What is a Bitcoin Bank Account

Which cryptocurrencies are currently on the market, how do you pay with them or invest money and what else should you know? Answers to the most important questions about Bitcoin & Co.

Some warn that virtual currencies are only for gamblers. Others believe it is a new market for investors and a different type of asset class. "The term currency is not exactly right, because behind a currency there is always a state or a central bank," says Cologne asset manager Uwe Zimmer. This is not the case with Bitcoin & Co.

Bitcoin, the first and best-known cryptocurrency, has been in circulation since 2009 in order to be able to make cashless payments on the Internet. The technology behind Bitcoin is called blockchain and is often referred to as a digital account statement. The idea behind the introduction of cryptocurrencies: make yourself more independent from banks, governments and regulations. No longer a place that says: This is the bank statement, you have that much credit. Instead, all parties have to agree on what the bank statement looks like. Since the blockchain database is managed by several computers, it is not considered to be manipulable and transparent.

In the meantime, cryptos have also become a popular form of investment - with high returns and high risk. Because as fast as the prices of the crypto currencies go up, they can also go down again. "We have seen that over the past five years," says capital market expert Zimmer.

There are now more than 7,700 such crypto tokens - they all work according to the same principle, according to Zimmer: “There is almost always a limited number.” So the demand determines the price. The limited availability made the Bitcoin and its imitators a coveted object for speculation in recent years.

"There was a hype about Bitcoin in 2016 and 2017," says Zimmer. While a Bitcoin cost 400 euros at the beginning of 2016, the rate soared to over 19,000 US dollars by the end of 2017. Since then, the price development has been like a roller coaster: From the end of 2017, the price fell again with violent fluctuations to $ 3,400 and continued its price movements with further violent fluctuations between 12,000 and 4,500 US dollars, only to surge up again. In 2020, the Corona crisis briefly stopped its highs in spring, but from summer onwards things picked up again rapidly. At the end of November 2020, Bitcoin stood at $ 19,133.40.

Bitcoin has long since become a fixed asset class. There are now a large number of alternatives, but according to the financial expert Zimmer only a few will survive.

  • Ethereum is a global platform. After Bitcoin, it is the cryptocurrency with the second largest total value. Like Bitcoin, Ethereum is a blockchain-based technology. The Ethereum Blockchain not only offers the possibility of receiving and sending payments, but also all kinds of decentralized applications can be processed via the Ethereum Blockchain network.
  • Ripple (XRP) is a payment network for banks with the aim of making international payment transactions between them more efficient and cost-effective. It is a system that is primarily dedicated to payment transactions between different currency areas and tries to make inefficient payment corridors efficient. That is why Ripple is often referred to as the "Bitcoin of the banks".
  • Tether is an unregulated cryptocurrency with tokens. It is issued by Tether Limited. Tethers are anchored to the rate of the US dollar or “tethered” - in German this means something like “tied up”. Due to their stability, tethers are used to hedge against crypto market fluctuations.

If you want to find out about the current prices of cryptos, you will find it here.

Worldwide and nationwide, not only in metropolises like Berlin, shops now offer their customers the opportunity to pay with crypto currencies. However, digital money is only suitable to a limited extent as a means of payment for everyday life because of the strong fluctuations in value. So if you want to trade or pay with Bitcoins, it should be clear that cryptos owe their existence to the blockchain and are not linked to real values.

By the way: Bitcoin is becoming more and more popular with companies like PayPal. Most recently, PayPal had acquired 70 percent of the Bitcoin supply - because the demand for its crypto service increased.

“You can't get bitcoins from your house bank,” says Zimmer. Interested parties must register with a crypto trading platform. In order to then trade or pay with the crypto money, you have to install open source software: This can either be a free Bitcoin client or a leaner so-called Bitcoin wallet. Entrepreneurs who accept Bitcoins & Co. also have to set up such a wallet beforehand.

The Bitcoin Wiki lists which shops and companies accept crypto currencies, Coinmap.org visualizes acceptance points worldwide on a map.