Bitcoin traders could be trading either a commodity or a currency as Bitcoin can be considered to be both. Irrespective of what you believe it to be, the volatility of the cryptocurrency presents profitable opportunities for traders and investors.
Basics of Bitcoin Trading
Bitcoin trading is as simple as purchasing BTC for a certain price only to sell them in the future for a higher price. The difference between the buy price and the sell price minus any fee or commission you pay to your broker or the cryptocurrency exchange is your profit.
If the price of Bitcoin falls before you are able to sell it, you have to either hold on to your bitcoins in the hope that the price will soon rise. Or you have to sell your bitcoins at a loss.
Long-term vs. Short-term BTC Trading
You can trade Bitcoin long term or short term. Long-term Bitcoin traders are those people who have studied the price trend of the cryptocurrency over a long period of time before coming to the conclusion that it would be profitable to purchase and hold bitcoins for a long period of time and sell them at a higher price in the future.
Long-term Bitcoin traders feel that the price of Bitcoin has to rise because of the increasing use and adoption of the cryptocurrency and the blockchain technology on which it is based. History reveals that Bitcoin value has a direct relation to its trade volume and market capitalization.
Short-term traders, on the other hand, are more interested in the price movements of Bitcoin within one day. They take advantage of the volatility of the digital currency and may enter and exit multiple trades in the course of one market day.
Profitable Even in 2021
The safety and stability of Bitcoin as an investment option increases with each passing year. So, Bitcoin trading is definitely still profitable even in 2021.
When the cryptocurrency was in its infancy, its volatility was so high that even the slightest event in the world of cryptocurrencies would cause its price to fluctuate. At present, however, increasing adoption of Bitcoin has stabilized the cryptocurrency to a great extent, reducing its volatility and making it a safer financial instrument for conservative traders and investors.
Trading Bitcoin CFDs
Instead of trading bitcoins directly, you can speculate on its price without owing it. In other words, you can trade Bitcoin CFDs.
CFDs are leveraged financial instruments that allow you to trade contracts based on the price movements of underlying assets without having to actually own those assets. You can enter a trade position by making a small down payment, which is a percentage of the total value of the trade. While the leverage can maximize your profits, it can also magnify your losses.
Exchanges vs. CFD & Binary Options Brokers for Bitcoin Trading
Bitcoin exchanges are similar to traditional exchanges, providing a platform on which you can buy or sell the cryptocurrencies. But the disadvantages of Bitcoin trading at cryptocurrency exchanges are many.
Exchanges are poorly regulated facilities that lack the required infrastructure to provide quick customer support. You cannot rely on their servers and matching engines. Moreover, you have to pay them fees and face a number of restrictions while making deposits into your account and withdrawing your profits.
Instead of trading Bitcoin and Bitcoin CFDs at exchanges, you can create an online brokerage account at a reliable Binary Options broker. A licensed and regulated online broker sources buy/sell prices from a variety of exchanges. If you are new to trading, you can learn and practice without risking your money on a demo account.
Bitcoin Trading in 2021 – Growing Popularity
Since the Internet plays an important role in human life at present, Bitcoin as a digital currency has captured a lot of interest not only among traders and investors, but also among those looking for a safe and reliable way to make payments online.
Bitcoins are like “digital gold.” Just as we have a limited quantity of gold in the world, we also have a limited number of bitcoins. We have 21 million bitcoins in the digital world, and as the days pass, it becomes very difficult to mine bitcoins.
The advantages of Bitcoin are many, and here are few of them:
- Bitcoin is based on a monetary policy that makes it easy for everybody to track the number of bitcoins in circulation and the number of bitcoins that have just been mined.
- You can send bitcoins to anybody in the world and receive bitcoins from anybody in the world.
- Bitcoin is not under the control of any bank, government, or financial institution.
- Bitcoin presents a safe, reliable, and anonymous way to make payments to anybody in any part of the world.
Conclusion: Should You Trade Bitcoin in 2021?
When it was created in 2009, the price of Bitcoin was less than $0.01, but it soon rose to more than $20,000 per bitcoin. Had you invested $50 in Bitcoin in 2009 and sold your coins when the price of Bitcoin touched its all-time high, you would have become richer by $100 million. No other asset would have given you such returns.
Still, nobody would tell you that it is safe to invest in Bitcoin. This is because Bitcoin and the technology on which it is based are still young and the digital currency is still highly volatile. You can expect its price to drop by more than 5% per day, every day. Bitcoin does give you a great opportunity to grow your money, but this opportunity comes with a high risk. If you must invest in Bitcoin, invest only money that you can afford to lose.
You are qualified to invest in Bitcoin only if you have a huge portfolio and invest a small part of your capital in Bitcoin as part of a hedging strategy. Or you are a very young investor with no financial responsibilities and won’t suffer much if you lose your money. Or you have a high-paying job and invest a small portion of your salary in Bitcoin every month.
Before investing in BTC, spend some time in understanding exactly how the digital currency works. Bitcoin is still young, and nobody knows exactly how it can impact global economy.
