We all know what Bitcoin is, but what are its related factors?
Bitcoin is a digital currency that 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? The article below will provide brief answers to all the above questions.
1. What is Bitcoin Trading?
Most of us know that trade is a process of buying and selling. Even exchanging 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 are called Bitcoin trading. Why did I mention quite similar here that the trading is identical, but the method of trading works differently in Bitcoin? Due to its volatility factor, bitcoin trading adds a new reckoning force to digital currency trading.
Volatility is nothing but ups and downs, which are seen in trading markets. These ups and downs surrounding 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 it is high.
So here, buying Bitcoin at a low price means buying a high amount of Bitcoin at a low cost. And selling it at a 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 trading method, Bitcoin trading occurs only at regulated exchange platforms. And this Bitcoin trading happens across the globe on a 24/7 basis. For this reason, Bitcoin exchanges have been created.
Bitcoin exchanges are digital currency platforms 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 in the marketplace that offer the option of trading Bitcoin. These exchanges help to pare the buyers according to their comfortability but extract a small processing fee for 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 and traditional trading are quite similar, there 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. We know that even traditional trading will bestow us with profits, but it will take longer than Bitcoin trading. Regular trading requires initial capital at the beginning of the trade, such as trading fees or processing fees.
However, such fees are not essential everywhere in Bitcoin trading, especially in Bitcoin trading exchanges. Even if they are applicable, they will be lesser than the charges applied in traditional trading.
In traditional trading, frequent news analysis and specific business models must be progressively done. Even certain factors, such as economic and political trends, must be adequately examined. During signs of recession, foraying into traditional trading will be a riskier option.
2.2 Starting to trade Bitcoin is secure:
You can adapt to trade Bitcoin quite quickly. As mentioned above, Bitcoin trading can start with little investment and provides infinite advantages. The factor of volatility gives Bitcoin trading an edge over traditional trading techniques.
Bitcoin trading doesn’t require more investment, as it is necessary for traditional trading. There is the paperwork needed even to start to trade Bitcoin, but it is quite simpler than do conventional trading. The paperwork requires less time, and you do not need intermediaries like brokers to start Bitcoin trading.
But trading Bitcoin is quite easy to start, but many risks are associated. Digital currency trading has been subjected to numerous threats in the past and can get easily hacked and mismanaged.
In the past, it has been even fraudulent to customers, with many losing their funds. However, over the years, these risks have been efficiently decreased.
2.3 Bitcoin trading is provided with 24/7 trading support:
This feature happens to be the main difference between Bitcoin trading and traditional trading. In conventional trading, only a few exchanges provide 24-hour trading sessions, but in Bitcoin trading, all the transactions offer the traders 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 trading Bitcoin and traditional trading. 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 Bitcoin and traditional trading is also the same, as both happen online. You need a computer or tablet to carry out your trading business. Both these trading techniques are globally accepted and are not tied to the rules of any financial institution.
3. Factors that 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 10,000 US dollars for one Bitcoin recently. This rise in value shows that Bitcoin is now the highest valued digital currency.
Over the years, two main factors have influenced the value of Bitcoin. They are:
3.1 Growing Interest in Bitcoin from Investors:
Nowadays, many investors are vailing towards digital currencies as their primary interest for investment. This attribute is because of the volatility factor and the high profit that Bitcoin can assure in a minimum amount of time.
Another prime reason for this factor is that most financial services have also started offering these digital currencies in their custom products and even as a transaction. This attribute would affect the liquidity and market capitalization of such digital currencies.
3.2 Interest from many countries:
Countries such as Europe and Switzerland have been friendly with using 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 investors in digital currencies.
Investors in both countries pay hefty amounts to invest in Bitcoin and digital currencies. South Korea’s regulation of 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 because of 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 trading 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 progress time.
Even smartphones were challenging to use when they were launched, but now almost 85% of the world’s population has a phone. So with time, everything can be learned, even the technology of Bitcoin trading. And to those who are scared of using Bitcoin in the wake of numerous threats, do not get afraid, as Bitcoin has proven to be safer.
And for people waiting for the right time to buy Bitcoin, can we tell that the right time is now? As we know, the price of Bitcoin has been on a high surge over the years, so you should start trading Bitcoin as soon as possible.
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 available types: 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 proactively 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 installing 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 help 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 immediately and are the best wallets for active trading.
Demerits – Online wallets are vulnerable to numerous threats, such as 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 they are safer and more secure than online wallets.
These wallets can be used conveniently on the go.
Mobile wallets also provide numerous additional features, such as QR code scanning.
Demerits – There is a massive risk of losing your data and 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, this wallet becomes less secure if your computer is connected to the internet.
If you do not back up your data and private keys on the computer, you may lose them if your computer crashes.
4.1.4 Hardware Wallets: Merits – Hardware wallets are considered 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 them on a day-to-day basis.
Demerits – Because of the lucrative options it provides, hardware wallets are the most expensive type of wallet.
For beginners, it is quite difficult to use hardware wallets. But for people who are into Bitcoin, trading from a long-time hardware wallet is an absolute must.
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 buying and selling Bitcoins effectively and knowing the exact time 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 that are developed in Bitcoin trading. They are:
6.1 Doing your research:
It is highly recommended that you research before starting your trading business. Listening to others and investing in something will invite more risks. So it is better to know prior knowledge about the technology to trade Bitcoin and the fundamental indicators of Bitcoin.
6.2 Being very careful about your investments:
Managing potential risks correctly is one of the perfect strategies for dealing with Bitcoin trading. It is highly advocated to have a proper sense of the digital market by setting up a regular account. Investing small amounts in the beginning and later going for higher volumes is better.
6.3 Have a proper plan on where your investment has to be:
Most 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, you must place your bets accordingly following the events of the digital market.
Yes, Bitcoin has been experiencing a high price surge 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 volatility factor.
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 with a way to harness your digital currency.
You can quickly protect your Bitcoin from various threats by harnessing your digital currency. 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 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 do we avoid these mistakes?
These mistakes can be avoided by following the above steps:
7.1.1 By choosing a digital currency trading platform that 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, do you guys understand what Bitcoin trading is?
In this article, we have underlined each specific question related to Bitcoin trading. We have also seen in what ways it is similar to traditional trading and in what ways it is dissimilar.
We also, in detail, learned about the pros and cons of trading 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.