5 Important Bitcoin Trading Concepts

With its arrival, Bitcoin changed the dynamics of the financial world. In 2009, a mysterious man or group named Satoshi Nakamoto invented Bitcoin’s decentralized digital currency. It was the first cryptocurrency globally; according to the present market value, Bitcoin holds the most valuable cryptocurrency. 

The current value of Bitcoin is around $44,000. In 2009, after its arrival, mostly internet enthusiasts were the initial investors of Bitcoin, but eventually, it became so mainstream that it started being the financial investment asset. Investors and traders worldwide started recognizing the potential of Bitcoin as a financial asset in 2013 after its value hit a whopping $1,000. Still, it received its popularity in 2017 after the value of one Bitcoin hit $20,000. 

This time, investors and people in business and the financial institutions and governments noticed it. By 2021, Bitcoin rose to its all-time high of $68,000. It was declared as this decade’s best investment. 

Everyone wants to trade in Bitcoin, but the task is more than it looks. So, here are five vital trading concepts you should know before you start trading in Bitcoin:

1. Trade-in Bitcoin Futures: One of the most significant disadvantages of Bitcoin and Cryptocurrency is its volatile nature. The value of Bitcoin fluctuates very frequently, around 30% each day. It is a massive inconvenience for novice investors. So, a way to handle such inconvenience is to trade in Bitcoin in the future. It is essentially a financial derivative for someone who does not know a lot. 

You can use this when you are uncertain about the fate of the asset. It comes with two options, call and put; if you want to buy the investment, you have to choose the call option; if you don’t, you can select the put option. To compete with volatility trading in the future, Bitcoin would be a great choice.

2. High-Frequency Trading: This way of trading is not for beginners. HFT requires intricate knowledge of mathematics, and the trader also needs to have excellent knowledge of computer science. The computers used in this trading method are mighty. 

The trader creates a bot that works on an algorithm. The bot can make huge transactions in a few seconds after analyzing the market. It makes the order and dumps the asset at a perfect time, giving you the best possible deal.

3. Creating a Balanced Portfolio: One of the most significant advantages of using Bitcoin is that it’s decentralized, meaning the central banks around the world does not regulate Bitcoin. Having privacy gives Bitcoin’s investors a sense of relief as they know that their privacy is not being invaded. This makes the government extremely nervous as Bitcoin can be used in various illegal activities such as money laundering or terror financing around the world. It is very much possible that governments might ban a particular cryptocurrency from fighting such activities. 

That would be horrible news for traders, and it will undoubtedly cost the traders an arm and a leg. Though it is impossible to shield yourself from such a crisis, you surely lessen your loss by investing in various cryptocurrencies. It is unlikely that any government would ban all cryptocurrencies in one go. So investing in another cryptocurrency like Litecoin, Ethereum, or XRP would be a very sensible decision.

4. Arbitrage: Another great way of trading in Bitcoin is arbitrage. Arbitrage is a trading strategy; if you buy the asset from one trading and sell it to another, the process is called arbitrage. A trader can purchase assets from various trading markets while sitting in their home with the internet. 

So sometimes the price of Bitcoin differs. If a trader books a volume of Bitcoin from one market and simultaneously sells it to another, they can make a considerable profit out of it.

Also, Check – How to Cash Your Bitcoins

Please do your Research: More like advice than a concept, but traders must do their primary research before investing in Bitcoin. The value of Bitcoin is highly volatile, which means the prices rise and fall in the blink of an eye. Suppose you didn’t do your research and bought Bitcoin at its highest value; you are most likely to go through a loss which means that your selling price would be lower than your cost price. On the contrary, if you do the research for a few days and manage to buy the Bitcoin at its lowest cost, even if it doesn’t hit a high value, you can still sell it for a good profit.
That being said, trading in Bitcoin can be very complicated as a lot contributes to its value. One of the things is its scarcity, as there is only 21 million Bitcoin globally, of which 20 million has been mined already. People understand that something whose number is limited can be precious. Many people around the globe trade Bitcoin; most of them are veterans. It is crucial to know what you’re doing to make a profit. Open account for crypto trading if you are looking for a safe trading platform.