What to Know Before Jumping in Crypto and Bitcoin Trading
Nothing more exciting than sticking it to the man. And what’s more satisfying than sticking it to where it hurts? Money and those pesky per transaction fees. That’s what a programmer or group programmers, who chose to remain anonymous under the alias Satoshi Nakamoto, set out to do by creating Bitcoin – the world’s first actually viable digital currency. Today, however, a slew of more digital currencies or cryptocurrencies are popping up trying to claim some market share of their own.
What are cryptocurrencies anyway?
To put it in layman’s terms, cryptocurrencies are just digital money which is made available on a platform called the blockchain which is arguably the most innovative invention since the Internet itself. This blockchain can be compared to a public record which anyone can access at any time and with the help of both public and private keys each transaction is encrypted and can be verified without fear of any manipulation from a third-party. Each transaction is also anonymous to some extent and the best part is that the blockchain a decentralized platform, so there’s no need for financial institutions to provide oversight and tack on unnecessary fees and commissions. This admittedly may sound a bit dodgy, but it actually works, and it has been for some time now. Bitcoin has been released 10 years ago on the 9th of January 2009 and it’s still going strong with thousands of investors from every corner of the world.
If you haven’t been keeping up with the crypto scene – one Bitcoin is currently worth 3,400 USD and that’s not even close to its peak records of 10,000 USD. However, it’s still miles ahead from the competition, with the second runner up being Ethereum which is currently valued at 112 USD. And there are many more digital currencies that are incredibly innovative in their own right. Ripple, Litecoin, Monero and Dash are just a few of the most popular ones.
Cryptocurrencies as a financial instrument
The potential to profit from an investment in any of the available cryptocurrencies is huge. Heading over to exchange and buying a couple of Bitcoin and holding till the price moves up is one way to do it but what if you could just speculate on crypto prices like forex and other financial instruments like forex, indices and stocks? Well, it turns out you can!
A quick search for “trading bitcoin” on the web will give you plenty of relevant results to get you started. With the help of a trusty forex broker, you can now get into bitcoin trading as well as any other cryptocurrency in a few minutes.
What’s great about trading cryptocurrencies instead of actually owning the underlying asset is that there are profit opportunities regardless where the market is headed. Since your broker is facilitating the trade on your behalf, you aren’t actually buying or selling crypto when you trade – so you are free to speculate and profit in both rising and falling markets. If you own Bitcoin, you can only profit when there’s a price hike. Trading Bitcoin via a broker, however, allows you to take the other side of the trade and take a short (sell) position on Bitcoin without owning any. And it gets even better.
Buying vs Trading Bitcoin
We ‘ve already established that by trading Bitcoin with a forex broker, your profit opportunities are twofold – you can trade regardless if the market is rising or seeing a decline. That’s just the beginning though because forex brokers offer highly competitive terms and other helpful benefits for clients. All the tools and robust trading platforms available to other instruments can now be leveraged for cryptocurrencies as well and that’s great.
Considering crypto is still a relatively young technology, there are still kinks being ironed out especially in terms of supervision and regulation. There have been a lot of investors separated by their crypto wallets and many exchanges have been closed after defrauding their clients. As such, Bitcoin trading with a regulated forex broker guarantees that your money is completely safe at all times. Note, that not all forex brokers are regulated through and that’s why you need to do your research before signing up for an account. Digging around the internet for customer reviews is your best bet in weeding out any brokers that are untrustworthy.
Another notable advantage you can enjoy by trading Bitcoin is that there is no need to worry about converting your local currency to Bitcoin (and vice versa) and safeguarding a digital wallet because losing access to said wallet means losing all your precious coins as well. Instead, you can trade Bitcoin with your local currency and your profits are transferred into your bank account or preferred payment method as soon as you make a withdrawal request.
Bitcoin trading also affords the benefit of using leverage on each trade. Leverage basically increases your buying power so it allows you to open greater positions than your invested capital would allow. Leverage trading is available at almost all forex brokers and depending on your account type you may see higher or lower ratios.
Consider the following examples with and without using leverage in a trade. You open a long (buy) position with 20 USD. If the price of Bitcoin goes up a few ticks, you may stand to gain 100 USD. If your broker offers a 100:1 leverage and again you wish to speculate on the price of Bitcoin going up and it does, you will actually be controlling a 2,000 USD position (20 x 100) with your 200 USD and potentially make 1,000 USD in profit from the same trade. Of course, leverage is a double-edged sword and it can just as easily blow out your entire account. Used sparingly, however, it can prove an invaluable tool when trading cryptocurrencies or any other financial instrument for that matter.
Crypto Market Speculation
Accurately and consistently predicting where the market will move next is going to prove extremely difficult in the beginning. As long as you start small and apply basic risk management rules on each trade, however, you will be able to develop a strategy that is consistently profitable.
The leading factor that impacts the cryptocurrency markets is market psychology. If you see a trend forming on the chart, it’s always advisable to follow it. Note that almost all cryptocurrencies are closely connected to Bitcoin so when the value of Bitcoin goes up, the rest are bound to follow suit. When the USD goes down the price of cryptocurrencies, in general, is likely to see some peaks since digital currencies are seen as a direct competitor to fiat currency i.e. normal money as we know it.
If you are interested in trading Bitcoin and other cryptocurrencies with a forex broker, it is highly recommended that you keep track of the fundamentals. Staying abreast of the markets is always good advice and since cryptocurrencies are such a volatile market it is highly recommended to keep an eye out for any pending releases or news on the current state of affairs. Anything that has to do with Bitcoin or blockchain technology will certainly have an impact on most cryptocurrencies’ prices.