Bitcoin exchanges are not the only way to invest in digital assets. In fact, there are other ways to get involved in this market. In addition to the typical exchanges, there are, for example, CFDs, brokers, future contracts or certificates. It is important to probe what investment opportunities exist, how they differ and based on which are the most appropriate choices for the individual investment plan. In this article, we present ten different investment vehicles for crypto values.
Trading venues for Bitcoin & Co.
You can buy and trade crypto values at specialized trading venues. Many of them are located abroad, not infrequently with questionable regulation and a non-transparent public image. In the meantime there is also a limited selection of German providers, such as bitcoin.de or BSDEX.
Trading Bitcoin & Co. works like a conventional trading place. The exchange maintains an order book with buy and sell orders. If the price of a buy order matches that of a sell order, a trade transaction takes place.
When choosing a corresponding Bitcoin exchange, one should pay attention to the selection of trading pairs, security, seriousness, the possibility of trading in fiat currencies and the entry and exit barriers for transfers. The investor should have a certain basic understanding of crypto values and digital trading venues.
Broker: Bitcoin purchase via detours
In the meantime there are some brokers who offer to buy and sell crypto values. A broker is a person or company that executes buy and sell orders on behalf of an investor. The broker charges fees for this service. More prominent examples are Bitpanda and Robinhood for private investors or the Asset Manager Crypto Finance AG for professionals.
The so-called contracts for difference or simply CFD (difference contracts) are highly speculative, complex and over-the-counter derivatives. They are only suitable for experienced and well-informed investors. Due to the underlying leverage there is not only an increased chance of winning, but also a disproportionate risk of loss. This is made clear by the CFD providers’ mandatory legal notice: “Between 74 and 89 percent of retail investors lose their money when trading CFDs.”
There is no official Bitcoin ETF yet, but industry participants expect such a product to be available in the future. Prominent market participants from the USA such as VanEck or the Winklevoss brothers, but also European participants are actively working on the official ETF for crypto values.
ETFs are investment vehicles that track the performance of a particular underlying asset or group of assets. Like traditional securities, ETFs can be traded on exchanges and with custody accounts. The underlying investment value is deposited with this instrument, i. H. the issuer buys and stores the respective assets in the background.
A certificate is a type of security, the price of which is derived from the prices of other assets. Certificates are very flexible and can reflect complex investment strategies. Certificates for crypto values are offered by companies such as Vontobel and f5crypto.
Investors wishing to trade certificates should understand in advance how it works and the associated risk.
Exchange Traded Notes (ETNs) are exchange traded bonds that track the performance of underlying benchmarks. ETNs are offered by stock brokers and, like them, are fully regulated.
An established crypto-ETN provider is called “XBT Provider” and is traded on the Swedish stock exchange.
Future contracts: futures contracts on Bitcoin & Co.
A future contract (or: futures contract) is an agreement to buy or sell an asset at a future time and at a fixed price. With futures contracts, complex strategies such as For example, hedging can be implemented – that is, hedging a transaction against future price or exchange rate fluctuations. Forward contracts are aimed at professional and institutional traders. The minimum investment is usually quite high.
There are already several exchanges that offer Bitcoin futures such as the Chicago Mercantile Exchange (CME) and Kraken. One of the best-known providers of Bitcoin futures is the US company Bakkt.
As we have already pointed out in our column, investing in crypto values is associated with high risk. A less risky investment tends to be buying shares in companies that could benefit from the growing adaptation of digital assets.
This approach requires independent research to identify such stocks. An obvious example would be the share of the German Bitcoin Group, which builds up its business area around Bitcoin and other crypto values.
It should be clear that the case is investing in a stock and not in a crypto value. The value of each stock depends on various factors, with the popularity of crypto values being just one among many.
The increasing popularity of Bitcoin & Co. has led to the emergence of a large number of specialized funds.
Funds are launched by investment companies or banks and actively managed by fund managers. A mutual fund is like a pot in which many investors deposit money. The fund management creates the money collected for the investors. There are different types of funds, such as equity funds, bond funds or themed funds that only invest in certain industries or trends.
An investment in funds is often considered less risky because fund managers can actively react to market situations – e.g. B. increase the cash ratio in the bear market. When choosing a fund, you should pay attention to how it works, contract terms and fee structure. One of the first funds for crypto values is the “Postera Crypto I” (ISIN: LI0385769448) from the Düsseldorf-based company Postera Capital GmbH. The minimum investment here is 50,000 euros.
Digital system service
Against the background of digitization, a whole series of new offers for private investment have emerged. There are companies that enable customers to invest money in assets using a smartphone and web application. This is attractive for many, because the process is simple and customer-friendly, the investment is rational, often fully automatic and therefore time-saving. A noteworthy example of the traditional financial market is scalable capital, in which investors can invest in diversified portfolios based on their risk profile.
Digital investment opportunities are still rare in the area of crypto values. One example is the coindex® platform for crypto portfolios, where investors can invest in index-based or individually compiled portfolios. Due to the simplicity of use and the rationality of the underlying index strategy, the platform is also suitable for beginners and passive investors.
There are various instruments to participate in the Bitcoin market. In addition to the different functions, it is also important for the investor to know whether the respective instrument is a direct or indirect investment. In the case of a direct investment, the buyer owns and controls the respective crypto value, while an indirect investment is only a securitization and does not grant any property rights. The following table provides an overview.