Bitcoin is a digital currency that operates without the influence of a central bank or operator. It uses peer-to-peer technology for person-to-person transactions. The asset was first introduced in 2009 and has grown into one of the largest currencies in the world.
It is not known who introduced the instrument. Some take the name Satoshi Nakamoto because it was he who presented white papers containing ideas on the play. Cryptocurrency is represented by BTC.
Characteristics of Bitcoin
Like any other financial instrument, Bitcoin has some unique characteristics that traders should be aware of.
Blockchain and peer to peer technology
Blockchain stores information about all transactions in small blocks and is visible to the general public. Since everything is transparent within the blockchain, it is quite impossible to cheat while exchanging bitcoin. Bitcoin is the pioneer in the adaptation to peer-to-peer transactions. The use of technology allows instant transfers to be performed.
Volatility and liquidity
The volatility and liquidity of the digital asset is among the highest compared to other cryptos. Traders use volatility indices which measure the movement of prices over a certain period of time for trading purposes.
Spreads and commissions
Some brokers charge the fees through spreads that are the difference between the bid price and the ask price. Others will induce compensation models for the manufacturer and the lessee. As manufacturers are responsible for providing liquidity to the market, they incur less costs than takers.
Bitcoin mining is done through GPUs and ASICs, which are responsible for solving complex mathematical hash puzzles. Miners receive bitcoins when they add a verified transaction to the blockchain. Mining can be profitable if traders use appropriate equipment and calculate electricity costs in advance.
A Bitcoin wallet is similar to your regular purse. The difference is that it holds your cryptocurrency and keeps it secure with a set of private keys. It is important to keep the private key safe and secure, as losing it would mean no access to the wallet. Like a regular wallet, traders can send and receive digital assets.
Bitcoin trading strategies
There are several strategies that traders can use to make profit from bitcoin trading. Some are complex, while others are straightforward and easy to learn. Traders can choose one based on their skill level and convenience. Let’s discuss a few below:
- Mean. Grid trading is one of the common methods of trading in the financial markets. When trading bitcoin, you would like to split your initial capital into several blocks. As the week or month progresses, the trader will want to buy the currency at certain price points and spreads, say $ 1000. This can help spread the risk that may face the volatility that bitcoin presents.
- Technical analysis. Using trend lines, supply / demand areas, market structure, and price action techniques can provide a monthly profit / gain ratio. Traders use indicators like moving averages, RSI, MACD, etc. to provide confluence on their trades.
- Arbitration robots. The use of various algorithms to trade cryptocurrencies in automatic mode is becoming famous. Traders use arbitrage robots that exploit the price difference between multiple brokers to make profit. It is essential to check the terms and conditions of a crypto exchange as they may prohibit this type of trading.
Some advantages of Bitcoin trading
There are several advantages to trading bitcoin. Some of them are listed below:
- Bitcoin is one of the most volatile and liquid cryptocurrencies on the planet. For traders who like the fast action, Bitcoin is the currency to use
- Many forex brokers offer high leverage, low commission, and deposits that provide access to the currency at no cost.
- Digital currencies are mostly free from global political influences, interest rates, etc. They are not linked to a bank