Bitcoin or BTC has catapulted itself as the leading cryptocurrency in the market today. It’s no wonder that people are looking at it as a viable medium of exchange and a lucrative trading venture. With its decentralized nature, it’s deemed as the currency of the future.
The cryptocurrency was conceptualized by a Satoshi Nakamoto, whose identity is still unknown. This electronic cash system worked on peer-to-peer transactions that are verified by miners in the network and recorded in the blockchain, which serves as a public ledger. The perfect balance of anonymity and transparency are two of the reasons why Bitcoin appeals to the fin-tech community.
The first Bitcoin was acquired through mining, which involves a computer solving a complex mathematical problem. Now, you can earn BTC by accepting it as a payment method, which is great if you own a business. Another straightforward way to get these digital assets and grow them is through trading, which works similarly to traditional stocks except that it’s for cryptocurrency.
If you’re thinking about trying your hand at this venture, here are some factors you should consider when trading in Bitcoin:
1. Price
Because it’s still relatively new, BTC’s value is still volatile. This is why there are frequent price movements for the cryptocurrency.
Like traditional stocks, Bitcoin is influenced by what investors and traders are feeling about it. If they feel uncertain because of negative news about the crypto, prices will most likely plummet. Of course, there’s always the possibility that its value will increase due to positive publicity.
Nonetheless, you can choose to look at BTC’s volatility as a chance to earn more from your trading venture within a short time. Moreover, the cryptocurrency’s value is no longer as unstable as its early years, so you can be assured that the risks aren’t too substantial when you invest and trade these digital assets today.
The factors that affect Bitcoin’s price are:
- Supply and Demand – Basic economics will tell you that cryptocurrencies follow the law of supply and demand. This means that the more people want to acquire Bitcoin, the higher its price will go, especially since the cryptocurrency has a predetermined limit of 21 million BTC. Currently, there are already17,944,500 BTC in existence, which makes up almost 86 percent of the maximum number.
- News Outlets – People’s perception of the cryptocurrency is heavily influenced by media and news outlets. So, when journalists choose to paint BTC in a negative light, it’s highly likely that traders and investors will follow suit and sell their digital assets, which can significantly impact Bitcoin’s value.
- Political Events – While no central entity or agency is controlling Bitcoin, political events still affect its price; albeit inversely. If people in a particular country lose their confidence in their government and economy, it increases the likelihood that they turn to fiat money alternatives, like cryptocurrency.
- Government Regulations – More and more governments are accepting the fact that Bitcoin will be an integral part of the global economy. Thus, they’re creating regulations on taxation and other aspects that they can control, which directly affect investors and cause BTC’s price to fall.
- In-Community Changes – Decisions within the Bitcoin community affect the entire blockchain and ecosystem. Investors must monitor the news on how the people involved with the cryptocurrency’s process come into a consensus when deciding on its future.
2. Platform
When you decide to trade Bitcoins, you also have to consider the platform that you’ll be using. Most cryptocurrency exchanges or web wallets allow users to conduct business with each other. Choose one that’ll keep your digital assets safe and secure.
If you’re a bit intimidated by buying and selling manually as well as monitoring the market, you have the option to go with automated trading platforms.Samuel White from bitcoinrush.info developed trading bots that execute the trades during optimal times on your behalf. You just have to deposit funds and configure the settings to inform the bot when you want to buy and sell your cryptocurrency.
3. Strategy
As with traditional stock, there are different strategies that you can employ for your Bitcoin trading. There’s no universal tactic that’ll work for all people. You must take the time to study the pros and cons of each and the best one that suits your needs as well as preferences.
These are four Bitcoin trading strategies that you should check out:
- Day Trading – With this tactic, you ride with Bitcoin’s frequent price movements. You look for short-term opportunities, typically within a trading day.
It involves buying BTC at a low price in the morning and sell the assets for the highest possible value later in the day.
- Scalping – This strategy is the more aggressive counterpart of day trading. The strategy entails trading frequently throughout the day, watching out for slight fluctuations on Bitcoin’s price.
With this, you buy and sell several times a day for small, continuous earnings instead of waiting for one significant price movement.
- Swing Trading – Swing trading, on the other hand, involves heavy technical analysis in the search for trading opportunities. You look closely at the trends and patterns of the market to predict when is the best time to buy and sell. This trading can take days up to months to see movement in your assets.
- Automated Trading – As mentioned above, there’sautomated trading software that buys and sells Bitcoin on your behalf. You just need to set the limit you want and let the bot do its job. It’ll wait for the optimal time and execute trades according to the boundaries you want.
4. Risks
Similar to traditional stock trading, you face the risks of losing money with this venture if you’re not careful. It’s better to start small and learn how the market works first before you go and put in substantial amounts of money.
Another risk to consider is cybertheft. Because BTC is a digital asset, hackers can easily get their hands on your Bitcoin if you don’t put up strict security protocols. It’s better to store a majority of your funds in an offline wallet and just transfer the amount you need for trading to your web wallet when you decide to increase your investments.
Conclusion
Bitcoin trading can be a lucrative venture as long as you approach it logically instead of being swayed by your emotions when making trading decisions.
Study what influences BTC’s price first. Then, choose the right platform and strategy that works best for your situation. Lastly, know the risks involved and find ways to mitigate them.
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