An In-depth Understanding Of How To Trade Bitcoin
A lot of people have heard about bitcoin and have also seen its impact on different industries. But the thing, not everybody knows how to trade bitcoin.
Created by Satoshi Nakamoto (a pseudonym) in 2008, Bitcoin is a digital currency built using blockchain technology. 11 years later, it remains the world’s most popular cryptocurrency.
Bitcoin has found application in a wide variety of fields and the extent of its application is still being studied by experts.
How Bitcoin Is Generated
Bitcoin is generated during mining. This is the process where “miners” try to solve different mathematical computations.
If these are eventually solved, the mined coin is added to the network and the miner who solves this is rewarded.
How Can You Get Bitcoin?
For miners, bitcoin is usually obtained after they have successfully solved some mathematical computations and are given these coins as rewarded.
For non-miners, however, bitcoin can now be obtained through exchanges. Exchanges are like regular markets where items of value are exchanged. For example, a commodity is given in exchange for a fixed price.
How To Trade Bitcoin
Now, you know how to get bitcoin but that’s not enough; you need to know how to trade bitcoin.
- Find A Trustworthy Exchange
While bitcoins are global currencies which are not regulated by countries’ economic policies, exchanges have to be registered by the government, which also ensures the authenticity of these exchanges.
So, to successfully trade bitcoins, you first have to ensure your country allows exchanges. Then, you check that your exchange of choice complies fully with set regulations. Additionally, search for personalized reviews about this exchange to ensure that they are indeed trustworthy.
Know also that while there are exchanges that only allow one to exchange their bitcoin for other cryptocurrencies, there are those that allow users to exchange theirs with fiat currency.
- Open A Trading Account
Now you have found a trustworthy exchange, open a trading account with which you will carry out the bitcoin trade. Many exchanges require you to provide personalized information to ascertain that you are eligible to carry out this trade.
- Fund Your Account
Next, you fund the account with your item of exchange. This could be the bitcoin, other cryptocurrencies and/or fiat currencies.
- Start Trading
Once you’ve funded your account, you are set to start trading bitcoin.
What You Should Know Before You Start Trading
As simple as bitcoin trading seems, you still need to know a couple of things before proceeding with the trade.
First, you should know that trading bitcoin comes with its risks. These risks are either:
- Investment risks
As is the case with other investment, the result of trading bitcoins could either be risk or reward. To minimize these, you have to be good at understanding changing trends.
Also, keep in mind that a little reward borne from little investment is better than a huge loss borne from high investment.
- Wallet security
Just like financial institutions, there is a seemingly relentless attempt to hack into the exchanges’ hot wallets, which are bitcoin wallets that are found online.
To safeguard your assets from such a security breach, it is advisable to only fund your hot wallets with limited assets. The rest can be kept in cold wallets, which is not connected to the internet.
Also, even though it is not regulated by countries’ economics, bitcoin’s price is still not fixed. The drivers of this price instability include bad press, limited supply of bitcoins and range of its applications.
To Wrap It Up
Trading bitcoin does not necessarily have to be an arduous process. Armed with the tips mentioned here, trading bitcoins, whether for other cryptocurrencies or fiat currency, can be a simple and rewarding experience characterized by minimal risk.