Bitcoin accounts are a generic phrase used to describe the different ways to store or trade cryptocurrency, and especially, Bitcoin.
In 2010, bitcoin traded at less than $0.01. By late 2021, this was above the $50,000 mark to only trade at 15,000 one year later. The bitcoin story is one of meteoric rallies and bursting speculative bubbles, with one constant – market volatility. This unpredictability – and high risk – is what attracts traders, but also why bitcoin trading should be approached cautiously by beginners and experts alike.
Before you get started with Bitcoin, it’s important to familiarise yourself with the different types of accounts available today and their features in order to decide which is the best option for your needs and make the most out of them.
Why trade and invest in Bitcoin with CAPEX.com?
What is a Bitcoin account?
The term “Bitcoin account” may refer to either a Bitcoin wallet, an account on an exchange, or a trading and investing account, on an intermediary crypto trading platform that allows the trade and storage of Bitcoins and other cryptocurrencies.
However, there is no such thing as a Bitcoin account. Bitcoin is a digital asset that exists on its own blockchain. Since the Bitcoin blockchain is meant to be decentralized, there can’t be a central entity offering a Bitcoin account, but only exchanges and brokerages that allow individuals to make Bitcoin transactions.
When talking about a Bitcoin account, we can be referring to the following:
- Bitcoin trading account
- Bitcoin investing account
- Bitcoin exchange account
- Bitcoin wallet account
1. Bitcoin Trading Account
Traditionally, bitcoin trading has involved the buying and selling of the cryptocurrency on an exchange. You buy and own bitcoin, and you’ll only be able to profit if you sell the crypto for more than you originally paid for it. But you can also trade on Bitcoin by speculating on its price movements using CFDs. These are a type of derivative – meaning you’ll take a position on market movements without owning any underlying coins.
Because CFDs are traded over-the-counter (OTC), you don’t need to buy and sell on a bitcoin exchange or to set up a wallet. Plus, CFDs are leveraged, which means you’ll use margin to open your position. This gives you full exposure to the larger position, for a smaller initial outlay. However, leverage amplifies your profits and losses, so be sure to take steps to manage this risk.
Trading accounts are offered by licensed CFD brokers that allow you to gain exposure to a wide range of assets, including stocks, indices, ETFs, commodities, forex, and of course, cryptocurrencies.
Opening a bitcoin CFD trading account is quick and easy. And there’s no obligation to fund your account until you’re ready to trade. To practise your bitcoin trading without risking your own capital, you can also try out a demo account. You’ll get virtual funds and can learn more about trading bitcoin markets for free.
A trading account can be a suitable option for most professional and individual investors who do not plan to take ownership of the assets but instead want to speculate and make predictions about the assets’ price movements.
How to trade Bitcoin
Through CFDs, you can trade on both spot and futures prices.
A Bitcoin spot market is simply a market where you can buy or sell assets at the current rate – called the Bitcoin spot price. When trading the spot market, your position will be opened immediately, or ‘on the spot’.
A Bitcoin futures price is a quote for a contract that will be executed at a certain point in the future. The value is linked to the spot price, but whereas spot pricing is used to make immediate trades, futures pricing is used by traders who hope to make a profit by locking in the price now and finalizing the sale at some point in the future.
When following futures prices, it is important to choose a crypto trading platform that has deep liquidity. This will ensure that you can exit your trade or open a new position anytime.
With CAPEX.com you can trade on both Bitcoin spot and futures prices through CFDs. Once you’re ready to start trading Bitcoin, follow these steps.
How to Trade Bitcoin with CAPEX.com
- Sign up for an account that allows you to speculate on the price movements in both directions.
- Upload the required documents to verify your account
- Deposit funds using available payment methods in your country
- Start trading Bitcoin Spot and Bitcoin Futures CFDs
Note that you can trade CFDs on +2.000 stock, indices, commodities, bonds, currency pairs, and cryptocurrencies.
2. Bitcoin Invest Account
Another Bitcoin account could be an investing account, which you may use to invest in Bitcoin funds or Bitcoin-related stocks. As of 2021, traditional investors may invest in Bitcoin without having to deal with crypto exchanges and wallets, thanks to the first Bitcoin ETF.
A crypto ETF (Exchange-Traded Fund) allows traditional retail investors to gain exposure to the digital asset without having the responsibility of ensuring the security of the underlying assets.
When investing in ETFs, you don't own any cryptocurrency because you own shares of the fund, which takes away any risks associated with direct owning the crypto, such as the risk of storing the private keys.
An investing account is a traditional brokerage account that allows you to buy and sell various investments, such as stocks (including crypto stocks and blockchain-related stocks), bonds, and funds. Whether you're setting aside money for the future or saving up for a big purchase, you can use your funds whenever and however you want.
How to invest in Bitcoin
The ProShares Bitcoin Strategy ETF (BITO) is the first official Bitcoin-linked ETF approved by the SEC (In October 2021) and listed on the New York Stock Exchange.
The SEC has recently approved 11 spot Bitcoin ETFs for funds that hold bitcoin, after approving few years ago the above-mentioned Bitcoin ETFs linked to Bitcoin futures contracts that trade on the Chicago Mercantile Exchange (CME).
Spot Bitcoin ETFs holds Bitcoin as its underlying asset purchased through other holders or through an authorized cryptocurrency exchange. This means that the performance of a Spot Bitcoin ETF is directly linked to the real-time value of the Bitcoins it holds. When investors buy shares of a Spot Bitcoin ETF, they are essentially buying a representation of actual Bitcoin, even though they do not hold the cryptocurrency personally. They hold shares of fund.
Derivatives-based Bitcoin ETF share prices mimic the price movements of derivatives and not actual cryptocurrencies. The price of shares in a crypto ETF rises when futures contracts’ prices increase. Similarly, the price of the ETF decreases when there is a corresponding decrease. Like other derivatives, synthetic cryptocurrency ETFs come with added risk as their operations might not always be transparent.
Each investor should research the available ways to trade and invest in Bitcoin before deciding what’s the best option for their situation. Remember that even if Bitcoin ETFs or stocks may not be as volatile as cryptocurrencies, you shouldn’t invest more than you are willing to lose.
With CAPEX.com you can trade the recently approved 11 spot Bitcoin ETFs and invest in Bitcoin through the ProShares Bitcoin Strategy ETF. Once you’re ready to start trading and investing, follow these steps.
How to Trade and Invest in Bitcoin with a CAPEX.com Account
- Sign up for an account that allows you to buy or trade BTC and Bitcoin-linked assets.
- Upload the required documents to verify your account.
- Deposit funds using available payment methods in your country.
- Take your position on BTC Spot and Futures, Bitcoin ETFs and Bitcoin-linked stocks.
Note that you can invest in +5.000 stock and ETFs with ownership.
3. Bitcoin Exchange Account
Another type of a Bitcoin account could be a Bitcoin exchange account, which is an account on a cryptocurrency exchange that is like the trading account you have with an online broker. You may want to choose an account on a crypto exchange if you want to own the cryptocurrency directly and want to trade fiat currency, such as US dollars or Euros, to cryptos, such as Bitcoin and others.
There are two different types of crypto exchanges - centralized and decentralized.
If you are looking for a Bitcoin exchange account that will store your crypto and allow instant trades, like traditional trading accounts, you might want to open an account on a centralized exchange (CEX). These offer hundreds of digital assets but are also the least secure. CEXs are known to attract hackers and may also face liquidity issues when many traders choose to withdraw their assets at the same time.
Decentralized exchanges (DEXs) are not governed by a central entity, don’t allow fiat-to-crypto trades, and address more experienced traders who have an advanced understanding of how the blockchain network works. DEXs users also need to keep their digital assets in crypto wallets and are fully responsible for the security of their assets.
How to exchange Bitcoin
Using a centralized crypto exchange, you may exchange Bitcoin for any other crypto asset the exchange offers. You may also choose to trade your Bitcoin for fiat currency, such as US dollars, and withdraw the funds to your bank account.
Once you’re ready to start, follow these steps:
- Select a crypto exchange and create an account
- Complete the KYC (Know Your Customer) process to enable your account
- Deposit money through your bank account or credit/debit card
- Trade fiat money for Bitcoin or any other asset
- Withdraw digital assets to a crypto wallet, or keep it on the exchange
Bitcoin Wallet Account
A crypto wallet, or more specifically, a Bitcoin wallet, can be used to store Bitcoin similarly to a traditional wallet. A Bitcoin wallet stores private keys, which is a cryptographic string of characters that allows you to spend your Bitcoin. A crypto wallet is usually encrypted with a password to protect it from unauthorized access.
A Bitcoin wallet, unlike the network, is owned by the person who has access to the private key. It's not shared or distributed like the blocks of the network. You should ensure your Bitcoin wallet is secure by setting strong passwords or keeping it away from malicious people.
A Bitcoin wallet account, or a cryptocurrency wallet, is considered the best way to store Bitcoin or any other cryptocurrency if you intend to keep it for a long time. However, crypto wallets require users to have a deep understanding of how the blockchain works and leave the entire responsibility of storing the crypto safely to the user. Inexperienced users may face difficulties using a crypto wallet. Transaction mistakes may lead to a loss of funds.
How to store Bitcoin
If you want to store Bitcoin for a longer time, then you would need to create a crypto wallet that supports Bitcoin. Of course, the same applies to any other crypto, but be aware that not all wallets support all cryptos.
Once you’re ready to start, follow these steps:
- Choose the right type of crypto wallet for your digital asset
- Create the crypto wallet (you need to secure your recovery phrase)
- Purchase Bitcoin from a centralized crypto exchange using fiat money (you need to set up a Bitcoin exchange account first)
- Transfer Bitcoin from the crypto exchange to your crypto wallet
- Don’t lose or give your recovery phrase (seed phrase) to anyone, or you might lose your Bitcoin forever
Should you invest in Bitcoin?
Bitcoin is the dominating crypto in the market of digital assets. Since its creation, BTC has increased in value many times. Its first remarkable price increase happened in 2010 when it reached $0.09, and by 2021, Bitcoin had reached an all-time high of almost $69,000. That is an approximate return on investment of 76,666,566% in just 11 years. While Bitcoin still has its ups and downs, its history suggests that there is a chance more highs will come. The tricky part for maximizing returns is knowing when to invest in Bitcoin.
As 2022 has shown, Bitcoin most certainly can fall quite drastically. However, history has shown us that every time the market drops like this, it is only a matter of time before it picks itself back up.
As you see, there are many ways to invest in Bitcoin. But first, you should establish your strategy. Also, you must keep in mind that Bitcoin is a highly volatile digital asset. Bitcoin can be a good investment if you have a reasonable risk tolerance and a positive outlook on the market. On a long-term basis, the history of cryptocurrency markets is quite predictable. Both Ethereum and Bitcoin have traded in regular cycles. They have both recovered from major crashes (not including the latest) and have since reached new all-time highs.
However, if you do decide to invest in cryptocurrency like Bitcoin, then also consider increasing your crypto portfolio diversification. You might even consider buying some Bitcoin and other altcoins from crypto exchanges while having a trading account to speculate on price movements. You should have an investment strategy for every cryptocurrency you decide to invest in.
But if you decide that Bitcoin investing is not the right move for you, you can get some indirect crypto exposure. You can either buy or trade shares of companies like Block (SQ) and MicroStrategy (MSTR) or invest in companies such as CME Group (CME) and Coinbase (COIN) that facilitate cryptocurrency trading.
Bitcoin Account Summary
A Bitcoin account can be a lot of things, depending on what you are setting out to do:
Bitcoin trading account
This is an account on a trading platform that offers access to other assets, such as stocks and commodities and allows you to trade the ups and downs.
Bitcoin investment account
If you wish to invest, you may choose to do so in regulated trading products such as Bitcoin ETFs, and you will take full ownership of the asset.
Bitcoin exchange account
Such an account is created on centralized crypto exchanges and will allow you to take direct ownership over Bitcoin or other cryptos.
Bitcoin wallet account
A crypto wallet is a place to store your Bitcoin and other cryptos for the long term, but it’s a recommended option for more experienced crypto and blockchain enthusiasts.
Free resources
Before you start investing in Bitcoin and decide which type of Bitcoin account to choose, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free crypto courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more-informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.
Sources:
- https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023
- https://www.ishares.com/us/strategies/ways-to-invest-in-bitcoin
- https://valkyrie-funds.com/
- https://hashdex-etfs.com/defi
- https://www.invesco.com/us/financial-products/etfs/product-detail
- https://www.wisdomtree.eu/fr-lu/products/ucits-etfs-unleveraged
- https:/cryptocurrency/wisdomtree-physical-bitcoin
- https://www.franklintempleton.com/investments/options/exchange-traded
- funds/products/39639/SINGLCLASS/franklin-bitcoin-etf/EZBC
- https://bitwiseinvestments.com/crypto-funds/bitcoin
- https://21shares.com/en-US/product/ARKB
- https://www.fidelity.com/etfs/fbtc
- https://www.ishares.com/us/products/333011/ishares-bitcoin-trust
- https://www.vaneck.com/us/en/investments/bitcoin-trust-hodl/
- https://etfs.grayscale.com/gbtc