Bitcoin Trading – A Guide For Seasoned Investors

bitcoin trading

If you read the article “Bitcoin: An Introductory Article to the World’s Most Popular Cryptocurrency”, you now have a basic idea of what cryptocurrency is, how it works, and what you are able to do with it.  The next question that I am often asked by those who have recently discovered cryptocurrency is this: Is it possible for me to make money trading this asset?

We asked Dylan Buckley who has experience working for and investing in Bitcoin as well as other Cryptocurrencies such as Litecoin and Dogecoin to educate us on what the Bitcoin fuss is all about.  Dylan Buckley is a freelance and self-help writer from Southern California.

The harsh truth about Bitcoin trading is that you may suffer great losses, experience large gains, or make absolutely no money at all. Nothing is certain in the cryptocurrency world except that Bitcoin and most other cryptocurrencies are extremely volatile. They are subject to dramatic price increases, decreases, and stagnant periods where the price may increase or decrease a few cents. However, that doesn’t mean that it isn’t possible to make money Bitcoin trading. Here’s what you need to know about Bitcoin in regard to trading:

Bitcoin Is Both a Great Investment As Well As a Terrible One

Before I begin forming my argument in this section, please visit this website and thoroughly study the Bitcoin price chart that spans from the first pricing of Bitcoin to its current price.

If you’ve looked over Bitcoin’s price history, you’ll notice that one Bitcoin was originally priced at $0.05. Since its inception in 2009, the price of Bitcoin has risen to around $4,300. In the past year alone, the price of Bitcoin experienced a $3,000 increase. You now understand why this is a potentially powerful investment.

However, you should also take notice of the price spike that occurred at the end of 2013. Bitcoin jumped to $1,000 and then gradually dropped $800 over the course of a year. Yes, Bitcoin has seen quite an improvement in price recently but it has experienced a similar price increase in the past, only to lose the confidence of many investors as its price declined dramatically. While it is doubtful that we will see this type of event happen again, it is still a possibility that we need to consider when it comes to investing money into Bitcoin.

For those of you who are interested in trading Bitcoin as a way to increase your wealth, these are the type of trends that you need to pay attention to. At any moment, regulations created by governments, a lack of interest in Bitcoin, or a small price drop may cause the price of Bitcoin to plummet. It may return to its original price or it may never recover. Invest at your discretion.

Trading Bitcoin and Trading In Forex Are Two Different Things

While trading in Forex is a necessary skill to have if you are interested in trading Bitcoin, the two aren’t necessarily the same.

For example, Bitcoin and Forex vary in three main areas: supply, demand, and inflation.

The supply of any government-controlled currency depends on how much the government chooses to print and disperse to the country in question. One day, the government may choose to print more of a certain currency and this will affect the price of said currency. Bitcoin, on the other hand, has a set amount of Bitcoins that will be produced in a given year. Eventually, Bitcoin production will cease and there will only be a certain amount of the cryptocurrency in circulation. This gives trading Bitcoin a little more stability over trading in Forex.

However, the demand of government-controlled currencies and the demand of Bitcoin is where things begin to change. As long as a country has faith in their currency and a need to use it, it is safe to assume that the price of the currency won’t change drastically and that the country won’t be getting rid of their currency anytime soon. Bitcoin doesn’t have that type of security. Since it hasn’t been adopted as a valid currency by the world, demand for the cryptocurrency is subject to change. World events, government regulations, and the media all have the potential to either help Bitcoin thrive or cause it to crash.

Lastly, government-controlled currencies are subject to inflation while Bitcoin is not. As stated above, a government can choose to print money at any moment for whatever reason. Bitcoin can only be produced at the rate that it is intended to be produced. No economic hardship or debt can cause a greater production rate of Bitcoin.

Overall, those who trade in Forex should shy away from trading Bitcoin if their reason for trading is security. Bitcoin is the least secure of all assets that are currently available to investors and traders. If you are a high-risk trader who prefers volatile investments, then Bitcoin may be a good option for you.

 

bitcoin trading

I’ve Considered All of Your Arguments and I Still Want to Trade Bitcoin. How Can I Go About Doing This?

To start trading Bitcoin, all you have to do is find a Bitcoin exchange. Bitcoin exchanges typically conduct business in one of three ways. They connect buyers to sellers, they let you trade with sellers and buyers directly on their platform, or they connect you to brokers. Traders who are only interested in purchasing and selling Bitcoin should use exchanges that trade Bitcoin using the first two methods. Only serious traders should use a Bitcoin exchange that uses the last method.

Now that we’ve discussed what types of Bitcoin exchanges exist, here is a list of some of the trustworthy exchanges that you should consider using:

Before you begin using any type of exchange, conduct extensive research on the Bitcoin exchange before you sign up for its services. Some trustworthy exchanges are well-known for their poor customer service, high service fees, and inability to exchange Bitcoin for a wide variety of foreign currencies. If you intend on using any service that is not a professional Bitcoin exchange platform, conducting research is absolutely necessary.

Also, be aware that your funds are not secure. Even the most professional, protected, and trustworthy of Bitcoin exchange platforms can be hacked and drained of funds. Should this happen, you may end up being a victim and there is a high probability that your Bitcoins will not be refunded or returned.

Invest only what you can afford to lose and keep your investments safe.

Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.  

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Australian Expat Investor Contributor

These articles have been written by an Australian Expat Investor Contributor. Please see their details in the relevant post. The views expressed in the article are his or her own and may not reflect the views of The Australian Expat Investor. If you are interested in contributing an article or story to The Australian Expat Investor please visit our contact page.

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