If you are a newbie in the world of Bitcoin trading, then you have just landed on the right web page. In the ancient times, our ancestors traded by literally exchanging goods and services or called the “barter trade.” Eventually, money was used as a medium of exchange, thus the establishment of monetary systems.
By understanding how money started, you’ll be able to understand why Bitcoins also emerged. Bitcoin is the first ever cryptocurrency in the world. As compared to real cash in the real world, cryptocurrency is a form of digital or virtual currency online or on the internet. The unit of Bitcoin as a cryptocurrency is BTC. The world is moving digitally, and the need and solution for a new currency have finally arrived.
Bitcoin 101: What is Bitcoin
What is Bitcoin? Due to its popularity in the internet and other areas, you are probably wondering what Bitcoin is. Bitcoin is a digital currency – a form of money in the online world. Unlike cash, Bitcoin does not involve banks because all you need is the Internet.
Satoshi Nakamoto, an anonymous person or even a group of people, is the brilliant brain behind the invention of Bitcoin in 2009. This marked the release of Bitcoin as open-source software.
Because Bitcoin is a decentralized currency, it is free from political and economic concerns that can affect conventional currencies. This is an open market that is accessible to anyone regardless of nationality, religion, age, and gender. It means that you and anybody else around you can be involved in Bitcoin trading. Isn’t it amazing to have a currency that speaks for the entire digital users worldwide?
Benefits of Bitcoin
Before touching base on how you can register for Bitcoins, you might want to know what the advantages of Bitcoin trading are.
Cost-Effective. No matter what other people might say about Bitcoin’s value, nobody can deny the fact that it is a cheaper and a more efficient way of transferring money across borders. This is because your money will not go through different banks wherein fees can apply.
Fast and Quick! The online world is quick and fast at almost everything. Bitcoin trading is not an exception. It is a fast way to make payment transactions with minimal fees.
Versatility. Unlike the monetary currencies we have today, you can use Bitcoins at almost anywhere around the globe. There is no need to convert your money into the appropriate currency whenever you go overseas. Bitcoin as a form or digital currency is gradually being recognized and accepted worldwide.
Less Volatile. Cash can be easily dispersed and be strained. On the brighter note, Bitcoin is less volatile than cash.
Go Online Shopping with Ease. Online shopping is made easy with Bitcoins. Instead of typing in your card details, which is sometimes not secured, all you need to do is find the Bitcoin payment option and you are ready for check out.
Investment. When monetary currencies are falling down, all your major assets in the bank will be affected. However, when you invest in Bitcoin trading, your investment will not be affected. It is a great investment tool because it is an open market.
Simple Records. Records are made simple and healthy, most especially for tax purposes because once a Bitcoin is transferred, the ownership is also transferred.
Blockchain: A Tool for Establishing Trust
Payment transactions are recorded in a “blockchain” or “cryptography” powered by computer. The blockchain is like a public ledger, the digital version of it, wherein all transactions – buying and selling – are recorded for everybody to see. It is Bitcoin’s main mechanism to establish trust and reputation in the financial world. Transparency is the essence of Bitcoin’s increasing demand.
How are Bitcoins Generated
Bitcoins are generated as a reward of “mining.” When a user is awarded newly created Bitcoins, this is called mining. It is a complex process with many mathematical formula and problems involved that only the software can resolve. Every time a mathematical solution is discovered, it creates a new block that can’t be altered or removed once accepted by the network.
In a simple analogy, it is pretty much the same how real cash is tied up with a country’s gold reserve. There is a connection or basis. Money did not exist out of nowhere. Just like how fake bills and coins can be determined, Bitcoins can’t be penetrated by hackers or cyber attackers because it is only created if there is a transaction between two traders, either buying or selling.
How You Can Trade Bitcoins Using Exchanges
Bitcoin trading refers to buying and selling Bitcoins. An individual can obtain Bitcoins in different ways, such as accepting them as payment for products and services. Bitcoins can also be bought directly from other persons or from websites known as “exchanges.” These “exchanges” are platform companies that either swap Bitcoins for regular currencies or help users convert their digital currency to real cash.
How You Can Buy Bitcoins Using Exchanges
Bitcoins can be purchased directly from other users on online marketplaces, just like buying clothes on the internet. You can also use a broker or a digital currency “exchange” such as Coinbase, Kraken, Bitstamp, and Gatehub.
When trading, you also need a Bitcoin wallet, such as Electrum or MyCelium. Bitcoin wallets are programs that are specially-designed to store Bitcoin information just like storing cash in a regular wallet. It can be stored on the web via a smartphone, tablet, or any computer, so they are accessible anytime and anywhere.
Sign up and Enter the Bitcoin Trading
Now that you know the basic information about Bitcoin trading, you are ready for the real deal. After choosing your wallet and your marketplace, it is time to know the steps of buying Bitcoins.
Step One: Download the Bitcoin app from Google Play or Apple App Store for your Bitcoin wallet.
Step Two: Create a wallet by signing up. You’ll be asked to provide your name, email address, and a strong password. Be sure that you have a valid email address because you will need that email address later. For a strong password, remember to use numbers and symbols if needed.
Step Three: Visit the website of the exchange you have chosen (Kraken, Coinbase, Bitfinex, Poloniex, BitStamp, or BitPanda). You need to register. Once again, you need to provide your name, email address, and a strong password.
Step Four: Be prepared to verify your email address and add your phone number. Do you remember your valid email address? We told you that would come handy. You will receive a verification email with a clickable link. All you need to do is click the link. Voila! Your account is verified.
However, that does not end there. You will be prompted to type in your phone number. Once you typed it in, you will receive a verification code. All you need to do is also type in the verification code.
Take note that you will be required to link your bank account to make a Bitcoin purchase. Just follow the instructions on the website. Depending on your location, some may only require the account number, but others also require your routing number.
Step Five: In the “Buy” section of your chosen exchange, choose the amount of Bitcoin you want to purchase. You can purchase less than one Bitcoin on your chosen exchange, such as 0.02 BTC, 0.5 BTC, or even 0.00000001 BTC that is up to the eight decimal points. You can purchase Bitcoins using bank transfer, credit card, or even cash. Congratulations! You now entered the world of Bitcoin trading.
How You Can Sell Bitcoins Using Exchanges
When it comes to Bitcoins trading, exchanges play a crucial role. An exchange holds the funds of both the buyer and the seller. It acts as an intermediary between the two. Here are the steps on how to sell your Bitcoins.
Step One: Set up an account or register with the exchange of your choice. You have to provide your name, email address, and a strong password. You will be required to link your bank account, so that you can withdraw your funds. (There are steps above that will help you in registering.)
Step Two: Go to the “Sell Offer” section of the exchange website. State the type of currency you want to trade. Provide the amount and asking price per unit. The transaction will be automatically completed by the exchange once somebody matches your offer.
Step Three: After the funds are forwarded to your account, you can withdraw them to your bank account. There are fees or exchanges charges for processing the transaction. The withdrawal fees may vary, usually at 1 percent to 2 percent of the total amount.
Bitcoin Trading Through Person-to-Person Exchanges
Person-to-person exchanges are also called as peer-to-peer exchanges. It involves having the data of the person or entity you are transacting with at all times. You have the Bitcoin wallet address, location, forum username, and IP address. It may also involve face-to-face transaction or meeting.
In person-to-person exchanges, there is no third-party involved as compared to regular exchanges wherein an exchange platform holds the funds. The trading is initiated in a Bitcoin platform, such as Gemini, Kraken, and Bitstamp, allowing traders to register an account.
Step One: If you want to trade person-to-person, you can create an account and find other Bitcoin enthusiasts in your area.
Step Two: You can communicate with your prospective trader through the forum section of the platform. The details would include the type of transaction, amount or asking price, and payment method.
In Bitcoin trading, person-to-person trades don’t require any documentation about your identity. It offers a reputation system for tracking your order and other users. The trust element is very important, so it pays off knowing the previous history of the traders before doing business with them. For Coinbase, new addresses are generated automatically for each payment, and it is associated with your Coinbase account indefinitely, so it is safe if you want to reuse them.
What are the Factors Affecting the Prices of Bitcoins
Bitcoin Supply. By 2040, all Bitcoins are expected to be mined. The availability of Bitcoin depends on the rate they enter the market. It is also affected by the activity of the people holding them.
Bitcoin Market Cap. The value and how valuable Bitcoin is perceived also influence the success of trading Bitcoins.
Bad Press. The perception of the public affects all currencies including bitcoins. The longevity, value, and security of Bitcoins are still being questioned.
Integration. The profile of Bitcoin in traditional currencies depends on its integration into crowdfunding platforms, new payment systems, and more.
Key Events. Major events such as security breaches and regulation changes can bring serious implications for Bitcoin and other cryptocurrencies.
Industry adoption. Bitcoin trading is still waiting to be fully embraced by different businesses worldwide. The impact still remains to be seen in the corporate stage.
Cryptocurrency offers a good opportunity, most especially for future investments. Bitcoin is less volatile than cash or traditional currencies. It means that the price can change suddenly and significantly. The 24/7 operation of Bitcoin only means that these changes can happen anytime.
Indeed, Bitcoin is the new face of modern and advanced digital currency, empowering consumers wherever and whenever they are. Happy Bitcoin trading!