Everything You Need to Know About Bitcoin Trading
Roughly a decade ago, the price of one Bitcoin was around one dollar. Now, the price of a single Bitcoin is upwards of $55,000.
Given this, it’s no surprise that a lot of people are interested in jumping on the Bitcoin bandwagon. You can find countless debates online about whether Bitcoin is a bubble or it’s just beginning its launch to the moon.
Are you interested in Bitcoin trading but aren’t sure where to begin?
Let’s take a look at some tips for Bitcoin trading and what you need to know about this cryptocurrency.
What Is Bitcoin?
The first cryptocurrency, Bitcoin was launched in 2009. This type of digital cash is decentralized and operates without intermediary institutions such as governments or banks.
When you have money that has been issued by a government, this money is considered fiat money. Fiat money is regulated and backed by the issuing government.
On the other hand, Bitcoin is powered through peer-to-peer technology and software-driven cryptography. What this means is that this currency is backed by code instead of being backed by trust in central authorities or physical objects such as gold and silver.
How Does Bitcoin Work?
When you own Bitcoin, it is stored in a digital wallet on either a smartphone or a computer.
The open-source code that powers Bitcoin is known as blockchain. Every time there is a Bitcoin transaction, it is logged in this shared public ledger. More than 6,000 cryptocurrencies have come into being since the birth of Bitcoin, many of which utilize the technology of blockchain.
The way that the owner of Bitcoin can initiate transactions and digitally sign them is through the private and public keys. This is the way that authorization can be proven.
Members of this peer-to-peer platform, also known as miners, are responsible for confirming transactions that occur. In exchange for this work, miners receive bitcoin as payment.
How to Trade Bitcoin
If you want to trade Bitcoin, there’s some upfront work you’ll want to do. Rather than succumbing to the fear of missing out, take the time to research, plan, and come up with your ideal strategy.
Understand What Moves the Price of Bitcoins
When you start trading bitcoin, you’ll want to learn about what moves the price of the cryptocurrency.
One important aspect is Bitcoin supply. There is a cap on the Bitcoin supply right now, which is 21 million. It is expected that this supply will be exhausted by 2140. If demand continues to rise in the years to come, this could influence the price.
Bad press can also impact the price of Bitcoin. If there is bad news about value, longevity, or security of Bitcoin, this can cause the price to drop.
Another important factor is whether or not Bitcoin is integrated into new banking frameworks and payment systems. If these efforts are successful, it could cause demand to rise.
In fact, Morgan Stanley recently became the first major U.S. bank to offer access to Bitcoin. You can check it out here.
Lastly, there are other key events that can impact the price of Bitcoin. Things like security breaches, regulation changes, and macroeconomic Bitcoin announcements can have an effect on the price of the cryptocurrency.
Pick a Bitcoin Trading Style
You will also want to consider what style you will use when trading Bitcoin.
Firstly, you might choose to day trade Bitcoin. This means that you won’t hold Bitcoin overnight, but instead, you will open and close your positions within the same trading day. If you are interested in profiting from the short-term price movements of the cryptocurrency, this is the style for you.
Swing trading is another option. This is when you hold positions for days or maybe weeks, taking advantage of longer-term trends.
Maybe you instead want to be more of an investor, practicing a buy and hold strategy. This strategy is sometimes referred to as “HODL”, which stems from a misspelling of “hold” on a popular forum.
Other options are scalping, range trading, and trend trading. It’s a good idea to learn about the different styles of trading before jumping in.
Learn About Trading Psychology
One important aspect of any kind of trading is the psychological aspect. Buying low and selling high might seem easy until you’ve got your own money on the line. All of a sudden, it becomes a lot more complicated.
It’s essential to master your emotions, exercise discipline, and learn to think quickly if you’re going to be a successful trader. Greed and fear are two powerful emotions that can lead you to make bad decisions in the moment.
Study, Study, Study
There is a near-infinite amount of material out there about how to trade successfully. It’s a good idea to learn more about what is going on behind the scenes rather than just watching the price tick up or down. As an easy trader, you might get lucky, but without a strong knowledge base, you might find you lose money in the long run.
Chose Your Platform
There are a number of different platforms you can use to trade cryptocurrency. Some of the biggest ones include Coinbase, Binance, and Bisq. Each of them have their own pros and cons, so you’ll want to find a platform that suits your needs and trading style.
Bitcoin Trading: Is It For You?
Whether you’re thinking of scalping Bitcoin or becoming a long-term investor, there’s quite a bit of upfront work you’ll want to do to make sure you are making a sound financial decision. When the price of something has skyrocketed in the way that Bitcoin has, it can be hard to know whether or not you should hop on the train or if you missed the boat. Rather than going in blindly, it’s a good idea to research all aspects of the cryptocurrency market and the stock market as a whole to make the most sound decisions possible.
Did you find this article on Bitcoin trading interesting? If so, be sure to check out the rest of our blog for more fascinating and informative content!