Provider
You should compare in advance how high the fees for transactions and the storage of cryptocurrencies are depending on the provider.
Another criterion: the selection of tradable cryptocurrencies differs greatly. So, before deciding on a provider, you should know which currencies you want to trade at all.
As a general rule, providers for trading and custody of cryptoassets are regulated by financial authorities. Therefore, non-regulated providers should be avoided in any case.
And you should generally become suspicious if exaggerated promises of profits are made or unwanted contact by providers happens.
Some Say that Crypto Trading is Not an Investment, but Speculation
Cryptocurrencies are extremely risky speculative objects that are not suitable for long-term investments such as retirement planning. Those who still want to try their hand at "gambling" with the knowledge in mind must accept that the invested money can be completely lost in the worst case.
Consumer protectionists advise not to put more than five to ten percent of one's investment assets into cryptocurrencies.
Important: Only bet on cryptocurrencies that are actually decentralized and counterfeit-proof. There are coins on the market that are issued as cryptocurrencies, but in reality, were set up by fraudsters and can be manipulated unilaterally.
Basically, if you do not understand what you want to invest in, then you should not invest.
Careful with the Limits
When choosing a currency, one should be aware that there are limited and unlimited cryptos: For example, Bitcoin is limited to 21 million coins, so the amount cannot increase arbitrarily.
In contrast, Ethereum, the number two crypto in the crypto universe has no limit set. Investors should note: As the amount of money gets bigger and bigger, there is a risk that the value will go down.
Finally, the old stock market adage also applies to crypto trading: don't put all your eggs in one basket. There are thousands of cryptocurrencies, putting all your eggs in one basket can quickly backfire.
