How to Make Money Trading Bitcoin?
Cryptocurrency remains a hot topic for quite a while. This market is relatively new and is extremely fragmented. That is why both experts and beginners can gain profits from trading bitcoin or other currencies. The only thing you need to do to succeed is to know how bitcoin trading works and which methods are the most efficient ones.
One of these methods will be discussed in the article below.
But if you want to learn more and to dive into the universe of crypto trading, we recommend paying attention to the following article. There you can learn everything about crypto signals and calls, bitcoin futures trading and much more!
With that being said, we invite you to an exciting journey to the world of bitcoin trading and guarantee that your life will never be the same again!
What Is Bitcoin Trading?
You probably know that Bitcoin is the first blockchain technology, which stood at the source of cryptocurrency markets. Bitcoin trading market emerged almost ten years ago, introducing thousands of sellers and buyers to the world. That is when the first exchanges appeared, many of which no longer exist.
Considering that Bitcoin is a premier currency, it becomes rather easy to buy and sell it any time and any place you want. It seems that the more volatile trading bitcoin is the more traders enter the market. Every time its price changes, Bitcoin becomes the leading topic all over the news. Such attention causes new interest and attracts more and more traders and investors until the hype falls. If you approach Bitcoin as an asset, you will see that it almost doesn’t have differences with traditional financial assets, which are traded on markets. However, bitcoin trading is still unique and here is why.
First of all, Bitcoin is not related to any laws or policies. It is a global currency although it still reacts on such global events as Brexit, US elections, devaluation in China and so on. Moreover, some crises or insecurities can lead to a significant increase in Bitcoin value.
Secondly, bitcoin futures trading (as well as other bitcoin operations) are accessible 24/7. There are hundreds of different bitcoin exchanges in the world and unlike stock markets they don’t have opening and closing time. You can buy or sell Bitcoin any time you want: when having insomnia or dining on a Balinese beach.
Finally, Bitcoin allows traders to register and operate without long and complicated registration processes. In most of the cases you will only need to verify your email. Bitcoin had its ups and downs with dramatic changes in price but it never equaled zero. This proves that Bitcoin has shown its value and traders need to reckon with it!
Let’s discuss bitcoin trading peculiarities and the best ways of becoming a bitcoin investor.
Importance and Stability of Bitcoin
Let us remind you the importance and stability of bitcoin before we move to bitcoin trading. During the existence of blockchain technology a huge variety of forks, i.e. technological branches of bitcoin, was created. 99% of them proved their insolvency and only trading bitcoin continues!
This is probably the most important aspect, because when you need to make an investment decision, the main risk lies in the fact that the price will fall down to zero. This will lead to complete disappearance of the currency from the market. At the moment there are various promising crypto technologies, which have proved their efficiency and will continue to evolve. Bitcoin is based on a relatively old blockchain technology, which has nothing but a financial value.
Still it is an alternative way of keeping value of the asset compared to traditional finances. That is why devaluation probability is extremely low and bitcoin futures trading remains a safe and secure tool of crypto trading. Any time you want to make a trading decision, keep the above fact in mind and it will certainly make the choice easier!
Bitcoin trading is rather simple if you follow these steps:
Decide how you want to trade bitcoin;
Learn factors that influence bitcoin’s price;
Choose a suitable trading strategy;
Start trading bitcoin!
Now, when you know more about bitcoin trading platform and the cryptocurrency itself, let’s move to more specific details.
If you were reading this article attentively (and we are sure you were) then you know that bitcoin trading is rather volatile. This asset got used to extreme fluctuations and Bitcoin price often rises and falls by tens of percents in a blink of an eye. When the market of cryptocurrency was still shaping, Bitcoin value could increase by 100% or even more!
The main reason of such bitcoin trading fluctuations was that the market lacked liquidity due to a low number of buyers and sellers. Every year the cryptocurrency market continued to grow, introducing more and more traders and investors. The more interested market players there are, the harder it is for Bitcoin to grow and fall at a high speed.
So now you will hardly witness Bitcoin’s fluctuation by 100% a day. High volatility in bitcoin trading allows traders to make profits, while high growth potential of trading bitcoin helps investors to become richer.
We bet you were waiting impatiently for this section! Who needs boring theory, when there are so many bitcoin trading strategies waiting for you? Unfortunately, you should always start with basic knowledge if you want to leave a trace on the market and not just to go broke over the night.
First of all, all the strategies for bitcoin trading can be split into two directions: speculative and investment ones. Usually professional market players divide their deposit into two parts: one is invested in a long run, while the second is used for speculations. We have already determined that it is almost impossible to imagine a situation, when Bitcoin price will reach zero. That’s why the most profitable strategy would be buying bitcoin on a bear market. Distinguishing features of this strategy are time and a net capital without leverages. This means that for successful trading bitcoin you just need to buy it when the price falls down and not to use borrowed capital.
If you are an investor, time plays in your favor. Be patient and wait till the price goes up and you can sell bitcoin, making profits.
Here are a few tips.
It is rather simple to detect the best purchase price: take the peak price of bitcoin and divide it into two. For example, the maximum Bitcoin price on Binance exchange was $19,800, so after dividing you will get $9,900. Considering that Bitcoin is an extremely volatile asset, it is very likely to rise and fall, and to beat the historical maximum. Waiting for this to happen we can easily purchase Bitcoin if its price falls lower than $9,900. This is a bitcoin trading approach, when your risks will be minimal.
Moreover, you can make purchases not on all of your funds but in parts: to break the entrance into three or five parts with a max gap of $1000.
Let’s assume that the price dropped to $9,000 and you have bought the first part. The price continued to fall and reached $8,000. You purchased it using the second part. The third part you used to buy the asset for $5,000. If the investments were divided equally, your average position would be $7,500. Once the price exceeds $9,900 you can start selling. But also in parts.
There is another advanced bitcoin trading approach: when you buy Bitcoin on a fall. To use this strategy you’ll need to purchase assets using capital that would grow exponentially. Thus you will significantly improve the average price of opening an investment position. However, you must always calculate the lowest and the highest price of entrance. Then you only need to detect the entrance price exponentially. This calculation form can be found on the Internet (Go on, Google it).
Let us remind you: these trading bitcoin strategies should be performed without any borrowed capital and leverages.
Remember that you fixate losses only when you sell assets. If you have bought Bitcoin all you need is some time to wait while the price will grow and absence of need in capital that you have prior invested into Bitcoin.
Sounds simple, isn’t it? In reality everything is even simpler! Now it is a right time to introduce you to bitcoin futures trading. Are you ready?
Trading on Spot or Futures Market
At the moment bitcoin trading can be performed both on futures and spot markets. The last one allows you to buy Bitcoin and withdraw it on a cold or hot wallet for storage. By the way, if you need some info about wallets, welcome.
Keep in mind that exchanges don’t guarantee safety of asset’s storage and any time you risk losing your investment capital or Bitcoin itself, because the exchange can be hacked in a blink of an eye. But after bitcoin trading deal is closed, you can withdraw assets to a cold wallet and you will be the only person to have physical access to it. Which gives almost a 100% security guarantee apart from unpredictable situations, like losing a key or a cold wallet carrier.
If your strategy is to make profits on speculative operations then bitcoin futures trading is for you. This is especially true for those countries, where trading bitcoin and other cryptocurrencies is forbidden but it is allowed to trade derivatives on official exchanges.
CME, the leading marketplace for trading derivatives, allows bitcoin futures trading without a fear of being caught. But it has its own peculiarities concerning capital. On a futures market you need to have funds for the trade, because you buy not the asset but a contract for buying this asset in future. Some trading bitcoin exchanges have a minimal quantity of Bitcoin in a single contract.
As for cryptocurrency exchanges, at the moment Bitmex OKCoin also offer futures trading. But before you start trading futures, we recommend getting familiar with how exchanges operate. For example, Bitmex exchange allows borrowed capital and trading with a margin. Leverage reaches x100, which is rather risky and inexperienced trader will most likely lose capital in a single deal.
Today we have discussed bitcoin trading: how Bitcoin emerged, why it is so popular and how anyone can benefit from it. We have also introduced you to bitcoin futures trading and the most viable strategies, which any trader can use.
As you see, trading bitcoin is rather straightforward and has a variety of benefits over trading other cryptocurrencies: it is unlikely to drop to zero, you can trade Bitcoin 24/7 and the registration process is quite simple. In addition, you have access to a variety of exchanges, strategies and instruments that will make trading even more fun and simple.
And if you find some terms unfamiliar or want to take your skills to the next level, you can always read our guidelines and become an advanced trader with minimum efforts!