Bitcoin trading is getting more and more interest for multiple factors. Let’s see how it works and how to invest in security.
Again, bitcoin trading is getting more and more interest. The reasons are many, ranging from growing economic difficulties, for which people are looking for new ways of earning, to the extraordinary opportunities offered by modern technologies, on all mobile devices (smartphones and tablets), which allow us to be operational when we want and wherever we are.
And how not to mention among the causes of the growing interest in bitcoin trading, also the price levels that cryptocurrencies are reaching. In a bullish run undertaken towards the end of 2020, accelerated by Covid-19. Which also led altcoins first to hibernate, to an incredible awakening.
What is trading?
Let’s start with the simplest and most obvious, but at the same time fundamental question: what is trading?
For online trading, also called by the acronym TOL, we mean the possibility of investing in financial markets through a terminal. By connecting to a platform that allows those who want to invest their capital to easily access the financial markets. If you’re still confused we recommend you to go url.
Those who undertake the activity of online trading are called traders. And they can be divided into:
- trader retails: users who invest limited capital. If they reside in a member country of the European Union, they face severe limitations by the EU’s highest authority for the supervision of financial markets: the ESMA. As for the maximum levels of leverage.
- institutional traders: these are operators who invest significant capital and also have some experience in this regard. This includes, for example, institutions, banks, hedge funds, etc.
Online trading was not born today, but it began to emerge towards the end of the 1980s, when the technology of the stock exchanges began. With an acceleration from the 90s, when American homes saw the increasing presence of personal computers.
In Europe it began to appear in the 2000s, although the spread became very evident with the arrival of mobile devices. And above all, with the phenomenon of cryptocurrencies. Which has fueled not a little interest in bitcoin trading. And online trading in general.
In particular, 2017 was the watershed year. When Bitcoin recorded a real price surge throughout the year. Coming to almost 20 thousand US dollars at the end of the year. Dragging many other cryptocurrencies with it.
Trading with bitcoin
Now let’s see what are the advantages and disadvantages of trading in Bitcoin.
Advantages of trading in Bitcoin
- Volatility: among the main advantages of trading in bitcoin, we find the possibility of investing in a particularly volatile asset. Able to record very sensitive price movements. If you trade with Contracts for difference, for example, you can take advantage of the volatility of cryptocurrencies in both directions. So, both if their price goes up, positioning yourself long, and if their price goes down, positioning yourself short. Obviously, in both cases you need to be careful to make the right evaluations. And in this, technical analysis on the charts can be useful, taking advantage of the many existing trading oscillators and indicators. As well as the fundamental analysis on all the factors that can externally influence the price of bitcoin (insertion or delisting by an Exchange; the birth of a new Futures on bitcoin; a hacker attack on an important platform; the endorsement of a character influential such as Elon Musk).
- Low costs: another advantage is the low costs compared to wanting to invest in other assets. Be careful though. The low costs also depend on the platforms you choose. If you buy Bitcoin directly with Exchanges, you need to beware of exchange and withdrawal fees. If you work with CFD brokers, you need to evaluate the spreads and the expected commissions. Regarding taxes, online trading provides a tax of 26%. Although on this we suggest you keep up to date because the tax system is constantly changing!
- Growing institutional recognition: and finally, the fact that Bitcoin is now considered a cryptocurrency like gold, with growing recognition as a safe haven. Therefore, it is gaining more and more recognition and this is an indication of fewer risks.
Disadvantages of Bitcoin Trading
- Volatility: let’s start from what is the main disadvantage: volatility. Yes, because this last characteristic is, as they say, a cross and a delight of Bitcoin. Indeed, price volatility means unpredictability. Therefore, on a rise we risk then to see a sharp decline arrive. It happened later in 2018, when bitcoin went from nearly $ 20,000 to $ 3,000 at the end of the year. Making it widely believed that it was a passing phenomenon that has already ended. A thesis, the latter, later denied by what Bitcoin did in 2019, when it stabilized at around 8 thousand dollars. But, above all, from the end of 2020. When it embarked on an even more evident rally. So much so that there are predictions that Bitcoin will reach 100 thousand dollars by the end of 2021. If not even 500 thousand US dollars.
- Speed of action and thought: another disadvantage of Bitcoin is having to be quick in thinking and acting. This asset, in fact, due to the continuous price changes, never provides for a lateral or similar trend from one day to the next. So, you have to be quick to seize the opportunities on the fly that bitcoin trading presents. Even with intraday trading strategies such as scalping.
- Financial bubble: finally, another disadvantage that is worth highlighting is that behind bitcoin there is always the risk of a financial bubble. A financial bubble is created when the price of an asset, which has no intrinsic value, begins to increase indiscriminately because more and more investors are targeting it. This creates a vicious circle, in which the more the price increases the more people point to it and therefore, the more the value grows. However, an artificial and unsustainable growth, which in fact then collapses. Or rather it explodes like a bubble. For now this has not happened and perhaps it is also an unjust accusation. But it is still a risk that a good trader must always take into account.
After reading these advantages and disadvantages, are you now ready to do Bitcoin trading?