Launched in 2009, Bitcoin is a decentralised cryptocurrency that uses peer-to-peer technology to operate without the involvement of any authorities, such as the central bank of any financial organisation, or even any third-party intervention in the process.
Also, managing transactions and the issuing of digital currency are carried out collectively by the network. Bitcoin is generally an open-source project, where its design is public, nobody owns or controls it, and everyone can invest in or trade in it effortlessly. Bitcoin also allows exciting user techniques that are majorly not covered by any previous payment system.
Steps to Trading in Bitcoin for Beginners –
In order to step into Bitcoin trading for beginners, an individual should acquire adequate knowledge about the industry. Along with that, it is also imperative to know the associated risks and the laws that may apply according to their jurisdiction, and decisions should be made accordingly.
- Create an account on a crypto exchange: To open an account with a legitimate crypto brokerage, you’ll need to provide personal and financial information, similar to stock brokerage. When creating an account, you will specifically need to submit your name, address, date of birth, Social Security number, and email address, and among other things, Know Your Customer (KYC) if asked.
- Subsidise your account: To start your trading expedition, it is essential to connect your bank account once you’ve signed up with a crypto brokerage. The majority of the cryptocurrency exchanges accept bank deposits via debit or credit cards and wire transfers. Usually, wire transfers are the most cost-effective way to fund your account, but once you have sent money through a wire transfer, the transaction cannot be reversed at any cost.
- Emerge a trading strategy: Basically a trading strategy is a set of basic rules and guidelines that a trader can use in their investments in the crypto market. Strategies are divided into three types: long-term (a year), medium-term (from a month to a year), and short-term (less than a month). Each of these techniques portrays how long a trader plans to hold a particular coin.
- Monitor and close your holdings: After trading Bitcoin in the crypto market, keep an eye on the price movement of the asset. Although the market is extremely volatile, most of the time it can downshift really quickly. However, on the contrary, if you notice a maximum hike on the asset you are trading, close the trade by selling it on the currency market and take yields.
- Store your assets in secured wallets: When trading in Bitcoin or other cryptocurrencies, it is essential to keep your funds in wallets provided by the exchange in order to access them at any time. Software wallets and hardware wallets are the two types of wallets provided by all the crypto exchanges. Generally, both are safe, but hardware wallets provide substantial protection as they keep your assets on a physical device that is not connected to the internet.
Key features one should use while trading in Bitcoin:
- Set up a profit and loss benchmark: The simple yet tough thing we need to know is when to get out of the trade, whether we are on a profit or loss of bitcoin. It is important to set a stop-loss level, which can help you cut your losses; this is one of the traits that all investors must have. This also applies to profits; it is important for a trader to not be insatiable and set a level for profits too so that things start off virtuously.
- Adhere to market cap over affordability: One common mistake all beginners make is that they buy coins when the prices are low. But the decision to invest in a coin should have less to do with affordability and more to do with the market cap. Because the higher a coin’s market cap is, the more suitable it is for investing in cryptocurrency trading.
- Risk management: It is essential to understand that Bitcoin is relative to fiat cryptocurrency, which is highly volatile. Simple thing you must note is that when Bitcoin price rises, altcoins fall, and vice versa. This may confuse most cryptocurrency traders. And so it is better to either have close targets or simply not trade at all during those times.
Pros and Cons of Bitcoin Trading
- Massive returns: Bitcoin has been a well-known asset class in the cryptocurrency market. Not only have large investments resulted in hefty gains, but small investments have also generated outstanding returns for long-term investors and traders.
- Decentralised: Bitcoin is the previous and most decentralised cryptocurrency to date. Moreover, the network is distributed across many different computers, known as nodes. Decentralisation is important because it prevents a single point of failure for an attack, making it almost impossible for officials to take down the network.
- Secure: Bitcoin is abundantly secure. Also, its public key cryptography makes sure every transaction is legitimate, and most importantly, it is decentralised, which means there is no centralised power that can manipulate it for their benefit.
- Distinct: Each bitcoin is distinct into 100,000,000 satoshis (or sats), which means a trader, for example, can use bitcoin to pay for a cup of coffee, utilising micro-payments online, and ‘stack sats’ with as little as $10. Also, being able to use fractions of a bitcoin can make it pay through peer-to-peer digital currency.
- Fixed supply: Unlike fiat currencies, governments are not eligible to print bitcoin whenever they want more money. The importance of that shortage is highlighted in the outflow model.
- Volatility: In comparison with other market assets, Bitcoin is extremely volatile. While that is to be expected with any rapidly expanding asset and has proven beneficial for traders, it may occasionally be difficult for long-term investors to stomach.
- Short history: Bitcoin was released in January 2009, which means that the historical price data of Bitcoin available to traders is comparatively short compared with traditional currencies. In fact, using price data before 2017 did not make much sense while trading in Bitcoin, as that year is marked as the start of the amazing rise in the value of cryptocurrencies.
- Energy concerns: Bitcoin’s proof-of-work concord system uses excessive energy to help safeguard the network, with miners running specialised computers and burning energy. Whereas numerous miners are switching to renewable energy to adapt to the green revolution.
- Learning curves: For fully understanding how Bitcoin works there is a steep learning curve which can be unsettling for the novice traders. Due to this, there are few con artists that take advantage and defraud the innocent.
- Regulation: While Bitcoins’ popularity has surged, no wonder that countries and governments want to take control of the cryptocurrency and its usage. However, the legal status of Bitcoin differs from country to country.
For instance, it is completely legal to use Bitcoin in countries like, US, UK, Canada, Japan and many more. But, countries like India and China have some legal restrictions on usage of Bitcoin and other cryptocurrencies.
Bitcoin trading on market value contains advantages and disadvantages, both. However, if you want to learn how to trade in Bitcoin, consult with the market experts like BlockchainTradein. We curate services with the help of our experienced market professionals for our clients on the relative topics that are ongoing in the financial market and help them know what are some of the positive outcomes of several investment entities.