This year, Bitcoin has soared to spectacular highs. Its price has quadrupled in comparison with 2020, and experts are predicting further growth. Becoming a crypto trader is tempting. Here are the basics to help you get started.
Learn About Key Factors
To foresee how Bitcoin will move, you need to understand the drivers. The number of Bitcoins is limited to 21 million. As supply is capped, rising demand always pushes the price upwards.
Secondly, the price is sensitive to publicity. If the security or longevity of the coin is questioned, the rate goes down. On the other hand, the growing adoption of Bitcoin by conventional systems and banks contributes to its rise. The more institutions embrace Bitcoin — the higher the demand and the price will go.
Changes in laws, macroeconomic announcements, and other fundamentals affect the value. If users agree to accelerate the network, this also boosts confidence in the coin and its rate.
Compare Different Strategies
Like Forex or stock trading, buying and selling Bitcoin has many dimensions. You may focus on momentary changes or long-term trends. Some of the most common styles are:
- day trading;
- trend trading;
- hedging, and
- HODL (holding).
Day trading implies that all trades are opened and closed within the same day. There are no overnight fees or concerns about adverse late changes. Traders aim to make the most of Bitcoin’s volatility during the day. As the cryptocurrency is unstable, it can reap larger profits than in Forex, where you trade stable fiat currencies like the Euro.
Different Types of Exposure
Buying and selling actual Bitcoins is not the only way to profit from their price. You can also make money indirectly through ETFs, CFDs, or market indices (Crypto 10). These different types of exposure allow you to diversify the portfolio and limit risks.
ETFs and CFDs are both derivatives. They are linked to Bitcoin and gain or lose value in line with the underlying asset. ETFs, or exchange-traded funds, are traded on conventional exchanges like NYSE. CFDs may be bought and sold through many online trading brokers.
Contracts for Difference are riskier than ETFs because they are often heavily leveraged. On the upside, you can maximize market exposure with a modest investment. The broker will lend a portion of their funds to increase your buying power and potential profits.
Deep liquidity: thanks to our large client base, our bitcoin market is very liquid. This means you’re more likely to have your orders filled at your desired price — even if you deal in large sizes
Finally, consider the Crypto 10 Index. It reflects the performance of 10 major coins at the same time. The value rises or falls, mirroring their behavior.
Find the Right Exchange
Bitcoins are bought and sold via brokers, exchanges, and peer-2-peer networks. The biggest names like Kraken or Coinbase are private companies offering secure and reliable platforms for trading. Find out about all applicable transaction costs before creating a wallet.