What is Bitcoin Trading

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What is Bitcoin Trading

Published days ago on July 31, 2020
By Anton Kovačić

The Idea of Trading Bitcoin

The world of trading seems frantic and like a high-speed thrill ride. It is depicted in movies and television as a way to get instant riches; however the reality could not be farther from the truth.

Instead of just pressing a lot of buttons to earn a lot of interest on investments, trading involves an education and knowledge, along with a dose of concise decision making.

Trading is an umbrella term for many different financial markets like exchange-traded funds, the stock market, foreign exchange, and cryptocurrencies. Cryptocurrencies are a fairly new way of trading and are a diverse investment for many traders, particularly with the introduction of bitcoin trading.

The trading process and people involved in trading have changed over time. Trading goes back to the times when grain was exchanged in ancient Mesopotamia. Financial instruments were traded in the 1300s with the exchange of government debt, and debt collected money lenders. Throughout history, people involved in financial markets were considered wealthy.

There is a shift happening today with financial markets in the way that cryptocurrencies are presenting new opportunities for investors. The way things work in financial markets and investors are changing because blockchain and the internet are making trading much more accessible to people globally. This evolution has created lower capital requirements for entry into investing, making it widely available to more people.

Even with the advent of cryptocurrencies, the essence of trading is steadfast. There are many possibilities that exist, along with possible risks and rewards.

How Investing and Trading Can Differ

It is possible to be an investor and a trader in today's market. Investing and trading have different goals and strategies that make them unique. Time is the major difference between them.

Each term is related to the amount of time that assets are held.

When you make an investment, you are looking at keeping long term assets in your portfolio. Trading usually applies to holding an asset for a short or medium amount of time. Many investors' goals are to build profits over time by buying and holding assets for the long term. This is referred to as hodling with cryptocurrency trading, based on a forum post by a user who had too much whiskey.

Either way, hodling or holding is a real-world strategy. It generally means that no matter how far a purchased asset drops in price, the investor will hodl or hold on to the asset until it increases in price.

Stocks and bonds are common investments, although there are many more, including real estate, insurance, options, investment funds, cryptocurrencies, and more.

Trading involves many of the same assets as investing, and the main difference between them is the markets. Trading brings buyers and sellers together to buy and sell with a focus on making money fast. Traders will study up to date pricing, charts, and industry news to educate themselves on the value of the assets.

They thoroughly analyze the data to decide on a course of action and strategy. Although small and medium trades are associated with trading, there are times when larger trades happen.

You can expect the same kinds of outcomes with trading and investing. They measure up very similarly with small profits or losses, or large profits or losses. There is also the break-even that can occur in trading and investing.

Understanding Bitcoin Trading

The buying and selling of bitcoin are the definition of bitcoin trading. It adds a new element to trading currency because it is new and dynamic. It's also a more volatile market, but it presents the opportunity for big gains.

The purpose of bitcoin trading is to buy low and sell high as with most any investment. The goal is to purchase bitcoin for a low price paying a low amount of fiat currency to get a large amount of bitcoin. When selling bitcoin at a high price, you receive a high amount of fiat currency in return for a low number of bitcoin.

If you look at a price chart of bitcoin, you will notice various large swings in price that can create big opportunities for gains in the market. Even when the price of bitcoin levels, there are still profits to be made from trades because pricing changes happen so frequently.

Trading bitcoin happens on exchange platforms that are regulated. Also, foreign currency exchanges are adding bitcoin to their trade offerings as well. As with forex, bitcoin trading happens 24 hours a day, seven days a week around the world.

The exchanges that bitcoin uses are unique platforms based on the digital currency exchange. It is a marketplace for currency trading as with trading bitcoin for dollars and back again.

There are many exchanges where you to trade bitcoin into various altcoins or other cryptocurrencies. The exchanges create a marketplace for buyers and sellers to make simple trades while collecting a small fee for the transaction.

Some of these exchanges include ShapeShift, Coinbase, Binance, Kraken, and BitStamp.

Bitcoin Pricing

Just like any investment and trading opportunities, there is no set worldwide price for bitcoin. Bitcoin pricing is determined by the individual exchange you select for your trades.

When you are purchasing bitcoin, the exchange will display the bid price. The bid price is also known as buying interest, and it is generally the highest price that a buyer is willing to pay on the exchange.

The selling interest or ask price will be the lowest accepted price for a sale on the exchange. The exchanges assign the highest and lowest prices based on 24-hour trends.

Before trading in bitcoin, it is vital to educate yourself on the cryptocurrency market and learn what affects the price of bitcoin.

It is essential to understand and distinguish between the value of bitcoin and the price of bitcoin. The price and the value must never be confused or mistaken when trading bitcoin.

Bitcoins value results from blockchain's worth. It affects the technology behind it, and the advantage it has as a new strategy to designate value around the world.

Bitcoin pricing is in direct comparison to the number of people who use it, and more importantly, the value and how much people are willing to pay for it. Bitcoin is also rare as a precious metal, and it is believed that the potential scarcity of bitcoin will affect its price in the long term.

There are also other factors that contribute to the volatile pricing in the new market. These other factors that affect bitcoin pricing include bitcoin integration as a form of payment by large corporations, coverage by the media, scaling, forks, and government regulation.

The Advantages of Trading Bitcoin

There is almost no barrier to entry when it comes to trading bitcoin. Basically, all you need is an internet connection and some spare cash. Bitcoin trading is radical as it has shaken up traditional trading by becoming part of the global economy and making space for an investment market based on inclusivity. You don't need a lot of money to get started, and this fact makes bitcoin a very accessible asset for the masses.

When trading bitcoin, you don't even have to buy a whole bitcoin. A bitcoin is divided into 100 million parts, and the smallest unit is referred to as a satoshi.

To get started, you can begin trading bitcoin with just a small amount. Combined with the small investment amount, there are basic mining fees, and exchanges generally do not charge large fees.

With bitcoin, there are no central authorities, and new bitcoin is created and given to the miner that located the new block of bitcoin transactions. There is also halving, which splits the Bitcoin and increases its value. Bitcoin is halved every four years for miners.

The generation of new bitcoin managed with strict limits to keep from flooding the market with new coins that would devalue them.

In addition, the decentralized system of bitcoin ensures that the price cannot be devalued or otherwise manipulated in any way. Changes in pricing follow the natural law of supply and demand and market fluctuations.

As bitcoin gains attention and popularity, the volatility in the market makes it an excellent investment. There is an opportunity for high profits with bitcoin trading, and there are also potential risks as well.