How to invest in Bitcoin in Belgium

What is Bitcoin

Bitcoin is a digital currency created in 2008 by Satoshi Nakamoto. We still don't know who they are. Unlike traditional currencies, Bitcoin lacks a central authority like governments or banks. It operates on a decentralized network where participants verify transactions. These are recorded on a public ledger known as the blockchain. This technology ensures transactions are transparent, secure, and immutable. The supply of Bitcoin is capped at 21 million coins, which enhances its value. New bitcoins are created through mining, where computers solve complex problems to validate transactions and secure the network.

Bitcoin is known for its price swings. People use it to buy, invest, or save. Some call it "digital gold" because it's scarce and fights inflation. Bitcoin also opens global finance to anyone online, no matter their background. Its decentralized system means no one can control or block transactions. This feature attracts those seeking financial independence.

Investing in crypto has been a wild ride since Bitcoin was introduced in 2009. Let's take a look at some reasons why you should invest in Bitcoin.

Why invest in Bitcoin

Bitcoin literally turned some early investors into billionaires. An initial investment of €1,000 in 2011 would have resulted in over €3.5 million today. We’re talking about a growth rate of over 100% a year:

However, as the graph shows, the fluctuations have been extreme as well compared to stocks or ETFs. For instance, if you had invested in Bitcoin in 2021, your investment would have dropped by 50% in the space of a few weeks. And there have been many similar drops in the short history of cryptocurrencies.

How to invest in Bitcoin

When it comes to your life savings, it’s vital to choose a provider that you can trust. As the crypto space is unregulated, it makes it even harder to choose an app. The lack of regulatory protection means you can lose all your money if the company declares bankruptcy or shuts down operations.

Choose a wallet to store Bitcoin

Set aside from educating yourself on the pros and cons of Bitcoin, you have to choose how to store it. To do so, you'll need a digital wallet. There are two types of wallets:

1. Hot wallet: Online wallets accessible via a web browser, mobile app, or desktop software. They are convenient but less secure because they are connected to the internet.
2. Cold wallet: Offline wallets, such as hardware wallets or paper wallets, which are more secure since they are not connected to the internet, reducing the risk of hacks.

Purchase Bitcoin through an exchange

To then purchase Bitcoin, you need to use a cryptocurrency exchange. Popular exchanges include Coinbase, BitPanda, Binance, Kraken, and Bitstamp. When choosing an exchange, consider factors like security features, fees, user experience, and the range of cryptocurrencies offered. We'll highlight one for you below that's used by a lot of Belgians.

Easiest app to buy Bitcoin in Belgium: Coinbase

There are so many companies registered in dubious countries like the Bahamas (FTX anyone?), so it's good to know that Coinbase is a recognised exchange from the US. They also offer recurrent investing, meaning that you can automatically invest weekly or monthly. Adopting good saving habits is easy when it's automated.

The downside of Coinbase is that it’s among the more expensive players. They charge between 0.05% and 0.60% per transaction. For an extra layer of security, it's best to transfer your Bitcoin from the exchange to your personal wallet, especially if you're holding it long-term. Keeping your Bitcoin in a cold wallet is the safest option.

Downsides of investing in Bitcoin

There are quite a few risks associated with investing in Bitcoin:

❌ It's a very risky investment

In the traditional financial industry, there are strict regulations to protect individual investors. For instance, your investments through the Curvo app are safe as they are tightly overseen by the Dutch finance regulators (AFM). A debacle like the downfall of FTX, where millions of customers were defrauded off their deposits, could hardly have happened to a traditional investment company that is regulated in the EU.

❌ Taxes can be complicated

In Belgium, investments in Belgium can be subject to capital gains tax and may likely change depending on whether you are a speculative investor or not. This classification of speculative or non-speculative is determined on a case-by-case basis by the Belgian tax man. Factors such as the frequency of transactions, the holding period, and the intention behind the investment are taken into account.

❌ Unclear what the long-term value is

Blockchain technologies underlying crypto are promising. They promise decentralisation and the disappearance of national borders for transferring money. But so far, this has not yet materialised into widespread adoption. So it's hard to know if the current valuations for cryptocurrencies are justified.

❌ If it sounds too good to be true, it probably is

The lack of regulations have brought a lot of scammers to the space, promising significant returns over a short period of time. If something sounds too good to be true, it probably is! Do your homework and don't fall for it.

❌ High fees

In general, the fees for trading Bitcoin are much higher than for trading traditional stocks or ETFs. Especially if you go through an expensive exchange.

ETF investing: a more sensible alternative to Bitcoin

Rather than picking individual stocks such as Amazon or Microsoft, index funds are a way to buy the whole market, across all sectors and regions of the world. The most famous index is the S&P 500, which contains the 500 biggest American companies. Large companies such as Apple, Alphabet or Tesla are represented in the S&P 500. This is offered to investors through an instrument called an ETF. Essentially you own a small portion of thousands of companies throughout the world. Instead of betting on a particular company, you are placing a bet on the global economy. Your investments are diversified, have a lower risk and a more consistent return than when picking stocks individually.

For example, you can invest in a BEL 20 ETF and benefit from the performance of all the largest Belgian stocks. Or, you can invest in a global index like the MSCI World, which consists of hundreds of stocks from many different countries. This diversification is a big benefit of ETFs. You're not putting all your eggs into one cryptocurrency like Bitcoin.

ETFs perform on the long-term

Because ETFs simply track an index (which is why they're also called "trackers"), you're investing in hundreds or thousands of companies in one go. They are also low cost meaning you get to keep more of the returns.

But also, globally diversified ETFs invest in the world economy, which has grown tremendously over the last decades because of continued innovation. The IWDA ETF, which tracks the MSCI World index, returned an average 10.2% per year since 1980.

ETFs are tax efficient

You have to pay the Belgian transaction tax, which is known as the TOB. This tax is between 0.12% and 1.32% depending on the ETF. And the 30% dividend tax can be avoided by investing in accumulating ETFs rather than distributing ETFs. Accumulating funds reinvest the dividends rather than paying them out to you.

Furthermore, capital gains aren't taxed in the case of stock ETFs. This is a huge advantage for Belgian investors.

Curvo: the easiest way to invest in ETFs

Choosing the right ETFs to invest in can be a challenge. But that's not all. You have to understand the intricacies of investing, comprehend the impact of taxes on your portfolio, learning how to use your broker, and know when to rebalance your portfolio. That's why we built Curvo. To make things easy so you can spend your free time on the things that matter most to you.

Get the best portfolio tailored to you and your goals

Invest in one of five portfolios, each optimised for a particular financial goal and appetite for risk. When you sign up, you're asked a series of questions to get to know you and learn what type of investor you are. Based on your answers, you are matched with the best portfolio. Your financial situation and goals (and even your attitude to risk) may change over time. That's why this process is repeated regularly to make sure that your investment strategy always remains aligned to you and your needs.

Diversification at its core

Each portfolio is globally diversified and invests in over 7,500 companies. That's a lot more than investing all your savings in Bitcoin.

All your money is invested

Your investments work with fractional shares. This means that all your money is put to work. There will never be cash sitting on your account doing nothing.

No transaction tax

There is a way to passively invest in ETFs while not having to worry about the transaction tax. At Curvo, all taxes are taken care of.

Invest sustainably

Sustainable investing is challenging because everyone has different beliefs and values. That's why your investments focus on one guiding principle: none of the portfolios invest in companies that are considered destructive to the planet.

Built for monthly investing

You can set up a monthly savings plan where your selected amount is automatically debited from your bank account and invested in your portfolio at the start of each month. This way, it's easy to adopt the best saving habits. Also, Curvo does not charge any transaction fees. And your investments support fractional shares meaning all your money is invested. So Curvo is ideal for monthly investing.

Discover how Curvo's app works.

Summary

In summary, Bitcoin promises high returns and financial freedom but comes with risks. Its price is volatile, lacks regulatory protection, and is susceptible to scams. Tax complexities and uncertain long-term value add to the risk. For safer, more stable investments, consider ETFs. They offer predictable returns and lower risks. This makes them a better choice for long-term investors. Whether you pick Bitcoin or ETFs, stay informed, understand the risks, and align your choices with your financial goals.