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With the development of Bitcoin the revolution on the financial market began. Many, which recognized this potential early and invested into the cryptocurrency, are today millionaires. Therefore it is understandable that the interest in the Bitcoin Trading does not tear off. But how does trading with Bitcoin actually work? Is it still worthwhile at all and what risks can exist?
General Information About The Largest Cryptocurrency
Satoshi Nakamoto brought the idea of a digital and decentralized currency to the world in a written draft at the end of 2008. A short time later, in early 2009, Bitcoin, the world’s first cryptocurrency, was finally born. The Bitcoin and cryptocurrencies in general stand out for a number of reasons that make them superior to traditional fiat currencies such as the euro or the dollar. To it belong:
- Decentralized: Cryptocurrencies are not controlled by a third party such as a government, central banks or financial institutions
- Fraud-proof: Cryptographic signatures and blockchain technology make double bookings and manipulation of any of them practically impossible.
- Partially Anonymous: Transactions made in Bitcoin are “partially” anonymous and cannot be attributed to a specific person. Of course, all transactions can be traced to a Bitcoin address
- Inflation-proof: Bitcoins cannot be produced in any number, as for example the central banks can, therefore the cryptocurrency is not threatened by inflation or even complete devaluation
What Makes Bitcoin Trading So Interesting?
Due to the properties just mentioned, Bitcoin has many advantages and is becoming increasingly popular worldwide. If one regards the price development of the Bitcoin it shows up that the cryptocurrency in the last year clearly increased. After the cryptocurrency was explained in the past again and again for failed, it registers today a value of approx. 10,000 US$. In the meantime it was also already over 20.000 US$. In comparison, the exchange rate in 2013 was still around US$ 100. This results in a price increase by a factor of 100 to 200 in just under 4 years. Experts are of the opinion that in the long term the value could even be much higher.
How Does Bitcoin Trading Work?
Anyone who has decided to invest in Bitcoin now generally has two options:
Buy Bitcoins Or Mine Bitcoins
The direct way to start Bitcoin trading would be to buy Bitcoins and hold them until a certain price increase is reached and then sell them. Who decides for this step, must overcome however first some hurdles.
Bitcoins cannot be obtained like other currencies from your own bank. In addition first a Wallet, thus a digital purse must be furnished. You can then buy Bitcoins on exchange exchanges or crypto-marketplaces on the Internet and send them to your own wallet.
A well-known Wallet provider is Coinbase. The platform also offers the possibility of purchasing Bitcoins directly. Alternatively, you can also store your Bitcoins in hardware wallets, such as the Ledger Wallet.
Usually, Bitcoins still cannot be obtained like other currencies with your house bank. However, meanwhile there are already a few banks supporting the purchase of cryptocurrencies.
Alternatively, Bitcoins can of course also be dug by mining. However, this method is no longer as profitable today as in the early days. The difficulty is regularly increased and this results in ever higher energy costs and high computing power that must be provided. Mining is therefore not recommended for private individuals to obtain Bitcoins, as the costs are usually significantly higher than the equivalent value.
Bitcoin Trading Via CFDs
How to start Bitcoin trading alternatively: For Bitcoin Trading you fortunately do not have to be in possession of the cryptocurrency. Alternatively, Bitcoin Trading via CFDs is possible. CFD stands for Contract for Difference. Here investors merely speculate on the rise or fall of the Bitcoin price.
Trading in these securities is basically similar to other securities. Underlying assets can be determined for which the CFDs are to be bought or sold. If the Bitcoin rises in value by 10%, then the value of the acquired CFDs also rises by the same percentage. With the use of leverage, risk-taking traders can even multiply their profit margin. If the trader had a Bitcoin CFD with a leverage of 20, his profit margin would even be 200% if the Bitcoin increases by 10% as in the example above. But a price development in the opposite direction is just as possible and would then even lead to a complete loss.
Choosing The Right Broker
There is a range of brokers online where you can start Bitcoin trading at any time, 24/7. In order to find a good and reputable provider, you should consider some important criteria.
- Security and seriousness. This is probably the most important point when choosing a broker. A good broker is ideally subject to a financial supervisory authority or is otherwise regulated and monitored by a higher authority. In addition, it should be checked in advance how the clients’ money is stored. There should be a separation between the company’s business account and the client’s funds. Otherwise, customer funds could also be lost if the provider becomes insolvent
- Return against risk management. High returns are of course desirable, but when choosing a broker, you should also make sure that measures are taken to minimize risk. A good average between yield and security is therefore appropriate, in order not to lose everything in the end
- Customer service and support. A reputable online broker should be easily accessible for his customers in order to be able to help quickly with possible problems and questions. This is not only important for inexperienced traders. In the best case, the company offers not only telephone availability but also communication via live chat
- Is there a demo account? Not all online brokers offer this feature and it may not be necessary for experienced traders. But for beginners, a demo account is a special advantage, as it gives them the opportunity to familiarize themselves with the subject without risking losses.
We have compiled a list of the best Bitcoin and Crypto trading places for you in the list below. Please note that without experience, you may be at risk of total loss. Never trade with more money than you are willing to lose. For secure trading we recommend the provider eToro. The fees are a bit higher but this is a regulated exchange. Only experienced users should trade on unregulated or decentralized exchanges.
eToro
If you want to trade cryptocurrencies securely, we recommend eToro. There you pay a little more per trade but you get a regulated platform. With decentralized exchanges or unregulated platforms you run the risk of hacking and a total loss. Especially for beginners eToro is much better suited than a specialized crypto margin trading platform.
Kraken
For the simple entrance: Kraken offers an easy interface for new investors to buy Bitcoin or a wide range of other cryptocurrencies (altcoins). You can buy and sell coins directly in market orders, or set limit orders with fixed price targets. Kraken even offers trading on leverage. In the USA customers can use up to 5x for leveraged spot market trades, while the rest of the world can trade cyptocurrency futures (CFDs) with up to 50x leverage.
Bitpanda
For someone without experience: Bitpanda is also suitable for fast trading between currency pairs. However, the platform is not designed for classic trading. There is no order book or chart instruments. However, Bitpanda is very suitable for beginners in the field of buying and selling cryptocurrencies. For experts we recommend Coinex or Bitfinex (from $10,000).
The following platforms are only suitable for experts. You should only act here if you know exactly what you are doing. At Bitfinex you need a minimum balance of $10,000 to start trading. We recommend that you perform full verification on all trading platforms before trading. This process will help you avoid possible suspension and loss of your balance.
Coinex
Our recommendation for experts: Coinex is the platform of Bitmain and ViaBTC, one of the largest mining pools in Asia and one of the largest mining hardware manufacturers. Especially exciting is here, as a member and CET Token user, you will receive regular Airdrops and many other great gifts from the platform.
The fees for trading are extremely low here. The 0.1% fees can be halved to 0.05 with the purchase of CET Token. Our absolute recommendation for real traders. Unfortunately no margin trading possible.
Bittrex
Bittrex is very popular with many traders, with a clear interface and normal fees it is easy to trade. Unfortunately, the platform does not offer any other major advantages for its users. So far, Bittrex is also considered serious and safe, we will keep you informed.
Unfortunately the platform is only available in English and not in German. Many of our readers are happy about trading platforms with several languages. Bittrex also offers an interface for automatic trading. However, the platform is already too big for arbitrage.
Bitfinex
At Bitfinex you should only trade as a highly experienced trader. The platform offers bets against the market (SHORT), margin trading and leverage. You should only work with these tools if you have experience in these areas. At the same time there is a hurdle with this trading platform. You need to have at least a $10,000 balance.
You can withdraw your balance from the platform after you have loaded the $10,000. This amount only serves as a kind of filter against small inexperienced traders. The fees are extremely high at 0.2% per trade.
We compare the most popular CFD brokers at present in our big CFD broker comparison.
Important Basic Rules And Precautions
As already mentioned, Bitcoin Trading can be a great opportunity but also a great risk. Therefore it is especially important to follow some basic rules and take precautions to keep the risk as low as possible.
- Bitcoin Trading is speculative. Bitcoin is still comparatively young and the idea is far from being fully developed. Therefore, there are hardly any reliable empirical values about the price development. Looking at the share price development, an average increase can be observed, but it is rather erratic and fluctuates strongly. This volatility is further fuelled by inexperienced traders in particular, as they react very quickly to price fluctuations and may sell too early. This then leads to a downward spiral and a vicious circle develops
- Always stay up to date. In order to successfully operate Bitcoin Trading, investors should regularly inform themselves about news on Bitcoin and the crypto scene in general. A headline can quickly lead to a price change, as described above. Whoever misses this news could miss a good opportunity
- Initially work with small amounts. In order to protect yourself from larger losses and to get a feeling for trading, only small amounts should be invested at first. In case of a bad speculation, these are more likely to get over
- Protection through limits and stop values. Many brokers offer their investors the possibility to protect themselves from total loss with a stop value. Here a certain value can be determined in advance, at which the investor wants to sell his CFDs, so that not the entire invested capital is lost.
Conclusion On Bitcoin Trading
Bitcoin Trading can still be a worthwhile investment. The examples from the past show how high the profits can be. But this time is probably over, because since the beginning/mid 2017 really everyone is investing in this area and the gold-rush atmosphere is over. It also remains highly speculative and the risk should not be forgotten due to the euphoria about the possible return opportunities.
For investors who are not very familiar with Bitcoin or the Blockchain or people who are only interested in trading the cryptocurrency, trading CFDs is the easiest solution. Personal note: Since the market is influenced by external forces, it is no longer possible to make reasonable predictions. Until the middle of 2017 it was simply necessary to wait and the price of most cryptocurrencies rose automatically. Those times are over. An investment in blockchain technology is more worthwhile.