How can I buy crypto currency in 2020


This is how you speculate with bits and bytes

Hendrik Buhrs
Expert for banks and stock exchanges As of February 25, 2021

Hendrik Buhrs

Hendrik Buhrs is an editor in the bank and insurance team. Before joining Finanztip, he reported on economic and consumer issues for the radio programs of the Hessian and later of the West German Broadcasting Corporation. Hendrik studied economics in Münster and Exeter. He gained his first professional experience at Radio Q and on Recklinghausen local radio. He likes to invest the money he has saved in travel.

  • Bitcoins are digital units of value that are intended to serve as a decentralized currency. They only exist as bits and bytes on computers or storage media. You cannot pay your taxes or rent with Bitcoins.
  • There is no state or central bank behind Bitcoins, but a global list of data, the so-called blockchain.
  • Bitcoin trading is highly speculative. In the past, the rate has doubled, but also halved again within weeks.
  • Also, there is no guarantee that you will be able to sell your bitcoins for a profit in the future. They can also become completely worthless.
  • Buy bitcoins only if you understand the concept and know the risks - and only with money that you can get over losing.
  • To buy bitcoins, you have to register with a digital trading platform and install a digital wallet on your computer, mobile phone or a special USB stick.
  • Be careful: more and more fraudsters are trying to make money on the hype.

At the beginning of 2009, the first bitcoins in history were created - more precisely calculated, because the maximum possible 21 million bitcoins only exist on computers, cell phones and storage media. The fact that the amount of Bitcoin cannot grow arbitrarily and that there is no central control option is an enormous advantage for friends of the cryptocurrency. Skeptics point to the violent price fluctuations.

At the beginning of 2021, a Bitcoin will cost as much as a mid-range car. You should get away from Hype about bitcoins don't just get carried away but also know the risks and side effects. Very important: Bitcoins are not suitable as an investment.

What are bitcoins?

The very question of what a Bitcoin looks like shows that this system is something completely new. While we come across euro coins or girocards every day and we have a clear idea of ​​other financial products such as a share or a gold bar, this is different with the digital sequence of digits and letters. But even if there is hardly an article about Bitcoins without an imaginative illustration, these are purely symbolic images.

Literally translated are bitcoins Coinsthat only exist on computers - that is, only digitally. Synonymous with digital coins, some also speak of digital currency or internet currency. Behind the idea of ​​Bitcoins is that the owners can use it to pay once - as an alternative to state money.

In addition, Bitcoins also stand for a secure exchange system. The idea: members of the network can transfer money to each other worldwide and check all transactions themselves - no bank is necessary for this. Even in retrospect, nobody in the network should be able to manipulate transfers of bitcoins.

The heart of the technology is the so-called Blockchain. she is that digital directory, in which all Bitcoin transactions are stored. All members in the network can check transactions (peer-to-peer technology), and powerful computers embed them in a complex arithmetic task. That makes fraud more difficult.

Bitcoins are also called Cryptocurrency designated. Cryptography, i.e. encryption technology, plays a crucial role in creating the blockchain. After all, something should be avoided that normally happens with purely digital goods: that a copy cannot be distinguished from the original and that “counterfeit money” floods the market.

Meanwhile there are also other crypto currencies. Some, like Bitcoin Cash, are derived from Bitcoin, others, like Ether (Ethereum), were developed separately. Bitcoin itself, with around 66 percent of the market capitalization of all cryptocurrencies, is still the best known and most widespread (as of January 13, 2021). You can find out more about how the blockchain works and how bitcoins are created below.

The usual abbreviation, i.e. the ticker symbol for Bitcoin, is BTC. Another abbreviation sometimes used is XBT. The latter follows the international ISO standard, according to which the beginning of a currency abbreviation must always correspond to a country code (as with EUR or USD) - but with Bitcoin no country can be defined, hence the X

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What do bitcoins cost?

The price of bitcoins is based on supply and demand. Interest and demand have risen steadily over the past few years, also due to the increasing reporting in the media. At the same time, the supply is limited because the Bitcoin network can only gradually produce new coins. You can read more about this below.

A brief history of Bitcoin

When the digital currency started in 2009 and hardly anyone knew it, supply and demand were low - the exchange rate at that time was less than 1 US dollar. Back then it was mainly they who bought Convictswho wanted a currency that was independent of central banks and commercial banks. As things stand today, those of the first Bitcoin owners who are still there have a fortune in their digital wallet. The price has multiplied enormously over the years.

In 2017, they also increasingly invested Financial investors. They saw Bitcoins and the computer technology behind it as the next "hot thing" and thus drove the price up. On closer inspection, however, the course is by no means just on the way up. From the interim record level in December 2017 (16,600 euros), the Bitcoin crashed and lost over 80 percent of its value at the time. At the beginning of December 2020, the Bitcoin price again exceeded the threshold of 16,000 euros and reached a new all-time high in February 2021 when the 40,000-euro mark was exceeded.

Since October 2020, US users of the PayPal payment service have been able to buy and sell Bitcoins via their customer account (exception: Hawaii). A transfer to other accounts is currently not possible. At the same time, PayPal expanded its offer to include the crypto currencies Ethereum, Litecoin and Bitcoin Cash. At the beginning of 2021, PayPal users from the USA should also be able to make purchases with Bitcoins. Paypal will then exchange the digital credit in a transaction for conventional money, such as dollars. In the course of the first half of 2021, PayPal also wants to offer a Bitcoin service in other countries. It is not yet known whether Germany will be one of them.

Are bitcoins good as an investment?

The idea of ​​bitcoins may be fascinating for you too. Nevertheless, there are some good reasons why you should under no circumstances use the digital coins as an investment or as a basis for private retirement provision.

Bitcoins do not work as a means of payment - Neither the department store nor the tax office accept Bitcoins, and most likely not your landlord either. However, there are some online retailers and a few shops, for example you can pay for food at Lieferando with Bitcoin. Some organizations like Wikipedia parent Wikimedia accept donations in Bitcoin. However, there can be no talk of broad-based acceptance. That can of course change - PayPal should at least give Bitcoins a boost.

Bitcoins are not secured - Anyone who buys a German government bond and lends money to the federal government for a few years knows that they are entering into a safe business. Germany is in good financial shape and it is very likely that it can repay the money, including interest. As a rule, there is a statutory deposit guarantee on bank balances, which takes over in the event of bankruptcy.

Bitcoins are much less secure: there is no state or central bank behind the digital coins. Nobody guarantees that your Bitcoin credit will generate secure income and that you can exchange it for euros after a few years. The German supervisory authority Bafin and the British FCA have warned of the risk of loss in crypto values.

Bitcoins have no material value - If you have a share in your portfolio, you are involved in a company with all of its assets. If you store gold in the safe, you can assume that you can pay with it in the event of a crisis - the material value will be recognized. It's different with bitcoins. There is only a (very young) idea behind it. Bitcoins only have a value as long as people believe in the success of the cryptocurrency. As soon as speculators turn away from Bitcoin, the Euro value of Bitcoins can slide quickly. You risk losing everything.

Video: Bitcoin explains: is it worthwhile as an investment?

Where can you buy bitcoins?

You know the risks of Bitcoins, but still find the idea of ​​digital currency exciting and want to stick with the topic? Then you should at most have one small amount of money Invest in bitcoins, i.e. small sums that you might otherwise have spent playing the lottery or at the fair - and losing them does not burden you.

Finanztip does not recommend buying bitcoins. If you still want to try it with a manageable amount, these are the first steps:

1. Choose a Bitcoin trading venue

You can buy and sell bitcoins at various trading venues on the Internet. Well-known platforms are for example Kraken or Binance, from Germany also Bitwala or Bison. You can use them to exchange bitcoins for euros.

Before registering, find out which Buying and Selling Fees the provider for Bitcoin trading requires. These can make up 1 percent of the Bitcoin amount, for example, but with some providers they are also higher. Fees may also apply if you want to deposit euros or withdraw them later, and also when transferring bitcoins to a separate wallet to store them there.

You should never go to a trading venue that has little or no independent media coverage. There is a lot of activity in this comparatively young market many scammers. You should also ignore advertising emails promoting an investment in Bitcoins.

Depending on the trading venue, you would get the bitcoins from different sellers. Sometimes there is a bank in the background that itself has a bitcoin inventory and uses it to service the users' orders. Other providers like are more likely to work like an exchange platform, comparable to Ebay classifieds. Investors can register and place offers to buy or sell in euros. Buyers and sellers decide for themselves what price they want for the bitcoins. Users can compare the offers directly.

Some trading venues are also known as exchanges or crypto exchanges. However, there is currently no legal framework for trading Bitcoins or other cryptocurrencies. The Bitcoin trading venues are therefore not comparable to the regulated stock exchanges such as the Frankfurt Stock Exchange.

2. Create and verify account

If you want to trade bitcoins, you have to deposit a bank account and verify it first. The providers are obliged to Verify the identity of the buyer and seller and save. Among other things, this should prevent money laundering.

With Bitwala and Bison, you have to identify yourself using a video ID. Kraken will ask for a photo of your ID or driver's license that you upload. verifies your linked checking account with a test transfer. However, trading is then only possible for small amounts (maximum 2,500 euros per year, as of January 7, 2021). It is also possible that participants in the marketplace do not want to do business with you as long as you have not fully identified yourself. Anyone who wants to act without restriction must therefore fully legitimize themselves.

3. Check the cost overview before buying or selling

As with any bank transfer or securities order, you should make sure that you have entered the desired amount correctly. Not only are whole bitcoins traded - that would be a very expensive affair at the current rates - but also Parts of bitcoins. Therefore you have to count decimal places. 0.001 bitcoins were equivalent to around 30 euros in mid-January 2021. The smallest theoretically tradable unit is a Hundred millionths of Bitcoin (named "1 Satoshi" after the pseudonym of the Bitcoin inventor - one Bitcoin is therefore equivalent to 100 million Satoshi). However, there may be minimum amounts depending on the trading venue. Make sure to pay attention to the cost overview so that you are not surprised.

Also, make sure to actually buy bitcoins and not a variant. There are also leverage products on Bitcoins, so-called CFDs, or others Bitcoin derivativesthat are a lot more risky than Bitcoin, which is already risky in itself. Some people type in "Bitcoin" at their securities broker and then find stocks of companies that have Bitcoin in their name. These are not necessarily dubious, they are just not synonymous with the crypto currency Bitcoin. There is no ETF on Bitcoins in the EU because such exchange-traded funds are never allowed to contain only one investment product.

To assess whether you a good course get it, it is worth using sites like for help. They provide an overview of the current price for a Bitcoin on different exchanges and exchange platforms.

Example of a small bitcoin purchase

4. After the transaction, check whether the bitcoins have been booked correctly

You should check carefully whether everything went well. When buying via your own checking account, there is the special feature that after the transfer has been initiated, you still have to confirm in your account that the money is on its way. If you forget that, the transaction will automatically stop after 60 minutes. You will then have to contact customer service.

If you have a separate wallet for the Bitcoins, which we advise you to do, you should buy the one you bought Transfer coins there.

5. Think about taxes and fees before selling

If you sell bitcoins at a profit within one year of buying them, this is a private sale taxable. There is an exemption limit of 600 euros per year. Profits from the sale of works of art or precious metals such as gold are also added together for this exemption limit. If you keep the bitcoins for more than twelve months, there is a profit on the sale tax free.

Depending on the trading venue, paying out euro balances to your own account may cost you fees. You should inform yourself about this in advance.

At the moment you can hardly avoid the subject of Bitcoin. Crypto is all the rage. Perhaps the course will double that soon. Or maybe it crashes. Nobody knows. At Finanztip, we see stock ETFs as the best option for long-term investments, plus secured fixed-term deposits as a risk compensation.

Hendrik Buhrs
Our experts for banks and stock exchanges

What is a wallet and what is it for?

Many investors buy bitcoins on the trading platform and then leave the digital coins in their account there. In that case, users could quickly resell their shares in case of doubt - but the digital money is not really safely stored there.

Because the websites of the providers are not necessarily secure. In the past, hackers have paralyzed the pages of exchanges that User accounts hacked and the bitcoins withdrawn. The coins were then gone and investors usually do not get replacements.

So that something like this does not happen, you should always keep your Bitcoins - instead of leaving them in the account of the trading platform transferred to a so-called wallet. A wallet is a digital purse with a personal key code. To put it in the words of Bitcoin author Andreas Antonopoulos: "Not your keys, not your Bitcoin" - without a keycode, the Bitcoin is not really yours.

The two principles of Bitcoin custody are also used with the terms Custodial wallet and Non-custodial wallet distinguished from the English word for care, trust. The Bitcoin account of many crypto trading venues is a custodial wallet because you as a user have to trust their security precautions.

Below we explain different types of non-custodial wallets.

Which wallet is the right one?

There are different providers of such digital, separate wallets and different places where users can keep them: the personal computer, the smartphone or an external storage medium that looks like a USB stick (“hardware wallet”). The idea: Because only you as a user have access to the devices, the bitcoins are safe on them.

But you can also do one special account on the Internet open - and use it as a wallet. With an internet connection, you can access it from anywhere. However, similar to the crypto exchange, there is then the risk that someone cracks your online account and steals your bitcoins. This variant, which appears practical, is therefore less secure.

How do you open a wallet?

To open a wallet, you first have to look for a provider and download a program to the selected device. When choosing the provider, overview pages on the Internet help. On the cell phone you can find possible Wallet apps in the Play Store or app store. There are Bitcoin trading venues like Bitwala that give you the choice and offer both a custodial and a non-custodial wallet.

If you are a separate wallet unlike the Bitcoin trading platform, you do not have to enter any personal data. You just set a personal access PIN and note a combination of randomly strung together words (offline key). The user interface can then be used immediately.

Without a backup, bitcoins can be gone

You should make a note of the offline key (handwritten at best) and keep it in a safe place. Because it is also the backup copy for the wallet. So if the hard drive or mobile phone should break or the special USB stick is lost, you can use the word code to get your bitcoins back - just like anyone else who knows the code.

It goes offline too (hopefully)

You can do that too write down the private key on paper ("Paper wallet") and deliberately delete all electronic components of the wallet. Then the word code is the only access to your bitcoins and logically it is guaranteed not to be hacked. However, it can still be lost - and can then no longer be reconstructed.

Lost Bitcoin keys are always a major nuisance. In January 2021, a German programmer made headlines because he could no longer remember the password for a Bitcoin credit worth millions.

How does a Bitcoins transaction work?

The special thing about the transfer of bitcoins is that they are considered to be particularly secure. Only the owner of the Bitcoin wallet should actually be able to use the Bitcoins in it.

What role does the Bitcoin secret key play

Every owner of a digital wallet is assigned several Bitcoin addresses, i.e. a set of account numbers. They each consist of one Series of randomly generated numbers and letters, for example 97noVc7klmr4kGGuqjPL6XWTPmmjuW9A. Wallet owners can then send amounts of money in Bitcoins from one address to another.

In order to secure the transmission, a so-called private key is also required. It is generated when the wallet is created. The private key is either stored privately by you or is built directly into the hardware - and it is secret. Nobody can easily disclose it. A transfer is only released at the end if the private key exactly matches the wallet.

Once released, transfers are recorded in the blockchain and can no longer be changed or reversed.

Bitcoin transactions are not anonymous

In principle, all members in the network can track transactions. They see the Bitcoin address, from which they usually cannot infer the identity of the user. However, there are two back doors:

Transfers from the trading venue to the wallet - If a user transfers bitcoins from the account at the crypto trading platform to a wallet, the bitcoin community can see that a transaction has taken place. But the sender address is not publicly linked to the real user name, but is stored in encrypted form on the platform. An unauthorized person would have to hack into the platform first. If a user transfers bitcoins from the exchange account to a wallet, the bitcoin community can usually link the sender address with the real username. The data is stored on the exchange platform.

Transfer from wallet to wallet - Users have to briefly connect their wallet to the Internet for a transaction. If the user's server is not anonymized, it is possible to find the IP addresses of the computers involved.

Experts therefore often speak of the fact that the Bitcoin system with Pseudonyms (Bitcoin addresses) works, but cannot guarantee complete anonymity.

If bitcoins are sold at a profit within one year of their acquisition, this is taxable as a private sale. There is an exemption limit of 600 euros per year.

That's how long it takes to transfer and that is what it costs

At best, it takes about ten minutes for a transaction to be booked in the Bitcoin network. However, if many transactions are running at the same time, the posting time can increase considerably and sometimes take several days. The reason for this is that the transfers are in a multi-stage calculation process are involved. You can read more about this in the following chapter on blockchain.

With every transfer there is a so-called Network fee at. This varies in amount and depends on how quickly the user wants his transaction to be carried out. If you transfer from an exchange to a wallet, you usually pay more - the transfer should be done in ten minutes if possible. The exchange determines the fee. However, if you transfer from wallet to wallet, you can determine the fee yourself. Users who want to pay little simply wait longer for the transaction.

What is the blockchain and how does it work?

The blockchain is a digital register that stores every single bitcoin transfer. Behind this is a concept (blockchain technology) that makes fraud much more difficult. Put simply, it works like this:

Check 1: Transfer covered?

The digital register blockchain consists of individual tabs that are digitally "filed" one after the other like in a folder. Different transfers are saved on each tab. If the card is full, the Bitcoin community checks whether the Bitcoin amount transferred is actually in the wallet and whether the user has really only transferred his Bitcoins once. You can only continue if everything fits.

A tricky arithmetic task is now assigned to the tab. To solve them, many computers on the network compete against each other. In the end, someone finds the clear solution. This approach then serves as a kind of seal for the tab. In the Bitcoin world it is called the sealed card block. Many sealed cards "filed" one after the other form the chain: chain.

Check 2: correct solution?

If someone were to manipulate a transfer on the tab afterwards, the arithmetic task would change - and accordingly the solution. Suddenly there would be a wrong solution in the digital register. Because every full member in the network has the blockchain data set at home and can check it, this change would be noticed immediately.

This Inspection process can be compared with the centuries-old principle of the kerbholz, in which two business partners each owned half of a board. For a new marking you had to put both halves exactly next to each other and score a notch. Neither of the two partners could unilaterally change the note, only together with the other. The blockchain has many thousands of Kerbholz parts, so to speak, which makes manipulation very unlikely.

Note: Full members of the network have saved the blockchain on their computer. They are thus nodes and usually use wallets that run directly on the computer. Those who keep Bitcoins on their mobile phones or online use Bitcoin technology, but have usually not completely downloaded the blockchain and therefore cannot actively intervene in processes. It cannot produce any new bitcoins either. A copy of the Bitcoin blockchain contained around 320 gigabytes of storage space at the beginning of 2021.

How are new bitcoins created?

There are new Bitcoins as a reward for the network member whose computer was the first to find the clear solution to the arithmetic problem and thus to seal the tab (i.e. to create a block). A reward is appropriate because it takes enormous computing time and energy (electricity) to determine the solution.

Digged - and not stirred

The Bitcoin language compares the time-consuming calculation of the clear solution path with the work of a miner. The owner of the computer, who is the first to solve the task, gets the wages of his work: He has "mined" new bitcoins.

The Bitcoin network has itself the Limit of 21 million bitcoins which, however, should not be reached until 2140. The cap is a central element of the Bitcoin payment system that does not believe in inflation. In November 2020 there were 18.5 million bitcoins in circulation. Since the incentive to prospect is lowered at regular intervals (every 210,000 blocks or approximately every four years), the prospecting process slows down.

If you want to know more about the topic, you can take a look at a blog post by the Indian developer Mohit Mamoria. Simply formulated and with many examples, he introduces the blockchain in a beginner’s guide in English. The Lucerne University of Applied Sciences and Arts explains the blockchain clearly with chickens and fried eggs.

Hendrik Buhrs

Hendrik Buhrs

Hendrik Buhrs is an editor in the bank and insurance team. Before joining Finanztip, he reported on economic and consumer issues for the radio programs of the Hessian and later of the West German Broadcasting Corporation. Hendrik studied economics in Münster and Exeter. He gained his first professional experience at Radio Q and on Recklinghausen local radio. He likes to invest the money he has saved in travel.

Sara Zinnecker

Sara Zinnecker

Sara Zinnecker was editor for investment topics until June 2020. Sara had previously written about investments and retirement provision for the Handelsblatt. She completed her traineeship at the Georg von Holtzbrinck School for Business Journalists.

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