Bitcoin is a new type of currency with extremely high volatility. Bitcoin can be purchased on an exchange, or one can trade Bitcoin futures against Bitcoin itself.
Bitcoin has recently seen some large swings in its value relative to the US dollar, so Bitcoin is stored at many exchanges that are not actually Bitcoin companies themselves but are instead just places for people to store Bitcoin.
The safest way to trade Bitcoin, therefore, is to do so on an exchange that does not hold any Bitcoin Revolution for users. If you had Bitcoins at an unregulated Bitcoin exchange and it went bankrupt, your Bitcoins would probably be gone forever. People have lost hundreds of millions of dollars worth of Bitcoin through trades on exchanges before – this includes MT.Go back in 2014-2015!
Bitcoin exchanges have strict limits on how much Bitcoin you can withdraw from them as well, which makes Bitcoin trading less convenient.
For these reasons, it is strongly recommended that Bitcoin traders store Bitcoin themselves in a Bitcoin wallet whose keys they control. Bitcoin wallets are needed to perform transactions with Bitcoin, whether those be receiving Bitcoin from someone else or sending Bitcoin to someone else. With a Bitcoin wallet and a little bit of know-how about trading Bitcoin – one can trade safely and effectively!
Now that you know the safest way to trade Bitcoin, here’s an example of what NOT to do:
Please don’t deposit your entire savings account into a brand new cryptocurrency exchange and start trading all your money away for high-risk investments such as ICOs (initial coin offerings). Bitcoin is very volatile and just as Bitcoin’s value can jump quickly, so can Bitcoin’s price drop as well.
There are a lot of Bitcoin scams out there, and people who make the mistake of losing all their money trading Bitcoin on unregulated Bitcoin exchanges become pretty desperate to get back some of what they lost. For this reason, it is recommended to only trade small amounts and to remind yourself constantly that you could lose everything if you don’t play your cards right!
Benefits of bitcoin trading
- Bitcoin is a digital currency that can be used to purchase goods and services online.
- Bitcoin is decentralized, meaning it is not subject to government or financial institution control.
- Bitcoin allows users to maintain anonymity when conducting transactions.
- Bitcoin offers users a secure way to store their money.
- Bitcoin allows users to work from almost anywhere in the world, as long as they have an internet connection.
- Bitcoin gives the user a sense of financial freedom. Users are able to do what they want with their money without being tied down by the government or bank restrictions.
- Bitcoin transactions are quick and simple. Bitcoin payments usually take 10 minutes or less to process, so you can get your purchase faster than if it were processed through a credit card company or another traditional payment method.
- Bitcoin’s decentralized system makes fraud virtually impossible, meaning that merchants will be much safer accepting bitcoin payments than traditional forms of payment such as debit cards whose chargeback systems allow customers to dispute charges and get their money back. In 2014, $74 million was charged back on $340 million worth of Bitcoin transactions. Bitcoin’s decentralized system puts the responsibility on the merchants and Bitcoin payment processors such as Bitpay to ensure all Bitcoin payments are genuine – an expensive but worthwhile task.
- Bitcoin is more secure than traditional online payment methods. Bitcoin payments can be made without personal information tied to the transaction, so users don’t have to worry about their identity being stolen or their funds getting lost or frozen by banks or governments. Bitcoin keeps your money safe through encryption, ensuring that only you have access to your data and your wallet. No third-party services can freeze or seize your Bitcoin funds like they could with a bank account.
- Because Bitcoin transactions are irreversible once confirmed, there is no risk of Bitcoin payments defaulting or being charged back to the merchant. Bitcoin users don’t need to worry about whether or not their Bitcoin payment will successfully go through, unlike other methods where merchants can receive the money but then reverse the transaction if it’s disputed by the customer. Bitcoin payments are non-refundable and you can rest assured that your Bitcoin won’t be lost due to fraudulent transactions.