While Bitcoin trading compares to traditional stock trading, beginners should understand essential caveats and risks before starting. Maybe you’ve heard stories of individuals that have made life-changing profits from trading Bitcoin. Perhaps, this has prompted you to invest in this virtual currency.
Bitcoin trading can indeed earn you significant profits. However, it’s not a risk-free venture. That’s why though some people have made excellent returns from their investments; others have gone broke trying to trade this virtual currency. And this shows that Bitcoin trading is not that easy. Here’s what a beginner should understand about Bitcoin trading.
Bitcoin Trading Fundamentals
The cryptocurrency market doesn’t have fundamentals, the traditional market trading cornerstone. When trading stocks, you need to analyze a company’s financial statements. This fundamental analysis helps you understand a company’s intrinsic value. You can also use technical analysis when trading stocks. This approach uses past market data to identify trends and predict future price movements.
With Bitcoin, there are no quarterly reports or analyst forecasts. So, how do you determine the fair value of Bitcoin? Some investors believe that Bitcoin has no intrinsic value. They argue that it lacks the backing of any asset, and most jurisdictions don’t accept it as legal tender.
Others believe that Bitcoin does have intrinsic value. They point to its limited supply, global recognition, and growing utility as a means of payment and store of value. Investors who believe Bitcoin has intrinsic value are more likely to hold it long-term. They’re less likely to sell it when the price is down.
How to Trade Bitcoin
Now that you know some basics let’s look at how to trade Bitcoin. When buying Bitcoin, you need to find a reputable exchange or broker. There are a few different ways to buy Bitcoin. You can purchase it with fiat currency, like the US dollar, on a cryptocurrency exchange like https://bitcoin-up.live. Or you can buy it with another cryptocurrency like Ethereum on a crypto exchange.
To trade Bitcoin, open an account on a crypto exchange. Some exchanges only offer cryptocurrency-to-crypto trading, while others allow you to buy Bitcoin with fiat currency. Once you have an account, deposit funds into it. Then, use these funds to buy Bitcoin.
When selling Bitcoin, you need to find a buyer by posting an offer on a cryptocurrency exchange or peer-to-peer marketplace. Once you find a buyer, agree on a price and payment method. Then, send the Bitcoin to the buyer’s wallet. But be cautious because you might send Bitcoin to another person’s wallet, then they decline to send you the agreed money.
Bitcoin Trading Risks
Like any investment, there’s a risk of loss when trading Bitcoin. The cryptocurrency market is highly volatile. Prices can increase and drop a lot in a short period.
This volatility makes it difficult to predict price movements. And since there’s no fundamental analysis to guide you, it’s easy to make mistakes when trading Bitcoin. Moreover, the cryptocurrency market is largely unregulated. And this means there are no rules to protect you if something goes wrong.
Be careful about security risks when trading Bitcoin. Criminals have hacked cryptocurrency exchanges and wallets in the past. So, choosing a reputable crypto exchange and storing your Bitcoin in a secure wallet is essential.
The Bottom Line
Bitcoin trading is not easy. There are many things to consider before starting, including the risks involved. Also, selecting a reliable crypto exchange is crucial because it influences the amount you can make and the safety of your money when trading Bitcoin. Nevertheless, Bitcoin trading can be a profitable venture with proper, ongoing research and precautions.
