Table of Contents
- How Do Bitcoin Exchanges operate?
- 5 Ways to Trade Bitcoin’s Smartly
- Expert’s Opinion
- Other Bitcoin Trading Guides:
- ICO Guides by Prooworld
Since the beginning of 2017, reports have shown that the world’s first digital currency, Bitcoin has nearly tripled in its price. There have been reports about the high demand for Bitcoin as it is gradually winning the trust of people. Its consistency and its ability to prove most bad reports about Bitcoin wrong have made more people rely on this digital currency, and as a result, people are beginning to buy more goods online hence, relying on Bitcoin for the transaction processes. As it becomes popular, to trade Bitcoin could be tough sometimes as the numbers of traders are increasing which leads to a higher form of competition.
It is a digital currency that can be bought, saved, spent, sold and even invested. The rise of the most widely circulated cryptocurrency witnessed a dramatic rise in value when the value rose by more than ten percent of its previous value. This sudden growth led to the instant popularity of Bitcoin among people. This world’s first digital currency is generated through what is called ‘Mining.’ The mining process has to do with the use of expensive machines which make use of electricity to solve mathematical algorithms in exchange for Bitcoins. Apart from mining in exchange for Bitcoins, there are several ways a person can obtain Bitcoin and one the ways to obtain Bitcoin is through buying it. Bitcoins can be bought from Bitcoin exchange.
How Do Bitcoin Exchanges operate?
These exchanges work just like the way the currency exchange is being operated in a physical bank. It has to do with using a currency to buy another currency. This works by first, a person is expected to deposit some money into his own account in the exchange. Then the owner uses the money deposited to trade with other users. This can be done continuously or can be withdrawn eventually. This system is ideal because the risk of losing money is extremely low, unlike bank operating systems. This exchange is done through what is called ‘buying’ (This is placing an offer to purchase Bitcoin in exchange for a currency of your choice.) and ‘selling.’
This is placed based on the user’s order. After this, the exchange system tends to match the orders with each other. Here, communication is done through a standard and secured web browser. One good thing is that; this currency exchange makes use of several payment options such as; Liberty Reserves, Credit Cards, Bitcoin Transfers, etc. On the downside, only a few currencies are accepted by these currency exchanges which are automated. The currencies accepted are mainly: U.S Dollars, Euros, Pound Sterling, Russian Rubles and Japanese Yen. Bitcoin can be treated like a real currency the only thing is that Bitcoin is different as it is generated by the computer. It is important to note that there are exchanges that stand as intermediaries for the Bitcoin currency transactions.
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This means exchanges like Mt.Gox are created for the sole purpose of converting the wealth accrued from Bitcoin to the owner’s preferred currency and vice versa. Despite the way, all these looks perfect; it also has its pros and cons as a person’s Bitcoin could be stolen. This is why knowing how to trade your Bitcoin smartly is very important for a trader.
5 Ways to Trade Bitcoin’s Smartly
The following are the ways in which a person can trade smartly.
1) Trade Bitcoin via Peer-To-Peer to network
To be on the safe side, one of the ideal ways to trade Bitcoin is using the peer-to-peer method. This method requires that you make a research on your local Bitcoin community. Find out if their method best fits your need. After this, you can connect with your local Bitcoin community and carry out your exchange directly, therefore, eliminating any third party in the process of your transactions. One thing to note is to make sure that whoever you carry out a transaction with should be a person that is reliable and trustworthy.
This is because there are scammers who pose as buyers or sellers hence, scamming other users of their Bitcoins. This is why you should be careful whom you choose to do your transaction with. An example is LocalBitcoins.com.
Local Bitcoins is a different type of Bitcoin market. Here, the buyer and the seller get to meet themselves before selling or buying their Bitcoins to each other. LocalBitcoin provides the option of selling your Bitcoin online or directly to humans. It can also serve as an online wallet that makes it easier to facilitate the transaction. It is important to note that in peer-to-peer cases like this, the exchange rate may differ from the person who is trying to buy or sell might prefer different currencies or even different payment methods.
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- 10 BEST BITCOIN INVESTMENT SITES (VERIFIED SITES – COMPARISON)
2) Trade Bitcoin via Trusted Exchanges
These days the number of scammers and scam sites are increasing. As a starter, it is advisable to only make use of reliable and trusted Bitcoin exchanges. For a Bitcoin beginner, going to your country’s most popular Bitcoin exchange could be your best bet as you are sure that your Bitcoin is in the right hands.
3) Trade Bitcoins via Trusted Trade Platforms
Another thing to put into consideration while trying to trade your Bitcoin is the type of Bitcoin trading platform that you intend to use. Most Bitcoin trading platforms come with their pros and cons thus; it is important to do adequate research when choosing the right platform for your trade.
As a Bitcoin trader, it is advisable to sign up on different Bitcoin currency exchange. Before signing up on these exchanges, one should make sure that you can withdraw your money in your preferred currency. After this, monitor the exchange price and sell your Bitcoin on the exchange with the highest Bitcoin price. It is important to keep in mind that Bitcoin giants like Coinbase and Bistamp could also substitute for Bitcoin exchange platforms as they offer such services. We also have exchanges like Poloniex, Kraken, Coins mama, Bitsquare, Local Bitcoin and so on.
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4) Trade Bitcoin via Bitcoin Options
Bitcoin options could also be considered if you’re willing to take the risk associated with it. Investors are known to trade in Bitcoin options. For the time being, trading via Bitcoin options comes with its own risk as it is yet to gain approval in the U.S. In May 2017 popular Bitcoin option LedgerX raised about $11.4 million in funding with the plan to operate as a regulated cryptocurrency. Until this is regulated people tend to be on their own when trading with them as Bitcoin options are not covered by the U.S law.
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5) Trade Bitcoins via Bitcoin Stocks
Presently, there are many companies that invest in Bitcoin. As it becomes popular with high demand, organizations are now getting involved in this cryptocurrency technology. Despite the good potential it seems to have, these stocks still comes with its own risks.
In other words, trading Bitcoin requires one to be smart and up to date with the current trends and dynamics of the Bitcoin market. However, this market still has great potentials and trading the right way is sure to go a long way in generating profit for the owner.
Other Bitcoin Trading Guides:
- Automated Bitcoin Trading Software: BTC Robot
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- Bitcoin Trading Guide & Strategies for Beginners
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