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3 months ago

How do people benefit from Trading Bitcoins?

In recent years, Bitcoin has evolved into a speculative investment for individuals seeking alpha from alternative assets and possibly it has highlighted uncertainties and/or weakness in fiat currencies. Bitcoin was the world’s first digital currency and it is expanding in popularity worldwide.

Trading bitcoin is like trading anything else on an exchange. Like the term implies, the process of buying and selling financial instruments such as stocks, bonds, commodities, derivatives, mutual fund and even now, Bitcoin, is trading. i.e. To Buy & Sell Bitcoin is bitcoin trading. Like Forex trading, bitcoin trading is quite similar like how the prices of both paper and digital currencies are based on global supply and demand metrics or how both prices are affected by demand in the same way, but they have some differences. According to a Bitcoin trader  Bashir Aminu, who is also a convener of online crypto group Cryptogene, the basic Bitcoin trading process is as follows:

“If you buy Bitcoins at one price and then sell them for a higher price, you make a profit of the difference between those two prices, less any commission that you paid. However, if the price goes down, you will be in the uncomfortable position of having to either sell them at a loss or hold and hope the price goes back up while risking higher and higher losses if the price continues to drop.” 

BTC and other cryptocurrencies offer a world of possible benefits and applications. Even more, one can trade dollars for euros through forex, and dollars for bitcoins on the exchange. People use Bitcoin and other cryptocurrencies for a multitude of reasons, some potentials of bitcoin trading from therein stands out:

  • Investing to make profits 
  • Buying in hopes that it will replace traditional currencies
  • Buying in hopes that it could help them attain financial security

 

Each of these groups of people has experienced some degree of success in their endeavors and some may have seen an unfortunate outcome. For those who wish to turn a profit, BTC skyrocketed in price, and they enjoyed nice returns. For those who wish to invest in the future, many businesses have begun accepting BTC as a form of payment. Larger organizations and companies have implemented blockchain technology, which was created along with cryptocurrency, to improve and optimize their quality checks, security, and supply chains. For those who seek financial stability and security in places where they either don’t have access to a national bank or the national banks in their countries are unreliable and unstable, time will only tell. Many cryptocurrency companies have moved to developing nations in the past years to bring cryptocurrency to people who wish to have more control over their money, and so far they have seen some degree of success. We can only hope cryptos grow in the coming years and that they’re used to their full potential. 

Drawn from above, it is more factual that, most people actively trading bitcoin right now are hoping to benefit from price appreciation by speculating that bitcoin’s price will increase. For the most part, these are short term traders. A smaller subset of investors view bitcoin as a future form of currency transactions and plan to be a long term buy and hold investors because they anticipate merchants all over the world adopting bitcoin as a payment platform. 

 

The usual way for most people to trade bitcoin is through cryptocurrency exchange and it is usually to make a profit just as one would invest in any other commodity to make a profit. To trade bitcoins on whichever exchange, one would usually follow the same or similar steps. Since Bitcoin is intangible bitcoin trading is only done online whether through smart devices or Bitcoin ATMs. First, open an account with a verified exchange, then one can fund the account with a native fiat currency, Fill in a preferred investment amount before proceeding to BUY (go long) or SELL (go short) Bitcoin.  Note that there are ‘long term’ traders and ‘short term’ traders in the bitcoin market each of these group of traders is classified by how long they may wish to hold onto a given position of trade. 

In the Bitcoin market, is trading profitable?

With in-depth knowledge of bitcoin trading, from the range of experience, trading style, skills, and knowledge, one would make a profit from it regardless of which way the currency is moving. Added with the different trading tools now in place, their design to simplify the trading process. Most of the work is really on the trader as the Market conditions are always changing; one would need more of a strategy in place to gain from trading.

For Long term, traders studying price trends over long periods of time are part of the strategies used.  Investors can make informed decisions via this to buy and hold Bitcoin for a long time hoping to gain profit from a price that is higher than when they bought the asset.

Short-term traders, on the other hand, analyze the behavior of Bitcoin price on an intraday basis in order to leverage on the swings in price. These type of traders thrive in market volatility, a factor that is presently a worrisome characteristic of Bitcoin.

There is a popular life instance of a family of five with Dutch origin, that sold everything they had and traded it in for bitcoin. In an interview at the time in 2017, the father Didi Taihuttu said in an interview with CNBC:  “We were just like – sell it, sell it, what can we lose? Yeah, we can lose all the material stuff. Yeah, we can lose all our money. Yeah, we don’t have three cars anymore. We don’t have the motorcycle anymore. But in the end, I think we, as a family, will still be happy and just enjoying life.”  According to the family at the time, income from trading at the start was just enough for food and necessities that they really needed. Conclusively, bitcoin trading can be very profitable, or you can lose just like any other trading situation. It is important to note that bitcoin mining is not the same as trading. So far the 'all-in-bet' the Taihuttu family made with bitcoin has benefited them. This is mainly because they played their cards well.

To actually benefit from bitcoin trading:

Invest in different cryptos or even the same but smaller amounts; capital should be broken into smaller lots for multiple positions at different price levels. 

Even as trading is a risk, trade only with money that can be easily forfeited in the case of loss. Uncertainty in the Bitcoin market made this factor very important.

Rather than trading manually, make use of trading tools borne from the available technology to increase the possibility of optimum profit.

Time, concentration and effort should be continually put in so as to keep up with constantly changing threads. 

Do not become greedy and keep trading after you should have reaped gains; Know when to cash in. 

In the end, it is really the cumulative gains that count as successful trading, not just scattered minimal losses here and there. These pieces of information are not based on expert opinion but from extensive research and other combined data. They do not stand as recommended advice from this establishment concerning bitcoin trading.

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Credits- Ian Cogswell, Lou Haverty, Iyke Aru, MacKenzie Sigalos

Anita O.

Lover of tech and blockchain.

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