Did you know Bitcoin is the most commonly used instrument among cryptocurrency traders?
It has grown at an exponential rate since its inception in 2009. While it is thought that its millionaire-making heyday has passed, it remains the most commonly traded digital asset, with significant profit potential for savvy investors.
However, it would be best to approach bitcoin trading with caution due to the significant risks involved. It is highly speculative because it is a decentralized market. In contrast to currencies traded on foreign exchange markets, where values are influenced by centralized governments, economic activity, and global events, bitcoin and other cryptocurrencies are largely determined by supply and demand.
This article has compiled a list of bitcoin trading facts to help you navigate the cryptocurrency market and reduce risk.
1. Use a trusted and reliable trading platform
First and foremost, what exactly is a trading platform? – Trading software that provides currency traders with Forex trading analysis and trade execution. Currency trading platforms serve as intermediaries between customers and brokers by providing charts and order-taking methods. Most can vary significantly in quality and cost.
There are numerous currency trading platforms available in the market. Finixio AI is a user-friendly digital trading platform that specializes in Bitcoin cryptocurrency. It makes no difference if you have never purchased a single crypto coin or made a stock market trade; Finixio AI is the place to trade Bitcoin. Everything is set up specifically for that market because it is a platform that prioritizes Bitcoin trading, making it possible for total beginners to navigate. Here are some suggestions on how to approach it.
- Finixio AI’s training platform offers a risk-free trial run for beginners. New users can trade and learn about the platform without using real money.
- The power is entirely in the hands of the account holder, which means you are always in control of what happens to your funds and where they are invested.
2. The last Bitcoin will be mined in 2140
There will only ever be 21 million Bitcoins produced. It’s embedded in the coin’s code or DNA. Notably, approximately 18.8 million have been mined.
Significantly, the number of Bitcoins you can mine is halved every four years, according to how Bitcoin mining works. While nearly 90% of the total possible Bitcoin is already in circulation, producing the remaining 2.2 million coins will take another 120 years.
3. Bitcoin payments are irreversible
A Bitcoin transaction can only be refunded by the person who received the funds; you cannot reverse it. This means you should only do business with people and organizations you know and trust or with a good reputation. Businesses must keep track of the payment requests that they display to their customers. Although Bitcoin can detect typos and will usually not let you send money to an invalid address by accident, it is best to have controls in place for added safety and redundancy.
4. Choose a Secure Wallet
Because your bitcoin wallet acts as a holding pen for your digital assets, you must make an informed decision to ensure security and ease of access.
There are numerous options, each with its features and functionality. Beginner traders should use a reputable broker, such as Coinbase, and their provided wallet. However, before selecting a wallet, it is best if you first decide which type is best for you.
Wallets are classified as cold or hot:
- Cold wallets keep your assets offline and are generally thought to be more secure.
- Hot wallets are linked to the internet, making them vulnerable to hackers.
5. Buy and Hold Bitcoin
The buy-and-hold strategy is a passive strategy in which positions are held for a period ranging from weeks to years.
There are numerous advantages to doing so:
By purchasing and holding bitcoin, you can avoid its short-term volatility. It’s not uncommon to see significant movement throughout a single day, which can mean that your stop loss and take profit targets are easily met, causing you to exit your trade.
This, in turn, can lead to overtrading, and because opening a new position is expensive, overtrading can significantly reduce your profits.
6. Government taxes and regulations
Bitcoin is not legal tender in any country. Most jurisdictions, however, require that you pay income, payroll, and capital gains taxes on anything of value, including bitcoins. Your responsibility is to follow your government’s or local municipalities’ tax and other legal or regulatory mandates.
7. Be Strict with Profit Targets and Stop-Loss Orders
As previously stated, bitcoin is extremely volatile, more so than any other financial instrument, so having a plan and sticking to it is critical.
Before opening a position, consider how much profit you are willing to take from the trade and how much loss you can bear, and set your target and stop-loss levels immediately.
This is among the most crucial advice because exposing yourself to potentially hazardous movement is simple without a disciplined approach.
Many new traders succumb to greed, holding on to a position for more profit only to see prices plummet, while others believe that a downward trend will reverse as they fall deeper into the loss zone.
You can easily avoid this pitfall and reduce risk by being strict with your profit targets and stop-loss orders.
Whatever kind of bitcoin trading strategy you decide to use must be built around security and risk-management protocols. Because the market is so volatile and there is a high potential for profit or loss, novice traders should only invest what they can afford to lose. To increase your chances of becoming a profitable bitcoin trader, use this advice and other reliable sources to ensure you have a firm understanding of the market and its pitfalls, are capable of conducting strategic technical analysis, and can put together a comprehensive risk-management strategy.