Bitcoin certificates are financial instruments that offer investors a way to gain exposure to bitcoin without owning the currency itself, but instead buying the certificate through, for example, an investment savings account (ISK). In this article, we go through what bitcoin certificates are, their advantages and disadvantages, and how to buy a certificate.
What is a crypto certificate?
A certificate is a security that represents a specific amount of a certain asset. There are certificates for, among other things, gold, oil, and bitcoin. Certificates thus follow the value development of the selected amount of the asset. If, for example, you buy a certificate with a divisor of 0.005, your value development is reflected by that of 0.005 bitcoin.
The original idea behind certificates was that the issuer, or “emittent,” of these should be able to issue the asset in exchange for the security. However, this is rarely the case nowadays, and certificates are more symbols of value development.
It is, however, important to know that when it comes to crypto certificates the price is approximate, especially in periods of rapidly fluctuating prices. You cannot rely on a certificate to move exactly in line with what it is supposed to reflect, and there may be delays in price changes.
Which crypto certificate should you buy?
There is no definitive answer to which certificate is best to buy, as it depends on what your goals and interests are. The main difference between different certificates is their fees and trading volumes. However, there are some factors that can help you consider what suits you best.
Advantages of crypto certificates
Easy trading
When you trade certificates, you do not need to get a bitcoin wallet, and you can buy certificates for several different cryptocurrencies that may be difficult to obtain from a Swedish crypto exchange. However, trading via an international crypto exchange can be more complicated and often lacks Swedish support.
Tax reporting
When handling bitcoin certificates, these can be held in an ISK, which means that tax reporting is handled automatically, and you only need to pay the annual standard tax.
Disadvantages of crypto certificates
Limited use cases
As mentioned, you do not own the cryptocurrency itself, only a reflection of it. This means that you cannot use the cryptocurrency in its true form, for example as a means of payment or to send the currency.
Fees
There are some fees you should be aware of before investing in a crypto certificate.
One of these is the management fee. It is a fee that you pay to own the certificates. Make sure to check the fee for the certificate you are considering and choose a certificate with a low management fee. The fee is always stated in the certificate’s terms.
It may also be of value to examine the spread for the crypto certificate. A spread is the difference between the price at which you buy and sell the certificate. If a crypto certificate has a high spread, you buy and sell further from the “fair price,” that is, the midpoint of the buy and sell prices.
If you trade for smaller amounts, you often also need to pay a brokerage fee. The fee may vary between different platforms, but on, for example,Avanza and Nordnet, the starting fee is 19 SEK.
Issuer risk
When dealing with issuers, there is a risk that the issuer cannot repay the security’s value in the event of a sharp decline in the asset. This means that as an investor in certificates, you need to be prepared for the risk of losing your entire investment.
Requires knowledge of the stock market
Buying certificates can involve significant risks and be complicated. To buy certificates, you may need to answer questions to show the platform that you understand the risks of the investment, and it is important to understand the risk of losing parts or all of your investment.
Our expert advice
Do you want to gain exposure to bitcoin but avoid the fees and risks associated with certificates? Then it may be a better solution to buy bitcoin directly.
At BT.CX, you can buy bitcoin quickly and securely. Unlike certificates, a direct purchase means that you yourself have control over your bitcoin without extra fees or issuer risk.