Bitcoin trading in 2020: is it worth it?
Unfortunately, Bitcoin didn’t enjoy a Santa Rally with the end of the decade, but BTC/USD is now hovering around the $8.925 handle. Some enthusiasts were probably expecting a somewhat similar performance to that of December 2017 where the cryptocurrency surged to the incredible $20.000 mark, but at least there has been a noticeable bullish push with the beginning of the year as the pair increased by 24%.
Admittedly, long-term investors aren’t phased by these movements and while some are profit-taking, the majority of crypto-enthusiasts are apparently in it for the long haul regardless of these short-term price fluctuations. The Bitcoin movement is still going strong and the belief that cryptocurrencies are the future of money doesn’t seem to be dying out any time soon.
Ever since cryptocurrency pairs became available in the forex market as CFDs, forex traders have been taking advantage of Bitcoin’s inherent volatility to realize substantial profits and now even the altcoins – Bitcoin’s less popular competitors have been seeing their trading volumes increase.
Supply and demand are key drivers of crypto prices and demand seems to be picking up this year. In fact, since the beginning of January; Ripple, Litecoin and Ether have climbed by 27%, 42% and 37% respectively – a clear sign that speculators are interested in altcoins as well.
How to trade Bitcoin and other cryptocurrencies
Bitcoin and other popular altcoins can be traded online via a trading platform as any other currency pair – e.g. EUR/USD or GBP/USD. The main objective of a trader is to identify where the market will move next. If the price appears to be rising, a buy order should be your next course of action. If the opposite is true and the Bitcoin price on the chart starts tumbling, then you can open a sell order and profit from the downward movement as well.
As you can see, forex traders can also turn a declining market in their favor since they don’t buy or sell any Bitcoin, they just speculate on the price with a buy or sell order depending on the market outlook. Trading crypto this way is more affordable and also more accessible since no crypto wallet services are needed.
The basics are quite simple and straightforward, but the reality is that the market direction isn’t always clear, and this is particularly true for cryptocurrencies which are considered one of the most volatile financial assets.
However, high risk comes with potentially high rewards as well. The price movements in a trading session can move up and down quite rapidly, but patient investors who aren’t easily deterred can enjoy substantial gains in a market that isn’t as saturated as other popular currencies, stocks and commodities.
What affects Bitcoin’s price
If you are interested in trading Bitcoin, or any other asset class for that matter, it’s highly important that you understand which are the factors that may have a positive or negative impact on its price.
For example, political and economic uncertainty in developing countries usually pushes investors to safe-haven assets that can retain their value through economic hardships. Since Bitcoin is largely decentralized and therefore can’t be manipulated, it’s a great store of value and therefore highly coveted during times of crisis.
It’s also important to note that cryptocurrencies are still in their infancy as financial assets and any major development in the crypto sphere will affect the price of cryptocurrencies in a greater degree than any other asset. Positive and negative press will quickly lead to an increase or decrease in prices respectively.
Therefore, traders should always stay on top of any fundamental news that may provide insight into the future of cryptocurrencies.
All tradable financial assets carry a certain degree of risk. Some would argue that speculating on the price of cryptocurrencies is too risky to be viable and that buying and holding some Bitcoin or other altcoins would be a wiser investment, but that’s not the best option for everyone.
Depending on your risk tolerance and profit targets, you may want to invest in some cryptocurrencies through an exchange, but the truth is that if you want more immediate results then trading through a forex broker is the better choice.
The volatility of the crypto markets is one of the riskier components, but this volatility is what makes cryptos such a favorable market to trade. The key is creating a trading plan that consists of risk management methods in order to protect your investment.
Traders need to decide the amount they want to invest beforehand, as well as what is the amount of risk, they find acceptable with each trade. Each of these questions may provide they answer to how many trades you will be opening per day, and which cryptocurrencies are more suited for your trading style.
Open an account with CM Trading to learn how to trade Bitcoin and discover the opportunities available in the cryptocurrency markets today!