Trading in Bitcoin
Bitcoin’s popularity as an alternative payment and investment option has paved the way for other crypto-currencies to emerge. Analysts are predicting that in the not so distant future, Bitcoin will become a commodity and a standard form of money that can be used for any type of transaction.
Every time Bitcoin value rises, new investors and speculators want some of the profits. Trading in Bitcoins is simple as it’s easy to send and receive bitcoins globally. In comparison to other financial markets, Bitcoin trading has minimal barriers. Here are some of the reasons why trading in bitcoins can be rewarding.
Getting Started with Bitcoin
Traders can earn or acquire bitcoins in three ways.
- In the form of payments
- Buying them off an exchange or an individual
- Earning via mining.
Mining: The easiest but slowest way to get bitcoins is to mine it. For starters, you need to invest in a PC whose sole role is decryption of bitcoins. Doing so on a mid-range PC can take you a year or more to fully decrypt a single block. Definitely not worth the time.
Payments: Bitcoin payments may not be mainstream yet, but there’s a good number of merchants accepting bitcoins for payment. Specific merchants strictly trade in bitcoins.
Buying off exchanges: Marketplaces known as bitcoin exchanges give traders a platform to buy or sell bitcoins using different currencies.
Bitcoin Forex Trading
Forex is thought to be a more stable market to invest in because of the slow pace of currency exchange rates movement. Despite other underlying issues that affect world economies and politics, currencies are more stable in comparison to other investment vehicles such as stocks. Forex investors make money from market fluctuations. The more volatile the price for an investment, the higher the opportunities to make a profit or loss.
This is why Bitcoin Forex trading is gaining popularity. The level of speculation and regulatory concerns have made Bitcoin prices highly volatile. As a result, Bitcoin investment is more like stocks and commodities – enabling it to gain larger profits or losses.
Buying Bitcoins in Forex
A majority of Forex trading is done by dedicated bitcoin exchanges such as Bitfinex, Bitstamp, and Coinbase. The main difference between Forex trading and the traditional Bitcoin exchange is its non-executable, and you buy bitcoins in pairs. Additionally, you cannot withdraw your Bitcoins to make a purchase. Rather you invest in a dedicated financial instrument such as currency pairs.
Bitcoin Forex Brokers
Forex brokers only recently began trading in bitcoin. They began bitcoin trading pairs which are the same as those in traditional forex platforms. A Forex pair will enable you buy and sell bitcoins relative to other currencies. As a trader, you can make a profit from the rise in the value of Bitcoin and a drop in the value of the U.S dollar. The opposite is also true. You can compare brokers that provide option to trade bitcoin as forex here.
Bitcoin CFDs Trade
Bitcoin Contract for difference (CFDs) will expose you to the bitcoin price without having to buy the underlying asset. This should give you more confidence as you won’t be holding any actual Bitcoins. Also, you don’t need a digital wallet to store them.
You can profit with CFDs from both rising and falling bitcoin prices. You make money if you buy a Bitcoin CFD and the price goes up. You lose money if it goes down. Alternatively, if you short-sell bitcoins and the price goes down, you make money. If the price goes up, you lose money.
Speculation or Investment
You can use CFDs to make short term high leverage trades or long-term low-leverage investments. In CFD trading, whatever percentage the value of the asset moves, you will gain equal Bitcoins, in respect to your leverage.
Markets and Brokers for CFDs
The possibilities to trade Bitcoin are almost limitless. These days CFD sites allow bitcoin traders to take part in forex, stocks, indices, and commodities. Due to the similarities between Forex and CFDs trading, bitcoin traders can equally engage forex brokers such as Plus500 and Avatrade in their trading. You can compare bitcoin brokers here.
Bitcoin Binary Options
Binary options trading is one of the simplest ways to profit from bitcoin investments. You can use your Bitcoins for binary options trading in two different ways.
- Payment method at a standard binary options broker – You can deposit your Bitcoins at the site and start trading using various assets. It’s like playing at a Bitcoin casino. You use your bitcoins as the currency and you trade in the same manner as someone using USD or GBP as a deposit.
- Trading bitcoin as an asset – Several brokers provide this option as one of many assets. Others only deal with bitcoin trading. Both types of brokers are known as a Bitcoin binary options broker.
Binary Options Brokers
Not every broker who claims to be a “bitcoin binary options broker” accepts bitcoin as a payment method. Some of them will only allow you to place a bet on bitcoin prices. If you want to fund your account using cryptocurrency, confirm in advance.
There are two main types of bitcoin binary options brokers.
- The first type of broker uses bitcoin as the sole medium of exchange
- The second type of broker uses bitcoin as the underlying asset
If you want to trade your bitcoins, Type 1 broker is more favourable as they will maintain your privacy. Compare bitcoin binary options here.
Benefits of Bitcoin Trading
- No transaction costs: Bitcoin transactions are digitally logged on public networks without the involvement of banks or clearing agencies. As a result, brokers pass on this benefit to clients by not imposing deposit or withdrawal fees for bitcoin transactions
- High leverage: Experienced traders can take advantage of the high leverages given by most brokers (1:1000) to boost profits. But the same can magnify losses
- Decentralized valuations: There’s no central bank to randomly change Bitcoin valuations. As a result, Bitcoins cannot be influenced geopolitically and are immune from inflation or interest rates
- No global boundaries: A bitcoin trader in Australia can easily trade forex through a broker based in the U.K. If both traders are willing to transact, they can overcome any regulatory concerns
- Security: Bitcoins transactions eliminate the need to reveal your bank or credit card details to deposit or withdraw cash
- Low cost of trading: Most forex brokers who accept cryptocurrency keep brokerage fees low to attract new bitcoin traders
- Low deposit amount: Some bitcoin forex firms can allow you to start trading with as little as $25.
Risks in Bitcoin Trading
- Untraceable: This feature can attract illegal activities such as drug trafficking, money laundering and ransomware
- Easy to lose: Once a hacker hacks into yours or the broker’s digital wallet, there’s no way to recover your investment
- High volatility: In the absence of regulations, unregulated brokers can use volatility to their advantage and to the trader’s disadvantage
- Hard to trade: Many exchanges offer bitcoins services but still it’s impossible to quickly transfer it into cash via payment platforms like PayPal. In addition, places that accept Bitcoin for payment are too few and far wide.
In forex trading, doing business with a decentralized currency that provides global transactions at no charge is an advantage. In view of the recent Bitcoin price gain, smart investors can use it as an alternative future investment. Despite cryptocurrencies increasing popularity, the associated risks are very real. You can compare your bitcoin options here.
Bitcoin’s development carried on without Satoshi’s input and by 2013 the currency had reached global prominence.
Bitcoin trading platforms
Bitcoin market size and liquidity
The number of Bitcoin ATMs increased from 538 in January 2016 to 838 by November that year
By our estimate the total number of bitcoin wallets is currently over 12 million. Here are the top five wallets with the most funding in million dollars.
A transaction is a transfer of Bitcoin value that is broadcast to the network and collected into blocks.
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