According to consumer advice centers, Bitcoins are not suitable for building wealth. If you still want to speculate with them, you should carefully consider the risks of this investment. Read more about Bitcoins and how to recognize dubious providers here.

The most important thing in brief:

• The digital currency Bitcoin was introduced by private individuals in 2009 and is intended to be an alternative to the traditional monetary system.
• In addition to the original Bitcoins, there are now also “Bitcoin Cash”, “Bitcoin Private” and “Bitcoin Gold”.
• Speculators also often use Bitcoins or certificates based on them and hope for price gains.
• Consumers are increasingly complaining about providers who lure customers with dubious investments in cryptocurrencies.
• Consumers also repeatedly report fraudulent platforms where they only supposedly offer the opportunity to purchase Bitcoins.

What are Bitcoins?

Bitcoins are a virtual means of payment. The digital currency was introduced by private individuals in 2009 and is intended to be an alternative to the traditional monetary system.

Bitcoins and many other newly created cryptocurrencies are still independent of governments and central banks. Instead, they are generated in a decentralized manner by computers using a cryptographic formula. Encryption techniques are used to make it impossible to copy or counterfeit this Internet currency.

The total amount of electronic money in Bitcoin is limited to 21 million units. This is intended, among other things, to prevent inflation of Bitcoins from the outset. However, the limitation ultimately also means that Bitcoins are not only used by people who see the new currency purely as a means of payment, but also by speculators who hope to make price gains through the digital currency.

Dubious Bitcoin transactions

Consumers are increasingly complaining about providers who want to persuade them to make dubious investments by offering deals on Bitcoins and other cryptocurrencies. Dubious companies and private individuals present themselves on social media , messenger services or contact consumers unsolicited by email or other random contact opportunities, such as when handing over a product sold via a no-ad. They promise financial freedom, high returns or permanent passive income through crypto mining, trading or investing in new, supposedly groundbreaking cryptocurrencies.

• As a rule, these companies are based abroad or have foreign bank accounts
• Sometimes illegal pyramid schemes are hidden behind such offers .

You can find more information on how to identify dubious trading offers early on in our article on dubious trading platforms . European regulators also warn against investing in crypto assets.

Podcast: The most important things to listen to

Simply buy Bitcoin and your pension is secured. Or is it perhaps not that simple?

In this episode, we evaluate Bitcoin as a financial investment and answer the question: Should I also buy Bitcoin?

The podcast was created as part of a project funded by the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection.

Buying Bitcoins: What you need to pay attention to

You can buy Bitcoins on certain exchanges at the current price. Alternatively, they can also be purchased from other users on certain trading platforms and marketplaces.

In order to buy or trade cryptocurrencies, an electronic wallet is necessary. This is the digital version of a wallet for virtual currencies. A distinction is made between the following variants:

• “Cold wallets”   are external data storage devices, such as a USB stick or hard drive, that are only connected to the Internet for the transfer of Bitcoins via a computer or WLAN.
• You can access “hot wallets” via a device connected to the Internet. To do this, you log into a platform, for example. Access is software-based via the web or an app.

When you make Bitcoin transactions, they are authenticated in a decentralized manner. The payment methods are transparent, but buyers and sellers are anonymous.

Regardless of whether you use a cold or a hot wallet, you will need the public address of the sender and recipient accounts, the transfer amount and, above all, the private key for a transaction. This is a virtual key that enables access to your own wallet.

  With cryptocurrencies, there is not only the risk that the price will develop negatively, you also have to consider various technical aspects and security questions – before you invest. Bitcoins can also be stolen from the wallet, for example. If you lose the key, you can no longer access the bitcoins. The crypto exchange on which cryptocurrencies are traded can also reject transactions or – in the worst case due to insolvency – close completely. 

How are Bitcoins secured?

Technically, the encryption techniques mentioned are supposed to guarantee security, but legally the virtual currency is not protected at all . El Salvador has now introduced Bitcoin as another legal tender alongside the US dollar. But that does not change the fact that the digital currency is not legal tender anywhere else and that Bitcoins in particular are not controlled by any central bank, government or regulatory authority. Anyone who buys Bitcoins is ultimately relying purely on the trust that someone else will accept this Internet currency. There is no legal entitlement to this.

There is no deposit protection for Bitcoins, nor is there any protection through a gold standard or other security. Anyone who considers Bitcoins not only as a means of payment, but also as a possible speculative investment, should therefore bear in mind that the capital invested in Bitcoins is fundamentally at risk of high losses. A total loss is also conceivable.

Conclusion: Are Bitcoins worthwhile as a means of payment or investment?

No one can seriously predict today whether Bitcoins, variants of them or other cryptocurrencies will prevail in the medium term as an alternative to conventional monetary systems. The development in recent years has increasingly moved away from the idea of ​​an alternative means of payment and towards an object of speculation.

Due to the risks involved – particularly the massive price fluctuations, including total loss, and the lack of security systems – Bitcoins are not recommended as an investment for consumers .