Bitcoin trading explained
Before we get deep into the nitty gritty of bitcoin trading in Germany and how to buy bitcoin in Germany, we’ll provide a brief explanation of how bitcoin trading works. The basics of bitcoin trading in Germany are the same as they are anywhere else, even if the legislation is different, so below you can find our broken down explanation of of the core things you need to know about bitcoin trading:
Trading vs investing
The first thing to understand about bitcoin trading in Germany, or anywhere else, is how it differs from investing. To explain it in the most simple terms possible, investing is the long game, trading is the short game. With investing, you buy bitcoin, store it away and wait in the hope that its value increases. We’ll explain more about how to buy bitcoin in Germany later on. Bitcoin investment gained notoriety in 2017 when the price of bitcoin spiked to $20,000, meaning those who bought bitcoin in 2009, when it’s value was $0.30, were made very wealthy. We should point out that the 2017 spike was something of a fluke and it’s not advisable to get into bitcoin investing in the hope that will happen again.
Trading involves buying and selling bitcoin in a short space of time. This time period can be weeks, hours or even instantly, as is the case with CFDs and Forex trading. Often with bitcoin trading you never actually own the underlying asset, and are relying on predicting the changing market to make a profit. The volatile nature of the crypto market can mean that it can spike very quickly, meaning short term profits, however it does make it very risky and can lead to sizable losses. That’s why, even if you want to get into bitcoin trading in Germany even on a casual basis, some time, effort and a learning process is required.
Different types of trading:
There are many different ways to trade bitcoin, but they can all be split into two broad categories; scalping and swing trading. Scalping isn’t recommended for beginners or casual traders as it’s all about making a profit on the day. Scalping traders are constantly buying and selling currency hoping for the smallest of market movements to make them a profit. As such it requires a deep psychological knowledge of the market and requires many hours to be spent in front of the computer screen.
Swing trading involves buying bitcoin and holding onto it until the trader feels the price has peaked and is about to drop. If the trader gets it right, the bitcoin will be sold at the right time for a higher price than it was bought. The time period for this can be anything from minutes, to weeks and months, making it essentially a short term investment strategy. This is recommended for beginners and casual traders as, while it does require attention and market knowledge, it doesn’t require constant attention.
Bitcoin trading Germany
Bitcoin trading in Germany has grown rapidly over the past few years. Not only that, but it has recently become a destination that has attracted crypto enthusiasts from across the world, thanks to their favourable tax laws surrounding bitcoin and other cryptocurrencies.
If you’re wondering how to buy bitcoin in Germany, it works pretty much the same as it does in other countries – where Germany differs is in the benefits of keeping your bitcoin. Where Germany’s legislation differs greatly from other developed nations is that they treat bitcoin as private money, rather than as currencies, commodities or stocks. This means that you pay no tax on your cryptocurrency profits provided you hold onto your bitcoin for a year or more in Germany. The taxation laws surrounding crypto also benefit small money traders as there’s no tax on private sales under €600, including bitcoin trades.
Getting a secure & fair experience with Bitcoin trading
Before you start asking how to buy bitcoin in Germany, you should first seek to find out how to have safe and secure experience when bitcoin trading in Germany. Below you can find our top tips for a safe and secure bitcoin trading experience:
First and foremost, you’ll want to make sure that the exchange or brokerage you’re using is authorised by a regulatory body either in Germany or elsewhere. If you’re using an exchange or broker that’s actually based in Germany, make sure that they are authorised by the Federal Financial Supervisory Authority (BaFin). Most exchanges based in the UK or EU nations are also available to Germany customers, if the exchange you’re using isn’t regulated by BaFin, make sure they’re authorised by another tier 1 European regulator, such as the FCA in the UK.
You’ll want to choose a reputable exchange or broker with a secure login system that protects your account from hackers while protecting your data. Look for a 2 factor authentication system, similar to one you’d find with an online banking system. Unfortunately it can be hard to strike the perfect balance between data privacy, solid security and regulation. For example, there are crypto exchanges with a secure login system that’s completely private and doesn’t require any ID or personal data from you, however regulators usually refuse to authorise such platforms.
When thinking about how to buy bitcoin in Germany, you should also be thinking ahead about where to store it and how protected your money will be. A secure platform should store clients’ funds offline in what’s known as a “cold storage”, as this keeps your funds safe from hackers. You should also check if your funds are protected or ensured if the broker you’re using enters financial troubles. The main way most brokers do this is by keeping clients funds separate from their own, however some go the extra mile with a regulator insurance policy for their clients. Brokers regulated by the UK’s FCA have their EU clients’ fund protected upto the value of £85,000 (€94,785).
Editor’s recommendation – the best trading platform for Bitcoin in Germany
Now it’s time for us to provide you with our expert advice regarding how to buy bitcoin in Germany, with our editors recommendation for the best platform for bitcoin trading in Germany.
Our editor has chosen to recommend Bitpanada as the best place to buy bitcoin for German customers. Although technically Austrian and not German, Bitpanada is a safe and reputable exchange that consistently receives satisfactory and glowing reviews from its customers.
If you’re wondering how to buy bitcoin in Germany, you can do so with Bitpanda by following the steps below:
- Register your account
- Enable 2-factor authentication & verify your account.
- Make your deposit in EUR
- Transfer the funds into your account
- Click on the “Buy” button at the top of your screen.
- Search for bitcoin and enter the amount of BTC you want to buy or the amount of EUR you want to spend.
- Double check the transaction to make sure you’ve selected what you want
- Click “Buy BTC” and confirm the purchase
For those of you who already own bitcoin and are looking to get into bitcoin trading in Germany, our editor’s recommendation for the best bitcoin trading app in Germany is eToro.
This is how our experts test trading platforms
First and foremost, when it comes to testing a platform for bitcoin Trading in Germany, our experts look at the regulation and legitimacy of the platform. The first thing we look for is the authorisation of a tier 1 regulator body. For bitcoin trading in Germany specifically, a legit trading platform should be regulated by BaFin, who we mentioned earlier. Almost every exchange based in Europe is also available to German customers, so if a platform isn’t regulated by BaFin, that doesn’t mean we write it off straight away.
Platforms regulated by top tier European bodies such as the FCA (UK), FINMA (Switzerland) or AMF (France) will usually get the green light from our experts. If a trading platform is completely unregulated but for a justifiable reason, such as complete anonymity for users, we’ll still go ahead and review it but with heavier scrutiny to ensure it’s safe and secure in other ways.
When it comes to testing the security of a trading platform, there are two different areas our experts focus upon; account and personal data protection and the protection of clients’ funds. When it comes to an account login system, user privacy is often sacrificed for increased security and regulation. Most regulatory bodies require authorised platforms to use ID and Know Your Customer (KYC) verification systems for new accounts. While this makes such platforms extremely safe and secure, it makes a lot of the clients personal data and identification available online, meaning privacy settings are low. Ideally what we are looking for is a 2-factor authorisation system that doesn’t require ID so users can still be anonymous. However this is extremely hard to find from a regulated platform due to EU laws.
Usability, look & feel
No matter what type of website or app you might be using, we think it’s safe to say you’ll always want it to be as easy on the eye and easy to use as it possibly can be, and it’s no different when it comes to bitcoin trading. From the registering process to actually buying bitcoin, the journey should be as easy as it possibly can be for users of all levels. While an easy to use platform is more important for beginners, as advanced traders will often seek more complex platforms, we feel that a site or app should be as straightforward as it can be. When it comes to looks, we like a platform with a simple colour scheme that’s slick and easy on the eye.
Tools and materials
We like our platforms to have tools and research materials to suit traders of all experience levels. Advanced and professional traders will be looking for detailed market research papers and intricate charting tools, in order to help better their investments. For new bitcoin investors, we feel that a platform with tutorial videos and step by step guides is important in helping users find out how to buy bitcoin in Germany. The creme-de-la-creme of beginner friendly trading tools is a demo account, which enables novice traders to practice on a free demo platform with virtual currency, so no risk is taken and no actual money is lost.
So there you have it, we hope we’ve covered everything you needed to know about how to buy bitcoin in Germany and are ready to get started on your bitcoin journey. To summarise everything we’ve covered, we’d like to leave you with our most important key takeaways:
- Decide if you want to trade or invest
- Choose a safe, regulated exchange or broker that keeps your funds secure
- Study the market and use learner tools or a demo account before investing/trading for real
- Don’t put in any more money than you can afford to lose – choose a platform with negative balance protection
- Remember bitcoin is volatile and risky