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Bitcoin Trading

Bitcoin Trading


What is Bitcoin?

Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock and buy Xbox games. But much of the hype is about getting rich by trading it. The price of bitcoin skyrocketed into the thousands in 2017.


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Why Bitcoins?

Bitcoins can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value.

Acquiring Bitcoins

Buy on an Exchange

Many marketplaces called “bitcoin exchanges” allow people to buy or sell bitcoins using different currencies. Coinbase is a leading exchange, along with Bitstamp and Bitfinex. But security can be a concern: bitcoins worth tens of millions of dollars were stolen from Bitfinex when it was hacked in 2016.

Mining

People compete to “mine” bitcoins using computers to solve complex math puzzles. This is how bitcoins are created. Currently, a winner is rewarded with 12.5 bitcoins roughly every 10 minutes.

Owning Bitcoins

Bitcoins are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Unlike bank accounts, bitcoin wallets are not insured by the FDIC.

Anonymity

Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online buying drugs or other illicit activities.

Bitcoin Trading vs. Investing

So what is Bitcoin trading, and how is it different from investing in Bitcoin?

Well, when people invest in Bitcoin, it usually means that they are buying Bitcoin for the long term. In other words, they believe that the price will ultimately rise, regardless of the ups and down that occur along the way.

Usually, people invest in Bitcoin because they believe in the technology, ideology, or team behind the currency.

Bitcoin investors tend to HODL the currency long-term. HODL is a popular term in the Bitcoin community that was actually born out of a typo of the word “hold”—in an old 2013 post in the BitcoinTalk forum.

So while Bitcoin investors buy and HODL for the long term, Bitcoin traders buy and sell Bitcoin in the short term, whenever they think a profit can be made.

Traders view Bitcoin as an instrument for making profits. Sometimes, they don’t really care about the technology or the ideology behind the product they’re trading. Of course, people can still trade Bitcoin if they do care about it. And many people out there invest and trade at the same time.

But why are so many people looking to trade cryptocurrencies (especially Bitcoin) all of a sudden?

Here are a few of the reasons:

First, bitcoin is very volatile. In other words, you can make a nice amount of profit if you manage to correctly anticipate the market.

Second, Unlike traditional markets, Bitcoin trading is open 24/7. Most traditional markets, such as stocks and commodities, have an opening and closing time. With Bitcoin, you can buy and sell whenever you please.

Finally, Bitcoin’s unregulated landscape makes it relatively easy to start trading—without the need for long identity-verification processes.