Have you been reading our posts? Today we will focus on the novice Bitcoin traders. Here, I will bring to you an easy guide in trading Bitcoins where you will reap a profit.
Cryptocurrency trading is the new thing and Bitcoin-the oldest can be extremely rewarding in terms of the spread. By spread I mean the arbitrage profit you will get by differing market prices. That is, the global market margin is widely available. This is usually as a result of different cross-rates calculations. With this, arbitrage comes in and many people can easily exploit this by trading Bitcoins.
If you have been careful about the cryptocurrency and economic news you watch; you will realize that there is a certain criterion followed by Bitcoin and any other Cryptocurrency out there. First, it is usually volatility followed by the bubble. With each bubble, the media attention shifts focus to Bitcoin. This spread of news creates attention and Bitcoin prices become volatile. That is with the increased attention; more people start tinkering with Bitcoin which becomes a hype and then the trading. This lasts until the Bitcoin hype fades.
Trading in Bitcoin is very easy. The reason for this lies in the fact that Bitcoin is global and has very little requirements. In fact, there is little to no verification when it comes to trading. Like any other security in the market, investors want their Bitcoins to maximize their wealth while the speculators want to gain their spread from arbitrage.
To start trading in Bitcoins, you need to join one of the many online trading companies offering CFD. This stands for Contract For Difference.
What makes Bitcoin trading easy?
The answer to this question lies in the various characteristics of Bitcoin. Some of these also lie with other cryptocurrencies but are more advanced and recognized in Bitcoin. These are:
- Volatility: Like any good speculating security in the stocks market, Bitcoin is volatile. Its prices are always yawning and are frequent enough to for daily charts. Actually, CoinDesk BPI provides these charts on a daily basis.
- 24-hour trading: What makes Bitcoin more profitable and better than the securities market is that it trades 24/7. Part of this lies in the fact that Bitcoin is global and there is no time limit because of the different time zones.
- Bitcoin is decentralized: This makes it independent of the various government controls. Also being decentralized makes it global meaning that any economic control in one place does not directly affect its prices. Such controls would be the devaluation of currencies or various controls in capital markets. Actually, these measures by the governments are what makes the prices of Bitcoin rise. An example is the 2013 Bubble created by Cyprus capital controls.
These factors have made Bitcoin a favorable security to invest and speculate in. actually, the other cryptocurrencies use Bitcoin as a Benchmark when it comes to trading.
Starting Bitcoin trading
Before we head there, it is important to know a few things when it comes to Bitcoin trading. First is that China leads in Bitcoin Trading. All the data collected from the many sources show that trading volumes in China are dominating the market.
It seems ironical considering that China is one of the most restrictive states to have a flourishing cryptocurrency in the market. Some might consider this a freedom of expression since Bitcoin is independent of any state power. However, that is not the case as most if not all Chinese Bitcoin Blockchain merchants consider Bitcoin as an asset to be capitalized on. That plus the following reasons is what makes China the leading Bitcoin Trader globally.
Global Leaders in Bitcoin
China hosts one of the largest Bitcoin miners, Bitmain. Bitmain operates two pools that accounts for almost 30% of all Bitcoin processing power. The other reason for China’s dominance is that the Bitcoin trading is that the Chines government had relaxed its finance regulations. This made trading much easier. This means that the Bitcoin market was also more developed and mature than the rest of the world. In the market, leverage was always maximized by lending, options, and derivatives. Also to this is that in China, exchanges were not charged. This means that Bots could trade non-stop to increase the spread in case of arbitrages.
This, however, has changed and the market dominance has shifted to Japan. The reason for this is that the Chines government has started imposing trade restrictions on virtual currencies. This is especially so on the companies that offer Initial Coin Offerings(ICOs) such as the oldest company in China BTCC. Others such as Huobi has have been exempted but the deadline will be on October 30. As of September this year, Japan had slightly over 50% of the global trades.
Getting started with Bitcoin Trading
The first rule of the thumb is that Bitcoin has no official trading exchange. This leaves the duty of searching testing and trading to you. Have no worries though, there rules to follow while selecting these trading sites.
- Location: Where the company doing the exchange is very important. This lies in the rules, laws and the regulations of that country. Also, this goes with the type of currency the exchange is taking. The recommended action is to always take exchange company in your country.
- Purchasing: The mode of purchasing is important. What method does the exchange take and what will work to your convenience?
- Exchange fee: You need to pay a certain fee when doing the exchange. Check if it has been inflated or if any other fee stands to reason.
- Security: Is the website HTT or HTTPS. The authentication steps to follow when entering your account.
After going using these basics to get your preferred site; you should also be able to avoid being scammed. There are many people over the net trying to get yours over using Bitcoin scams. Try to avoid these as much as you can.
Now, there are some reputable sites where trading is safe, secure and reputable. The following is a list that I have compiled. This is according to my best knowledge and your input and addition are welcome. This is compiled in terms of USD volume from the first.
Buy Bitcoin from best Bitcoin Exchanges
- Bitfinex. This exchange is the first in terms of USD volume. Its daily volume is 25000 BTC.
- Bitstamp. The company was founded in 2011 making it one of the oldest exchanges. its daily volume is 1000 BTC.
- Coinbase. This was the first exchange to be regulated in the United States. Coinbase trade volume is about 8000 BTC daily.
- Okcoin. Since the downfall of China dominance in the market, Okcoin has taken a huge dip but its worthy to mention it in the list. It used to trade at over 9000 BTC but this has fallen to less than 1000 on the day of publishing this article.
- Another worthy mention is Kraken. It is the first in terms of EUR daily trading volumes at around 6000 BTC. This makes it top 20 in terms of USD volume.
Like any other security in the market, Bitcoin has its own trading risks. Some of these are discussed below.
- Leaving money on Exchange:
Bitcoin is an independent non-participant currency. Apparently many do not know this. one of the most remembered cases is the Gox collapse. During its time, it was one of the largest exchange points. It was one of the easiest ways to obtain Bitcoins but on its collapse, users left more than 800,000 Bitcoins in Gox accounts. In February 20014, withdrawals were halted and up to now not have received their funds.
The best way to avoid a case like Gox catastrophe is to use a regulated exchange.
- Capital risk: Your capital your risk. You should start trading at low amounts then growing to larger and larger when you start gaining profit. This you will do after learning the strategies and understanding the market signs.
Above anything else, before trading, you should search and find the best strategies to use in trading Bitcoin. There are many resources on Bitcoin on the internet that you should utilize to your fullest.
Step by Step Bitcoin trading
To trade, you will of course need to sign up an account. Kraken will be used in this excerpt as a general guide to get you started.
To open an account, go to the official website and click sing up box.
Confirmation will be done using email. Once this is done, you will log in and fill your personal information.
Once you sign up and all your levels or verification are procedures are followed. You will get the following.
By the way. Every Exchange must follow the AML and KYC laws for verification.
Once your account is set up; go to funding and select your preferred choice of funding. You will get the following screen shot.
As with Kraken, there are many choices of deposits to choose from.
- EUR SEPA Deposit (Free) – EEA countries only
- EUR Bank Wire Deposit (€5) – EEA countries only
- USD Bank Wire Deposit (Free until 3/1/2016, then $5 USD) – US only
- USD SEPA and SWIFT Deposit (0.19%, $20 minimum)
- GBP SEPA and SWIFT Deposit (0.19%, £10 minimum)
- JPY Bank deposit (Free, ¥5,000 deposit minimum) – Japan only
- CAD Interac Deposit (Free until 3/1/2016, then 1%, $10 CAD fee minimum, $5,000 CAD deposit maximum)
- CAD EFT Deposit (Free until 3/1/2016, then 1%, $10 CAD fee minimum, $50 CAD fee maximum, $10,000 CAD deposit maximum)
The deposits are different. With the banking system, the deposits take a maximum of three working days to process while with Bitcoins it can take about an hour but with six different confirmations.
To begin trading, select Trade tab. You can switch the trading pairs to match which you want using the black bar. To begin our trade assuming a $300 deposit in the account, select new trade. Here, you see that Bitcoin is trading at 0.5XBT for $37O per Bitcoin.
On checking the last trade, the price was $383.17.
The reason for this is because, one may submit at a lower price than the current one. This is done when expecting a fall in the prices of Bitcoin. Since in this case my bid is lower than the market price; my order will be processed later than the others. This is so because of placing an order through the Limitorder. This places an order by a particular price. Before placing an order, you should check the orderbook for your trading pair before deciding the price.
An example is the following:
As you can see, there are various prices through which people have placed their orders. You can skip this by placing an order through the market price. Such as the following:
As such, the market order will submit a buy order at the lowest possible available sell order which is 0.5XBT at $384.07 per XBT. If it is selling, it will place at the highest sell order of which is $382.5.
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