The cryptocurrency market is one of the most volatile financial assets. With high volatility comes great risk but an even greater reward. Cryptocurrency has enabled a new generation of traders to achieve great wealth from massive price fluctuations. No other financial asset behaves similarly – Forex prices fluctuate by the hour yet in minor increments. Crypto, such as Bitcoin, can change the price by thousands of dollars daily.
In this article, we take a look at cryptocurrency and share valuable advice for all traders.
Renewed surge for Crypto
Cryptocurrency prices have rebounded in 2023, with Bitcoin surpassing the $30,000 mark on April 11, a feat not seen by the asset since June 2022. It’s the first time the king of crypto has passed this crucial barrier after remaining trapped in the $26,000 to $29,000 range since the start of 2023. Overall, the market capitalization of cryptocurrencies stands at a whopping $1.17 trillion.
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Asking the right crypto questions
The price hike has seen renewed interest in Bitcoin and cryptocurrencies.
But do you know how to trade Bitcoin correctly? What is Bitcoin and how can you mine it? How do you invest in Bitcoin? Don’t worry, we’ll answer all your questions and more in this article.
Let’s start first with the most common question that pops up in Google:
What is Bitcoin?
Simply put, Bitcoin is an electronic currency or rather a decentralized cryptocurrency. No one controls it. It is not printed such as US Dollars or Euros and neither is it tied to a financial asset or commodity such as gold. Though invented in 2008, the currency started being used in 2009 when its application was released as open-source software. They are produced by people who use Computer programs to solve complex mathematical problems. These people are known as “Bitcoin miners.”
Bitcoin allows anyone anywhere in the world to send and receive money without permission from a bank, company, or government entity. The transaction is immediate and the cost is negligible no matter how much money is sent or received. This takes middleware banking services, such as PayPal or Western Union, out of the equation. It is also the largest cryptocurrency of its kind by total market capitalization.
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Bitcoin Trading Methods
There are two primary ways to trade Bitcoin:
Either by buying Bitcoin and then selling it to make profits from it.
Or via CFDs, where you speculate on the value of Bitcoin without owning it. You can trade the contract based on the market price. You benefit from the difference between the present value of the asset and its value at the end of the contract. If this difference is positive, it is in your favor, as is the case with gold trading. For example, if you buy one Bitcoin at $18868.50 and the price falls to $18771.20, it means that your loss will be $97.3.
You can also trade Bitcoin on margin, an option that allows you to borrow from Bitcoin trading companies using leverage to complete the liquidity needed to complete the transaction. If your account is insufficient, for example, to enter a long position on 5 Bitcoin, the leverage supports you to enter and complete the transaction, and after reaching its target, it closes the position for settlement and returns the borrowed amount in addition to the interest or fees due, and the profit is added or the loss is deducted from the principal – exactly like dealing with regular currencies or gold. and oil.
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What is Bitcoin Trading? And is it like Forex trading?
The main difference between the Bitcoin market and the Forex market is the liquidity factor. The Forex market is the largest and most liquid market in the world, with an average daily trading volume of up to a trillion dollars.
Liquidity is the degree to which the market allows you to buy and sell assets at fixed prices. The more liquidity, the more stable the market will be. If there is a deal worth a million dollars a day, the market can absorb this deal easily, without much change in the value of the dollar. In the case of Bitcoin, the same transaction may have a much greater impact on the value of the digital currency due to the relatively small trading volume. For price stability, the demand for Bitcoin must be compliant. With inflation.
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How to invest in Bitcoin
To invest in Bitcoin there are important steps you need to follow:
First: Get a Bitcoin Wallet
There are several options for a Bitcoin wallet, but the most popular are software and hardware wallets, which are mobile application wallets that connect to your traditional bank account. It allows quick and easy access to Bitcoin.
Second: Linking a bank account
To buy Bitcoin, you need to link your wallet to a bank account or credit card. Although all these payment methods perform the same function of exchanging traditional currencies for Bitcoin, each has fees. Transactions made using a bank account can take four to five business days to be processed.
Bank accounts are generally recommended when dealing with large sums of money. Credit cards, on the other hand, make it possible to buy Bitcoin almost instantly. The disadvantage is that you can buy smaller amounts of cryptocurrencies or Bitcoin, and users cannot sell Bitcoin or deposit money into their bank accounts when their wallet is connected to a credit card.
Third: Register on the cryptocurrency trading platform
Cryptocurrency exchanges or Bitcoin exchanges are online exchanges where you can trade Bitcoin against traditional currencies, for example, Bitcoin for the dollar. These platforms vary in terms of license, reputation, reliability, security, fees, and cryptocurrencies available for trading. Therefore, you should always look for a licensed and secure platform to trade Bitcoin or any of the other cryptocurrencies such as CMTrading.
Fourth: Start investing
You are now almost ready to trade Bitcoin but keep in mind some important tips:
CFDs are leveraged products that are considered speculative trading and carry a high level of risk and are not suitable for every investor. By trading, you can lose some or all your invested capital and therefore you should not speculate with capital that you cannot afford to lose. And you should be aware of all the risks associated with margin trading. Always be on top of market movements and fluctuations. Always do your research and diversify your investment portfolio.
What factors affect the price of Bitcoin?
Sharp fluctuations in the price of Bitcoin are a great opportunity to trade, but at the same time they make the cryptocurrency market a risky proposition, with Bitcoin prices for example changing sharply and without warning.
Factors that play a role include:
Miners
The amount of Bitcoin is limited to 21 million units, all of which are expected to be mined by 2040. However, their prices fluctuate based on the rate at which they enter the market and the activity of Bitcoin traders.
Negative News
All currencies are affected by public opinion and negative news, but Bitcoin is heavily influenced by any news. The life, security, and value of this virtual currency are always put under the lens of a microscope. As such it’s prone to wild swings in prices.
Major events
Major events often play a pivotal role with important implications for virtual currencies. Including regulatory changes, security challenges, macroeconomic setbacks, and more.
Social Media
There is no doubt that in the past few years we have witnessed sharp fluctuations in the prices of Bitcoin and other cryptocurrencies due to social media. Tweets from billionaire Elon Musk about Bitcoin and Dogecoin sent the price of these assets skyrocketing and plummeting…sometimes within a 24hr period.
Regulations and governments
Governments and regulatory policies will affect the prices of cryptocurrencies in general in 2023 and beyond. Tightening control over Bitcoin mining affects its prices and exposes it to very sharp fluctuations, as we have recently seen the price of Bitcoin affected by China’s decisions that would restrict Bitcoin miners.
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