bitcoin

Are Bitcoin Certificates A Sensible Investment?

Many investors have raised eyebrows on Bitcoin certificates because these certificates were always too speculative, too uncertain, and “without intrinsic value”. But this initial assessment eventually changes for some investors who have tried investing in Bitcoin certificates.

What is a Bitcoin and how it works?

Are Bitcoins a sensible investment?

Cryptocurrencies like Bitcoin are definitely only suitable for very risk-conscious investors. There is a risk of a total loss, theft of your own wallet, loss of access data, becoming a victim of fraud (especially when new currencies (ICOs) are published), etc. Therefore, only “play money” should be used, if at all. This means invest only with money that does not bring you economic difficulties in the event of losses.

Why invest in Bitcoin?

Although Bitcoin and other cryptocurrencies have no intrinsic value, it can still bring crisis protection to some degree, at least as long as there are still people who believe in the currencies.

Similar to gold, it can be assumed that if a major crash is imminent, the prices of the cryptocurrencies are likely to rise sharply. Simply because trust in the central bank’s paper money system is waning.

Conversely, cryptocurrencies are more likely to get stuck in a stock market boom like the one in December 2019.

Assets that are likely to behave in the opposite direction to other assets are good as a hedge, which is why some investors use cryptocurrencies in addition to gold to diversify for the crash. It will then be seen whether there will be a new financial crisis.

Regardless of that, there is an assumption that the long-term rates of the two cryptocurrencies will rise – even without a crash. But this statement is more of a forecast without a real basis.

Are Bitcoin certificates a perfect investment vehicle?

The participation certificates or simply called Bitcoin certificates have advantages and disadvantages. Again, Bitcoin certificates are just as risky and speculative as a direct investment in Bitcoin.

Bitcoin certificates have an invaluable advantage. You can keep previous securities account and just buy these certificates and then you have a foot in the world of cryptocurrencies.

Disadvantages of Bitcoin certificates

  • Tax disadvantage: Certificates fall regularly under the flat tax of almost 26 percent when buying or selling. Just like ETF or stocks. After the allowance of 801 euros (single) is exceeded, this tax always applies to your winnings. It is different with a direct investment in Bitcoin and its sale: From a tax perspective, these are “private sales transactions”. There is an allowance of 600 euros per year. Any income above this amount must be taxed at the personal income tax rate. As a rule, this should be higher than the 26 percent flat tax. BUT: If you hold your Bitcoin for more than a year, the entire proceeds are tax free. Here, Bitcoin is treated like physical gold, an invaluable benefit of direct investment.
  • Issuer risk: Certificates are always subject to the risk that the issuing bank could go bankrupt. This can lead to significant losses up to the total loss of you. Especially when everyone is talking about a crash, a risk that should not be underestimated. So always choose a stable and healthy bank as an issuer.
  • Bitcoin crash, resulting in a total loss. Cancellation of the certificate by the issuer: In the securities prospectus of the certificate you will often find clauses stating that the bank may terminate the certificate in the event of unforeseen events with a period of notice. Now your Bitcoin certificates are currently in the red and the bank will cancel them in 3 months, for example. Although the certificates have no due date (open end certificates), a due date can still occur.
  • Bitcoin crashes and disappears from the market: no question – if the base value (Bitcoin) of a certificate dies, the certificate no longer has any value and you suffer a total loss. Admittedly, this also applies to direct investment.
  • Running costs: Only death is free. Of course, the issuer of a Bitcoin certificate also wants his part of the cake. For my open-end certificates, these are running costs of 1.5% per year that gnaw on my return. But you can usually get over it.

Advantages of Bitcoin certificates

  • Fast and liquid tradable: Because the transaction is carried out via the regular securities account, you can get in and out of the market in a matter of seconds. For direct investments in cryptocurrencies, this is usually a longer-term procedure until your own money is actually back in the account
  • Easy tax handling through flat tax through your broker
  • No risk of hacker attacks, theft of your wallet or dubious Bitcoin exchanges or their bankruptcies
  • Participation of almost 1: 1 of the underlying asset

Conclusion

It is not advisable to invest a large part of your assets in Bitcoin certificates mainly because they are speculative and high-risk investments. And if you have borrowed a capital to invest (https://www.southeasttitleloans.com/lending-options/), do not invest in participation certificates. To keep it simple, if Bitcoin dies, then your entire invested capital will also die and you don’t want that to happen. So if you want to diversify and include a Bitcoin certificate in your portfolio, keep it small and simple.

Posted by Lyndsey Annabel in Crypto

Bitcoin Not Immune To Financial Market Crisis

The recent slump may come as a surprise to observers, but it is not only within the scope of what is known from Bitcoin, but is also in harmony with the financial markets. Yesterday even the “crisis currency” had given way to gold, if only by five percent.

What Happens to Bitcoin if Stock Markets Crash into a Bear Market?

However, anyone who has seen Bitcoin as a new “safe haven” in times of crisis in recent months should now be disappointed. In places, Bitcoin was even given the nickname “digital gold”.

Experts stay relaxed

For experts like Kai Kuljurgis, founder of the crypto investment platform Coindex, the recent drop in price is more an effect of the beginning professionalization of the market. A lot of institutional money has flowed into crypto values ​​in recent months. That drove the courses. However, new investors, in particular, would quickly withdraw.

Die-hard Bitcoin supporters do not see the recent price losses as a drama, but rather a good opportunity to buy cheaply.

Posted by Lyndsey Annabel in Crypto