Since the bitcoin technology as created, it was then provided a lot of avenues for people to take control of their own finances. From investments to buying and selling bitcoins to earn a profit, bitcoin sure has the dynamic financial flexibility that people can use to their advantage. But, how do you make money with bitcoin?
This article will touch upon how bitcoin trading works, how to do it, and the different styles of trading (and how each style earns money in different ways). If you’re looking to make money with bitcoin, then you’ll probably want to take some notes.
So what is bitcoin trading? The best way you can think about it is by thinking of bitcoin as something you can buy with your money. For example, you can buy food, a car, or a house provided that you have enough money. The difference is, bitcoin isn’t a material object that retains its value. As seen by people getting rich by buying bitcoin, the value of bitcoin is constantly changing so by buying bitcoins, you have the chance for your investment to grow over time.
It’s important to note that bitcoin is a virtual currency that is completely executed online. This means it can be traded around the world. In this sense, bitcoin trading means buying and selling bitcoins and exchanges.
Let’s put this in a real-life example: You’re going to Europe for the first time on vacation. Right now, all of your money is in U.S. dollars. If you want to convert them into Euros, you’d have to go to a currency exchange and have them converted into Euros (it’s important to note that there is an exchange rate or fee for the transaction). This is the same as bitcoin trading, except you’re converting your fiat money into bitcoin. Instead of going to a money exchanger, you go on bitcoin exchanges like Coinbase and Paxful. There are a lot of other good bitcoin exchanges out there, so be sure to explore your options.
In essence, bitcoin trading is the buying and selling of bitcoin exchanges… and doing this can earn you a lot of money.
How to trade your bitcoins
Before trading your bitcoins, you’re going to have to choose an exchange on which you can trade on. There are two factors I like to look at before trading on exchange:
- Trust – Ask yourself if the exchange looks trustworthy. If it looks sketchy, trading on that exchange can lead to them running away with the money you were intending to invest.
- Fees – All bitcoin exchanges charge fees. It’s a way for them to earn a profit and in turn, they provide a service to their users. Explore each platform you’re considering and see how much they’re going to charge you for their services.
It’s important to note that each bitcoin trading platform has a different process when it comes to buying and selling bitcoins. As an example, I’m going to go over the trade process of a peer-to-peer platform like Paxful or Localbitcoins. Looking to get help from miners? What is the best asic miner you should consider? Check out this best bitcoin mining hardware.
On peer-to-peer platforms, there are a ton of ways to buy bitcoin. This is due to the vast amount of payment options available.
- Once you have created an account, you can go straight to buying bitcoins.
- Search through the list of offers for one that might suit your preferences (i.e. how much bitcoins you’ll be getting on the dollar, your payment method, the requirements you’ll be submitting, etc.)
- After choosing an offer, submit all requirements to the seller and wait for him/her to verify the payment.
- Once the payment is verified, the seller should then release the bitcoins from escrow (escrow is a service that most peer-to-peer platforms use – it acts as a third party and holds all bitcoins until both parties are satisfied with the trade).
The selling process is also just as simple. It’s basically reverse-engineered from the process of buying bitcoins.
- The first step is to create an offer. This is where you can input all your preferences. Preferences include profit percentage, payment method that you’ll be recieving (this includes all the requirements that you’ll be needing), payment window (how long the trade will last), etc.
- Wait for someone to take your offer.
- The trade begins and you’ll have to wait for the buyer to submit all of his/her requirements.
- Release the bitcoins from escrow and the trade is completed.
Different styles of trading
Now that you’re equipped with the basics of trading, it’s best that you familiarize yourself with the different styles of trading. This is so that you know what style of trading suits you most. Each style presents a different way of making money with bitcoin. Here are some of the more popular styles:
Day trading is the most common type of trade. Day trading is the execution of long and short trades to capitalize on the market price of each day. People that use this method close all trades by the end of the day to prevent open positions overnight.
While this is the most common, this style is also one of the most technical strategies can do. There are still risks to day trading so make sure that you educate yourself to minimize losses. Because bitcoin’s price is so volatile, overanalyzing the market can get a bit risky at times.
Swing traders open different positions at short periods of time. This means that traders buy and sell bitcoins during significant raises and dips in bitcoin’s price.
With this style, you have to constantly stay updated with the news surrounding cryptocurrencies. You do this so that you can keep track of bitcoin’s current price. It will help you determine when to hold an open position for a trade.
This is probably the easiest strategy for traders. This involves keeping bitcoins closely and keeping an eye on the cryptomarket. When bitcoin’s price dips, this is when traders will usually buy in bulk.
Like the other methods, this style requires you to keep yourself updated with the news surrounding bitcoin. This method also doesn’t guarantee a money-making opportunity for traders. The market can also get a bit stagnant at times, pressing pause on your trading progress.
Why trade bitcoin for money?
Because… why not? Ever since the popularity boom of bitcoin, there have been a lot more people getting into crypto trading to make money. There are even now different uses for bitcoins, but that’s a story for another time.
If you’re looking to start trading bitcoin, be sure to properly educate yourself and do your research. This will minimize any risks that you encounter on your bitcoin journey. I wish you nothing but the best. Good luck!