The world of cryptocurrency is growing at an explosive rate. And with that growth come more and more markets, exchanges, wallets, mining rigs, and other information you may need to know to trade Bitcoin. But what if you’re looking to invest a little bit into the market? The good news is that it’s never been easier for people interested in the burgeoning demand to open an account and start buying their first Bitcoin.
What Is Bitcoin?
Bitcoin is a cryptocurrency and worldwide payment system with no central bank or single administrator. It is a decentralized system, meaning that instead of the transaction being processed by a central bank or financial intermediary, it is processed by a network of nodes. Bitcoin is also the name of the open-source software which enables the use of this currency. The network is peer-to-peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in public distributed ledgers called a blockchain.
Now that you understand what it is let’s advance onto what you can do to begin trading.
Get A Wallet So You Can Securely Store Your Funds
A Bitcoin wallet is where you store, send and receive Bitcoin. Every Bitcoin wallet can have multiple addresses but can have only one wallet. The wallet holds all of the private keys which identify your addresses. The first thing you will need to do before even considering buying your first Bitcoin is to choose an established wallet provider where you can securely hold your Bitcoins. This is because you’ll need a place where all of your money is stored safely between trades or transactions. This is essential to be careful not to use the same address twice or lose your Bitcoin. Private keys should never be shared and you should treat them just as you would a password for your online bank account.
Choose An Exchange
People often wonder what Bitcoin exchanges are and how they work. It’s not as complex as it seems, and there are many different types of exchanges. So, what is a Bitcoin exchange? An exchange is a website where you can use fiat currency to buy various cryptocurrencies. As you probably know, cryptocurrencies like Bitcoin are not bound by any country or government, which means that you need a specialized exchange specializing in buying and selling.
Choose Your Payment Method
Once you’ve found an exchange that suits your needs, you can complete your registration and verify your identity. To purchase your first Bitcoin, you will need to deposit real Fiat currency into your chosen exchange. Some exchanges take credit cards, and others only accept bank transfers or wire transfers. Some require proof of address before you can buy Bitcoin. It depends on which country you live in, what fiat currency you will use, and what forms of identification you can provide.
Research and Study
Before you consider spending your first dollar on Bitcoin, you must make sure that you understand what makes it move up and down. In the past few weeks, we have seen that Bitcoin and altcoins are not immune to market forces. After a massive rally, it has recently fallen into a bear market. The most likely culprit is an overabundance of speculation that has led to an unsustainable bubble. This happens in a recyclable fashion, but you can still make a profit if you study not only the reasons it rises but also why it falls so spectacularly.
Know Your Limits
Know what you can spend and what you cannot which is the same advice for investing in the stock market. For example, if you can absorb the loss of $1000, you can consider investing; however, if the loss of that amount would be a significant drain on your resources, it is probably better to start lower. Of course, the issue is that you need to invest a lot to make a lot. Nonetheless, the critical point is only to commit what you are prepared to lose.
Choose A Trading Style
Once you are familiar with the basics of how to use the systems that permit you to buy Bitcoin, you should consider what your style of trading should be. There are four main styles that most people end up in, and each technique yields vastly different results.
Day Trading
Cryptocurrency trading requires a special breed of investors, one who is not afraid of volatility and can stomach the ups and downs that are part and parcel of the day trader lifestyle. You have to be willing to accept that there will be good days and bad days and that you will spend most of your time researching and learning how to trade the world of digital currency properly.
Trend Trading
The term “trend trading” is used to describe a trading strategy based on trend detection. Trend trading involves purchasing an asset increasing in price, and selling it when the price begins to decline. Trend trading has been the subject of considerable debate among traders. Some argue that the strategy is designed for long-term investments, and others claiming that it can be used for both short-term and long-term investments.
Hedging
When you buy Bitcoin, you are not simply purchasing a digital currency, but you are making a bet that the price will rise. By investing in the Bitcoin market through a Bitcoin exchange, you can gain exposure to the cost of Bitcoin through the market’s trading of the currency. You can use shorting instruments such as a Contract For Difference (CFD) to bet against your initial bet. This means that you might be able to recoup some losses if the price crashes.
HODL
HODL first appeared on the BitcoinTalk forum in late 2013 as a drunken misspelling of the word “hold.” However, the term has stuck and is now used by investors and analysts to describe a strategy for getting the best possible returns from cryptocurrency investment. The process is simple: hold your cryptocurrency investment, regardless of what happens to the value of the coins, and you will be rewarded in the long run.
Bitcoin can be a fantastic investment if you know what you are doing and a terrible one if you don’t. It is an investment and, as such, can go either way. Nevertheless, if you understand what is at risk and do your research, it can be a rewarding experience.
