How To Trade Bitcoin

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Simpler Trading Team

Aug 16th 2022  .  11 min read

How to Trade Bitcoin

While fiscal and economic policies have run amok, inflation is soaring. The cryptocurrency market has drawn the attention of would be investors and traders alike. Why? It’s safe to assume that some are looking to take advantage of intra-day price movements in the crypto markets, while others are looking to protect the buying power of their USD.

While inflation and unfavorable economic policies may have helped usher in a bearish sentiment in the stock market, it appears that digital currencies may be staging a modest comeback.

Forex traders who buy or sell fiat currencies are now are using cryptocurrencies as a hedge. These traders consider inflation an ongoing risk since as it decreases the value of fiat currencies. In the past, hedges have typically involved commodities such as gold, however, cryptocurrencies are now commonly used for this purpose. 

Something that differentiates BTC from a fiat currency is that it’s deflationary. That means its buying power increases over time due to a depreciating supply of cryptocurrency coins.

In the past, inflation has risen slowly due to economic conditions. However, the pandemic has greatly accelerated government spending which has contributed to the meteoric rise in inflation. Combine the pandemic with a European land war and we get even more government spending. We have seen investors searching for a flight to safety in different digital currencies. 

While the value of FIAT money issued by the government erodes daily in an inflationary environment, the value of bitcoin moves independently.

Bitcoin can easily be bought, sold, and transferred as a decentralized currency. This level of agility is valued highly by traders when inflation is prevalent. Since bitcoin and cryptocurrencies are not subject to government oversight, the interest rate increases by the Federal Reserve have not influenced the digital currency.

Even with volatility in price, digital currency offers traders a touch of stability with potential for returns. Still, let’s not confuse bitcoin and cryptocurrencies with stable investments. There is much for us to understand about this speculative investment opportunity as bitcoin has volatility issues and unpredictable performance.

A solid trading strategy requires us to weigh digital currencies’ risks and potential to determine whether they are helpful as a hedge during times of inflation and economic stress.

This image depicts a bitcoin exchange

What is Bitcoin?

Bitcoin is the original cryptocurrency and has continued to be the most well-known digital coin. It was created in 2009 by Satoshi Nakomoto. 

Traders often use the word Bitcoin synonymously with the word cryptocurrency, however Bitcoin is merely on type of cryptocurrency.

Traders and investors both will note that crpytocurrencies are volatile in nature. Price action is heavily influenced by investor sentiment, pushing the markets higher or lower. When economic and market events cause sentiment to rise, so too will the price of crypto assets.

We could even see positive movement should cryptocurrencies become regulated by major world economies, such as the U.S. Treasury. Once regulated, traders may be more likely to perceive the cryprocurrences as a legitimate form of trade. Because there has been little to no adoption by government regulatory bodies, some investors remain too skeptical to hold cryptocurrencies as an investment. 

At the most recent check-in in July 2022, the price of one Bitcoin was equal to $20,365 USD – or $20,365 BTC to USD. This price is nowhere near the high points of 2021 when it topped $62,000 USD

Live crypto prices are available online in real-time. Traders can find pricing information for cryptocurrencies such as bitcoin, Ethereum, and dogecoin in one place. Market analysis is provided with cryptocurrency prices to give traders background on the various coins.

Where To Trade Bitcoin

Would be traders have been asking “how to buy cryptocurrency” in the crypto market. 

To buy or sell crypto on an exchange, a trader would need to open an account on a reputable exchance like Coinbase or FTX. Once an account has been opened, you would be prompted to link your bank account. After you have elected a method to fund your account, you can then exchange your fiat currency for a coin available on the exchange you have selected. 

*An important note to remember is that not all exchanges provide access to all coins. If there is a coin that you would like to trade or buy specifically, you will need to confirm that the exchange in question allows that coin to be accessed on their platform.*

With a plethora of scammers who will gladly take your money, this has traders asking where the leading platforms for crypto buying and selling are located. 

Traders should look for a platform that offers deep liquidity – or many buyers and sellers. They should also be able to trade pairs that link bitcoin to major fiat currencies such as sterling (GBP), Ethereum (ETH), and other cryptocurrencies. Most cryptocurrencies in the market are decentralized networks. These networks are built on blockchain technology – a distributed ledger enforced by a network of nodes.

BTC/USD Chart On Trading View

Finding A Trading Strategy

Typically, Investors strictly buy and hold coins, while other “traders” look to take advantage of short term price action. If you’re an investor, you may look for better entry or exit points when executing trades, but overall are looking for exposure to long term price appreciation, aka “HODL”. 

Traders are typically using some sort of technical analysis and indicator to determine an entry and exit with price targets. Based on what their analysis tells them, they can find the appropriate trading strategy. 

This may determine which platform you choose to elect as your exchange. 

Popular Crypto Exchanges

Coinbase

Coinbase is a platform used to exchange cryptocurrencies. It allows consumers to transact and store digital currencies in a wallet stored within the platform. Coinbase typically allows access to the most common coins and tokens, like Bitcoin and Ethereum. Coinbase allows consumers to exchange fiat currencies for crypto using your bank account, credit card, or transfer. 

Coinbase offers a wallet service to store private keys offline and encrypt them. Traders can create multiple wallets on Coinbase and then keep coins or use Coinbase to buy coins.

Coinbase Pro has been an independent service from Coinbase but will soon be no longer offered. The company has said that it will migrate Coinbase and Coinbase Pro into one unified account. This will grant access to many popular features that other platforms have, such as the decentralized marketplace, staking, borrowing, and use of a Coinbase card. 

Binance

Binance is a global exchange that provides access to hundreds of cryptocurrencies. Since 2017, Binance has become one of the world’s most popular exchanges. 

In 2019, Binance created Binance Chain as well as its own digital currency, Binance Coin (BNB). Binance gives access to both basic and advanced accounts. Basic accounts traditionally have lower trading limits. Advanced accounts have higher trading limits. Binance has also created a mobile app that allows access to their platform on the go.

Kraken

Kraken is a US-based exchange. This exchange offer traders and investors the ability to exchange crypto for fiat and crypto-to-crypto exchanges. Kraken was created in 2011 and remained one of the first exchanges to date. Kraken allows access to the market’s most popular coins and tokens today. 

Kraken allows access to exchanges that allow investors to trade on margin. Margin trading allows trading with leverage. This means traders can put down only a portion of the total amount needed for trade and borrow the rest from the exchange. This allows traders to take larger trades and reap more significant rewards but with much more risk. A trader should always use caution when trading on margin or any leveraged account. 

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How To Start Trading Bitcoin

Traders often trade digital currencies such as bitcoin by scalping and using swing trades. Scalping takes advantage of small, intra-day price movements, while swing trading involves anticipating larger market swings. In either scenario, traders hold on to a digital currency until it hits the target or optimum price.

Charts and indicators allow traders trading digital currencies to use what they know from stock market trading. Cryptocurrency indicators are available to allow traders. 

Simpler Trading provides more information about installing indicators in the Simpler Trading Learning Center.

Binance is one of the primary exchanges we use for altcoins at Simpler Trading. I’m offering some tips for you to navigate the site and enter orders. Users can toggle between Basic and Advanced trading pages – although there isn’t much difference between the two. 

If you’re using TradingView to do your charting, the basic trading page will work fine because your focus will be on the Order Entry screen.

First, traders should find the pairing that they want to trade. This is what will be most important. The tab box allows you to select from Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), and Tether (USTB), which approximates the U.S. dollar. You will need a balance of one of these four tokens, which serve as your funding. If your account is funded with Bitcoin, you want to trade with something that will outperform bitcoin.

If you input Neo (NEO) in the search bar, for example, an exchange pricing scenario of NEO/BTC pops up on the page. You can continue this with other tokens to see how the prices compare.

Further down on the page, you will find an area to place orders; market order, limit order, and stop limit order. 

A limit order is placed when you want to only pay a specific price for NEO. If the price hits the target, you placed the order, and it gets filled. You will not get a filled order if the price does not hit your target.

A market order works differently. Here, you input the price you are willing to pay, which would be the highest number on the book as offered by the sellers. The sellers are indicated in red. Market orders get you in and out immediately, although you may not get the best price and may pay higher fees. The other input for the order is a set amount, or it can be based on a percentage of your bitcoin tokens you want to trade.

Stop limits work two different ways: for buying and selling. Should you own NEO and want to place a Sell order using a Stop limit, you could enter the support level at which you don’t want to go any lower and place that in the order field. You will input this number in both the Stop and Limit fields – although markets move pretty fast, the Limit number should be somewhere between the Stop and support. A stop price that triggers the sale and a lower limit can allow the system to fill the order.

Should you place an order to buy, the green prices are the listed buyers while selling prices are red. The buying figures are still theoretical as they can be canceled anytime. On the opposite side of the page, the Trade History field shows the trades going through.

Cryptocurrency platforms offer a unique flow to allow traders to place a trade, but more often than not, placing the order is a matter of a few quick steps.

Before executing a trade, traders may consider the value of the bitcoin or cryptocurrency as compared to the U.S. dollar you bought it with. The bitcoin price today could have changed, and the trade of bitcoin price to USD maybe not be in your favor.

Cryptocurrency Stocks Offer A Simpler Solution.

Traders who would instead take advantage of cryptocurrency stocks on the market exchange have a few options with four crypto mining stocks, in particular. 

These companies have announced expansion plans that could indicate growth in the next few years, and all of them are among the top 15 RIGZ exchange-traded funds (ETF) holdings.

  • Marathon Digital (NASDAQ: MARA)
  • Riot Blockchain (NASDAQ: RIOT)
  • Hive Blockchain (NASDAQ: HIVE)
  • Hut 8 Mining (NASDAQ: HUT)