We all know what is Bitcoin, but what are the factors related to it?
Bitcoin is a digital currency which is of the topmost value. But how to trade this Bitcoin? Is it similar to our traditional trading or dissimilar? If it is similar then in what ways is it similar? What are the different ways of dealing with this Bitcoin?
Can a beginner quickly learn how to trade Bitcoin? Is it safe to use? Are there any methods of storing Bitcoin? If yes, what are they? Brief answers for all the above questions will be provided in the article below.
1. What is Bitcoin Trading?
Most of us know to trade as a process of buying and selling. Even exchanged is one of the parts of trading. But what is Bitcoin trading? Is it similar to the goods trading which is seen in everyday life?
Yes, it is quite similar.
The buying and selling of Bitcoin is called Bitcoin trading. Why did I mention quite similar here it that, the trading is identical, but the method of trading works differently in Bitcoin? Bitcoin trading adds a new reckoning force to digital currency trading due to its factor of volatility.
Volatility is nothing but ups and downs, which are seen in trading markets. These ups and downs surrounding the Bitcoin trading create a possibility of earning a more significant number of high yields for the traders.
But what is the prime aim of Bitcoin trading? It is similar to what we see in the share market, which is to capitalize on the correct opportunities. These opportunities are buying Bitcoin when the price is low and selling it when the price is high.
So here, buying Bitcoin at a low price means buying high amount of Bitcoin at a low cost. And selling it at top price means, selling a small amount of Bitcoin at a high price. This step is how the trading of Bitcoin works and should always work like this.
But as stated above about the method of trading, Bitcoin trading occurs only at regulated exchange platforms. And this Bitcoin trading happens across the globe on a 24/7 basis. For this reason, the Bitcoin exchanges are created.
Bitcoin exchanges are the digital currency platforms which are created to provide a marketplace for the trading of Bitcoin. Major Bitcoin exchanges include Binance, BitStamp, Coinbase, Kraken and ShapeShift.
Other than the Bitcoin exchanges, there are many more exchanges found in the marketplace which offer the option of trading Bitcoin. These exchanges help in paring the buyers according to their comfortability but extract a small processing fee for providing an easy trading process between the two.
2. How is Bitcoin trading similar to traditional trading?
This question has been explained lightly in the previous passage. We shall see it in a manner in this passage.
Though Bitcoin trading and traditional trading are quite similar, they are three main differences between them. They are:
2.1 Making profits through traditional trading is quite tricky:
Using traditional trading is quite tricky as it requires a lot of paperwork to be done. We know that even traditional trading will bestow us with profits, but it will take a longer time compared to Bitcoin trading. Regular trading requires an initial capital at the beginning of the trade, such as trading fees or processing fees.
Whereas, in Bitcoin trading, such fees are not essential everywhere, especially in Bitcoin trading exchanges. Even if they are applicable, they will be quite lesser compared to the charges applied in traditional trading.
In the traditional trading frequent analysis of the news, specific business models have to be progressively done. Even certain factors, such as economic trends and political trends, have to get adequately examined. As during signs of recession, foraying into traditional trading will be a riskier option.
2.2 Starting to trade Bitcoin is secure:
You can adopt to trade Bitcoin quite quickly. As mentioned above, Bitcoin trading can get started even with little investment and provides you with infinite numbers of advantages. It is the factor of volatility which gives Bitcoin trading an edge over the traditional trading techniques.
Bitcoin trading doesn’t require more investment, as it is necessary for traditional trading. There is paperwork needed even to start to trade Bitcoin but is quite simpler to conventional trading. The paperwork requires a lesser amount of time, and you do not need intermediaries such as brokers for starting Bitcoin trading.
But through to trade Bitcoin is quite easy to start, there are many numbers of risks associated with it. Digital currency trading is subjected to numerous threats in the past and can get easily hacked, mismanaged.
In the past, it has been proved even fraudulent with customers with many of them losing their funds. However, over the years, these risks have been efficiently decreased.
2.3 Bitcoin trading is provided with a 24/7 trading support:
This feature happens to be the main difference between Bitcoin trading and traditional trading. In conventional trading, there are only a few exchanges which provide 24-hour trading sessions, but in Bitcoin trading, all the transactions offer the traders with 24-hour trading sessions.
What does this mean? This step means that with traditional trading, you can do your transactions only during a specific period, but with Bitcoin trading, you can do it anytime.
Except for these differences, the other things are almost similar to trade Bitcoin and traditional trading. Like both these trading techniques endorse prices depending on their supply and demand. This attribute happens to be the main similarity between Bitcoin trading and regular trading.
The work process of both Bitcoin trading and traditional trading is also the same, as both happen online. You need a computer or tablet for carrying out your trading business. Both these trading techniques are globally accepted and are not tied to the rules of any financial institution.
3. Factors which affect the value of Bitcoin:
Over the years, Bitcoin has been experiencing a high surge in its value. The cost of Bitcoin, which was 3,000 US dollars, has easily crossed the amount of 10,000 US dollars for one Bitcoin recently. This rise in value shows that Bitcoin is right now the highest valued digital currency.
Over the years, there are two main factors which have influenced the value of Bitcoin. They are:
3.1 Growing Interest on Bitcoin from Investors:
Nowadays, many investors are vailing towards digital currencies as their primary interest for investment. This attribute is because of the factor of volatility and also the high profit which Bitcoin can assure in a minimum amount of time.
Another prime reason for this factor is that most financial services have also started to offer these digital currencies in their custom products and even as a mean of transaction. This attribute would affect the liquidity and market capitalization for such digital currencies.
3.2 Interest from many countries:
Countries such as Europe and Switzerland have been friendly with the use of digital currency in their country. Such is the affection of these countries towards Bitcoin is that they have already started to launch new products for using cryptocurrencies.
Even banks in the U.S have enabled their customers to trade in Bitcoin. Though countries in South Korea and China have clamped down on Bitcoin, it hasn’t proved to be a significant dent in the interest of the investors in digital currencies.
Investors in both countries are paying in hefty amounts to invest in Bitcoin and digital currencies. South Korea’s regulation towards Bitcoin has resulted in a limited number of digital currencies in the country. Because of this limited number, the demand for Bitcoin has soared higher in South Korea.
Lastly, the demand from Japan for Bitcoin is also higher, the reason being the drive-up prices of these digital currencies. This attribute was because Bitcoin got recognized as a legal tender earlier this year in the country.
4. How to get started to trade Bitcoin?
Getting started with Bitcoin trading is quite more comfortable and straightforward. But the main thing is that you have to adapt to newer technologies and learn it, to be efficient in Bitcoin trading. Even if you do not learn it at the beginning, you will discover it correctly by the progressing of the time.
Even smartphones were challenging to use when they got launched, but now almost 85% of the world’s population has a phone in their hands. So with time, everything can be learned, even the technology of Bitcoin trading. And to those people who are scared of using Bitcoin in the wake of numerous threats, do not get afraid as Bitcoin has proven to safer to use.
And for people who wait for the right time to buy Bitcoin, to them we can tell that the right time is now? As we know the price of Bitcoin is on a high surge over the years, so it is better, you start the trading of Bitcoin as soon as possible for you.
The demand for Bitcoin trading has increased to a high value over the past few years. So don’t wait too long, choose a proper Bitcoin trading exchange and start with your Bitcoin trading by doing a small amount of paperwork.
In simple, we can state four steps for starting with the trading of Bitcoin. They are:
4.1 Create a Bitcoin wallet by choosing the best one
4.2 Purchase your first Bitcoin
4.3 Safely secure the Bitcoins you have purchased in your wallet
4.4 Start your trading by selling your Bitcoins and receiving others in return
You can choose any wallet from the four types which are available, namely desktop, hardware, mobile, and web. After you select your type of wallet, please check the compatibility of these wallets with your operating system. Once both get pro-actively chosen, you can select the best wallet available depending on your choices and start with your trading.
You can choose these wallets by going to the Bitcoin website or install them by directly downloading their QR code.
Now let us discuss some of the merits and demerits of the different wallets available.
4.1.1 Online or Web Wallets: Merits – Online wallets helps traders by enabling faster transactions.
These online wallets provide you with the option of managing multiple digital currencies.
The noteworthy feature of these wallets is that they can be used right away are the best wallets for active trading.
Demerits – Online wallets are vulnerable to numerous threats such as online hacking and scams.
If the computer you are using is infected with a virus, then there might be chances that your online wallet can also be infected with it. This factor risks your protection heavily.
These wallets store your private keys with a third-party, and you do not get the authorization to store them.
4.1.2 Mobile Wallets: Merits – The first advantage of mobile wallets is that these are more safe and secure than the online wallets.
These wallets can be used conveniently on the go.
Mobile wallets also provide numerous additional features such as QR code scanning and others.
Demerits – There is a massive risk of losing your data and the private keys if your phone is lost or damaged.
Like Online wallets, even mobile wallets are prone to malware attacks and viruses.
4.1.3 Desktop Wallets: Merits – Desktop wallets provide useful means of trading for those who trade directly from their computer.
One of the praiseworthy features is that these wallets do not store your private keys on a third-party server.
It is incredibly safe to use if your computer is never connected to the internet.
Demerits – Though it doesn’t store your private keys on the third-party server it is harder to use them on desktop wallets.
As mentioned in the above passage, if your computer is connected to the internet, then this wallet turns to be less secure.
If you do not back up your data and your private keys on the computer, then you may lose it in case your computer crashes.
4.1.4 Hardware Wallets: Merits – Hardware wallets are under consideration as one of the safest digital currency wallets.
Hardware wallets are of great use for storing a large number of digital currencies, and you do not have to use it on a day-to-day basis.
Demerits – Because of the lucrative options it provides, hardware wallets are the most expensive type of wallets.
For beginners, it is quite difficult to use hardware wallets. But for people who are into Bitcoin trading from a long-time hardware wallet are an absolute must to use.
5. What are the different exchanges that permit Bitcoin trading?
The first Bitcoin trading exchanges that permit Bitcoin trading are:
6. What are the different trading strategies that can be followed?
The trading strategy is the process of buying and selling Bitcoins effectively and knowing the exact time when to buy and sell them to experience high profits.
The trading strategy of Bitcoin differs a lot from the long term buy and hold strategy of traditional trading, which is commonly seen in passive or indexed investments.
Following are different trading strategies which are developed in Bitcoin trading. They are:
6.1 Doing your research:
It is highly advocated that you do your research before starting your trading business. Listening to others and investing in something will invite a higher number of risks. So it is better to have prior knowledge about the technology to trade Bitcoin and also in knowing the fundamental indicators of Bitcoin.
6.2 Being very careful about your investments:
Managing the potential risks in the right way is one of the perfect strategies while dealing with Bitcoin trading. It is highly advocated to have a proper sense of the digital market by setting up a regular account. It is better to invest small amounts in the beginning and later go for higher volumes.
6.3 Have a proper plan on where your investment has to be:
Most of the people in Bitcoin trading fail to encash profits due to an ineffective plan setup. You must always have a proper plan for your investments and set it up accordingly at the right time to encash a higher number of profits in Bitcoin trading.
6.4 Place your bets properly:
As mentioned, numerous times about the factor of volatility in Bitcoin trading, it is essential that you place your bets accordingly following the events of the digital market.
Yes, it is indeed true that Bitcoin is experiencing a high surge of prices over the years. But it is still advised to place your bets accurately. This way can also be an option for managing the risk of Bitcoin’s factor of volatility.
6.5 Make use of wallets:
This strategy is another way of effectively planning your Bitcoin trading. These wallets help in securely storing your digital currency and also provide you a way to harness your digital currency.
By harnessing your digital currency, you can quickly protect your Bitcoin from various threats. These wallets also offer you a way to exchange your money when they are out of the trading business.
7. How to avoid common trading mistakes?
The most common trading mistakes committed by most of the traders are:
7.1 Investing in digital currency without knowing the risks associated with it
7.2 Trading in Bitcoin without getting proper reference or guidance
7.3 Getting greedy and expending more than needed on digital currency
7.4 Trading Bitcoin without a proper plan
7.5 Choosing a wallet without knowing the merits and demerits of it
7.5 Trading in Bitcoin without knowing or acquiring the relevant information
7.6 Believing in rumors spread across the globe
How to avoid these mistakes?
These mistakes can be avoided by following the above steps:
7.1.1 By choosing a digital currency trading platform which is reliable and secure
7.1.2 By adequately analyzing the security measures required and verifying it with the platforms provided
7.1.3 Getting proper information before trading, such as fees, calculation of profit, and others.
7.1.4 Using mitigation tools such as TP/SL which help in avoiding risks
7.1.5 To trade Bitcoin with a proper plan
7.1.6 Investing in other digital currencies which are available
So, you guys understood what Bitcoin trading is?
In this article, we have underlined each specific question related to Bitcoin trading. We have also seen in what ways is it similar to traditional trading and in what ways it is dissimilar.
We also, in detail, learned about the pros and cons to trade Bitcoin and even the merits and demerits associated with Bitcoin wallets. Seeing all this, we can proudly say that it is effortless and safe to use Bitcoin.