5 Steps to Trading Bitcoin
Over the years cryptocurrencies have become a real pop-culture notion. Every day information about bitcoin slips through the media. If you are one of the curious who got affected by the trend but has no idea where to start and what points to consider, this article is for you.
Follow these steps to start your digital currency experiment.
Learn Bitcoin Basics
Even though you have been under non-stop media influence for at least for 3-5 years and know the general concept of bitcoin, do not omit the educational step.
Cryptocurrency is an intriguing peer-to-peer digital money created to operate within the blockchain network. The latter is a shared public ledger where people perform transactions, or in other words currency transfer between bitcoin wallets. All the operations are marked by a private signature that secures your personal data. While all the actions within the blockchain are transparent and visible to any person, your ID details are not revealed. The system confirms your transactions through the process of mining. The most popular and reliable currency is bitcoin. All other cryptos fall into the category of altcoin.
For a deeper dive into the technology and bitcoin specialties read materials at bitcoin.org or bitcoin magazine.
Even if you think that you are proficient enough in this topic do not stop exploring cryptocurrencies’ news and expert opinions. Usually, they are the only resources that you can rely on when making buy and sell predictions.
Explore Trading Strategies
While the news keeps on buzzing about ultimate crashes and unexpected skyrocketing of bitcoin, the percentage of people who have trust in this currency is relatively low. However, we all know how hype cryptocurrencies are. This gives them targeted audiences that embrace at least two types of market behavior.
One group tries not to speculate on price volatility but rather invest in bitcoin for the long-term. They are ready for surviving all its falls and rises and patiently wait for the ultimate hike in price. Adepts of this behavior see bitcoin as a way to support the technological progress, future of digital currencies, and invest in their personal prestige rather than make a deal that can ensure income.
The other group considers bitcoin to be a traditional asset that allows gaining profit in the short term. These people are bitcoin traders (experts with a strong analytical background, good knowledge of technology behind «digital money», and adventurous enthusiasts) who are ready to trade non-stop because, unlike traditional markets, Bitcoin trading is open 24/7.
Consider Pros and Cons
Apart from a 24-availability look through the list of other pros.
- Free Environment
Bitcoin is the only non-regulated currency in the world which makes it decentralized and transparent. Bitcoin rates do not depend on geopolitical events, countries inflation or other microeconomics issues. It involves no third party that can potentially freeze your transactions. Yet, anyone can look through the accounts in the bitcoin blockchain but no one can manipulate funds or see your personal data.
- Easy Start and Accessibility
Any person in the world even the ones who have no access to traditional exchange systems can trade bitcoin. They skip numerous verification procedures that should be undergone for other markets. The only things they need for a start are a bitcoin wallet and an address. Owning this, they can easily transport all their funds using a memory stick! Moreover, with bitcoin traders are not tied on currency exchange rates.
- ID Theft Protection
When you perform a transaction, it is confirmed by a unique digital signature guarantying safety to your currency movement. Besides, no personal information can leak anywhere – people are automatically protected from ID theft. You have an option to back up and encrypt bitcoin.
- Fast Payments
Bitcoin settlements usually happen within 2 business days and are not subject to any bank holidays or weekends. Nobody reverses your transactions.
Unfortunately, even the shining bitcoin has its flip side.
Experts say that bitcoin needs at least 5 more years to overcome market turbulence and stabilize. The market needs to become less emotional and more trustworthy for influential investors.
- Extreme Price Swings
As a relatively new trading tool bitcoin involves risks. High volatility promotes no trust in the currency as a reliable business instrument.
Raoul Pal, head of Global Macro Investors, says: “There will either be a total loss of principal or a very, very high return.” Based on this quote, skeptics of the digital currencies describe bitcoin trade as a lottery the results of which cannot be predicted as traditional trading patterns and methods do not work effectively.
- No Insurance
Being decentralized doesn’t only give total freedom but has several drawbacks as well. For example, people have no insurance if they lose their funds or forget passwords and private keys.
- Hack Risk
Bitcoin software is still not ideal. The developers are still inventing new tools and features.
Now when you have learned the theoretical base and weighed all pros and cons it is time to begin.
You need to have a cryptocurrency wallet and find an exchange or a broker to buy and then sell your coins. Select a reliable company with good reputation that will make the process simple offering you its own wallet and exchange. Another tip: start by trading the most popular currency like bitcoin, for example.
Once you are all set buy your first coins and begin trading either crypto to USD or crypto to crypto. However, remember that “crypto pairs” trade can sound promising, but it is more complicated and risky than simply investing in bitcoin or altcoin.
You can download the application and trade from your phone. With such a volatile market as one of the cryptocurrencies, you should make decisions ASAP. That’s why setting alerts will also be a useful option.
Do not Overestimate Yourself
Always keep in mind that cryptocurrencies are an emerging technology that is being aggressively promoted. Even though the pace at which it has been growing over the latest decades looks promising nobody can predict anything in the long-run. If you do not feel confident in your evaluation and analytical skills do not invest your life savings in cryptocurrencies since they disobey well-established financial and economic rules.
Summing It Up
As intriguing as it may sound bitcoin is still in the process of establishing. Thus, if you want to try trading cryptocurrencies, do it wisely, educate yourself, communicate with more experienced traders, consider risks and follow the news.