Price exposure vs. true ownership: is the Bitcoin in your wallet actually yours?
Buying your first piece of Bitcoin is an exciting moment.
You set up an account with a seemingly reputable exchange, connect your payment method of choice and make your very first purchase.
Then you sit back and look at the value in your wallet delighted to finally be a part of the cryptocurrency revolution.
But theres a hitch.
You might not actually own the Bitcoin you just bought.
Those numbers in your wallet may not reflect underlying ownership. If youve brought Bitcoin from some of the popular exchanges, you may have been misled into buying a CFD or some kind of derivative product that gives you exposure to the price of Bitcoin... but not actual Bitcoin ownership.
Whats a CFD?
Simply put, a CFD is a contract between two parties, one of whom wants to sell an asset and one of whom wants to buy it.
But buy and sell are misleading because the asset doesnt actually change hands.
Instead, the buyer purchases exposure to the asset at its current price. If the asset changes in price, the seller pays the buyer the difference.
Thats what CFD stands for - contract for difference. If the price of the asset decreases, the buyer ends up paying the seller.
There are lots of different types of CFDs. In the cryptocurrency world, buying a CFD gives you exposure to the price of Bitcoin (or another cryptocurrency like Ethereum and Litecoin.) If you decide to sell and the price has gone up, you receive the difference, minus fees. If you decide to sell and the price has gone down, you pay the difference.
Whats the difference between price exposure and true ownership?
Some cryptocurrency wallets dont actually give you ownership of the Bitcoin you pay for. This means you cant move your Bitcoin out of your wallet. All you can do is hold, sell or transfer it to other users. Most importantly, theres no way to spend it - because you dont own it. Plus, youll probably end up paying for the privilege.
If theres a security issue, for instance, you cant transfer your balance to a different wallet.
Your only option is to sell, then withdraw the money and buy again. Users have reported paying fees as high as 6% in the process. Numerous people have also reported having their accounts closed and losing their money with no way of getting it back.
This is a mistake many newbie Bitcoin investors make.
Sure, some of these wallet providers do tell you that youre buying price exposure and dont claim to give full ownership.
But with so much new jargon floating around, new investors may misunderstand what that means. Unless you have experience investing, you probably dont know the difference between exposure and ownership.
Thats another reason why its vital to always DYOR (do your own research.) Dive into your wallet providers small print, and you might just find you dont really own your crypto.
Wirex gives you true ownership
When you buy Bitcoin with Wirex, its yours. You own it. You can do whatever you like with it - spend it online and in-person using a payment card, sell it, hold it or send it. The choice is yours.
Bitcoin is all about decentralisation and democracy. With Wirex, you truly own your Bitcoin and youre not at the mercy of centralized control. Thats what were trying to avoid, after all.
Buy Bitcoin today with Wirex.