As the most popular digital coin on the internet today, bitcoin is more than just a convenient means of transferring money from anywhere in the world. For investors, its convenience and scarcity make it a valuable investment asset. However, unlike other traditional stock investments, bitcoin trading has a lot of risks.
With the market hitting a rocky path in the last few months, retail investors have to know that the cryptocurrency industry has as many benefits as the risks. Here are several tips that most people may not know about when trading bitcoin:
- Expect volatility
While a 5 % loss within a day in stocks is pretty scary, a 20% movement within hours is pretty standard in cryptocurrencies. Like any other digital asset, bitcoin is considered to be at its infancy stage, and it’s possible that its value could go to zero in the future. However, the price volatility is mainly what makes bitcoin profitable for both short-term and long-term investors.
That said, you should view this virtual currency as a speculative investment option that makes up less than 5% of your portfolio. You should also avoid investing an amount you can’t afford to lose.
- Know where to buy bitcoin
Though most people fail to realize this, learning to trade bitcoin starts by identifying the best place to buy your digital currency. Depending on your country, you can buy and sell coins in crypto exchanges or contact individual sellers through online forums and escrow services. However, you need to consider the payment options allowed by each firm. For example, you may want to choose a firm that accepts my vanilla debit card to pay for bitcoin instead of using your bank account.
- Know when to buy and sell
Just like any other investment portfolio, learning the right time to buy and sell cryptocurrency is critical to ensure that you avoid losses. It’s important to take note of any changes in the crypto market, to allow you to predict any possible future price changes easily. For instance, Litecoin investors should have seen a price crash in December last year after its founder sold his share capital. However, most people bought more digital coins instead of selling, making huge losses after the price drop.
- Bitcoin’s price manipulation
Though bitcoin is built on a secure and decentralized system, it runs into some issues that traditional assets don’t. It’s evident that the digital currency market experiences a higher level of volatility when the bitcoin conference commences. Last year, bitcoin’s price hit $18,000 and started to tank within 24 hours after the conference started.
While you may be familiar with shady trading technique at the stocks market, nothing comes close to bitcoin’s manipulation. It’s most likely that traders come together to manipulate prices, but you can still make a profit.
Given that the blockchain and the cryptocurrency industries are still in the experimental stage investing in bitcoin is both highly risky and potentially profitable. Luckily, you can exchange your fiat currency for bitcoin by using my vanilla debit card or trade-in other tokens. However, as noted in the past few weeks, hackers are a huge menace in crypto investment.