Bitcoin is a decentralized cryptocurrency that is currently one of the strong candidates for the role of a global currency. Being decentralized is not controlled by any central individual or agency, rather it is maintained by peers called miners who are rewarded with bitcoins for their efforts. The source code for bitcoin is crafted such that it would be hard for any miner to grow enough to be superior to the rest. The setting and coding of the bitcoin source code keeps its status as a decentralized currency unhurt. Like every currency, bitcoin can be used as a medium of exchange, and a store of value. It is the most accepted and adopted virtual currency in the world.

The fact that the value of bitcoin changes more frequently than fiat currencies has made it gain the interest of a lot of traders. This is because the high volatility of bitcoin means that traders could receive huge profit (or loss) in a relatively shorter span of time. The amount of bitcoin that can be gained or lost in trading bitcoin is theoretically infinite. It is theoretically infinite because a trader's profit (or loss) depends on the amount that was invested in the trade.

Trading Bitcoin

There are two major ways of trading bitcoin. The first way to trade bitcoin involves buying bitcoins, and waiting for its value relative to another currency to change, before selling it (exchanging it with the other currency at an exchange rate). To achieve trading bitcoin via this method, you can use your fiat currency to purchase it from wallets of other individuals or corporate bodies. This exchange of fiat currency for bitcoin is done at an exchange rate, and there are usually transaction charges as well. Note that this exchange rate mutates relatively fast, and it is never fixed because bitcoin is a volatile currency.

Aside from buying bitcoins from other wallets, you can mine bitcoins, either by cloud mining (which pays less) or by using a mining device. Initially, when bitcoin came into existence, it could be mined using personal computers. But as the volume of miners grew (and still grows), the processing capacity of personal computers proved inadequate. Companies across the globe have begun to produce devices with processing capacities fit for the mining of bitcoins. However, the disadvantage of mining devices is that they are expensive, not just to purchase, but to run and maintain. The electricity needs of these mining devices are typically over the roof, and too much for an average individual to buy. This discourages many miners (especially from Third World countries) who cannot afford constant electricity supply.

Aside buying bitcoins from other wallets,

For people who cannot afford the high amount of electricity needed to run mining machines, they typically engage in cloud mining. Cloud miners typically receive bitcoins by buying mining contracts from miners that have enough resources to mine the raw bitcoin. The contract ensures that cloud miners receive a percentage of the bitcoins mined for the period stipulated in the contract.

For people who cannot get bitcoins through any of the means described above, they can still trade bitcoins. Trading bitcoins without having them is the second way of trading bitcoins. This is done by having a 'contract for difference (CFD)' in place. As the name implies, a contract for a different trade is about wagering a certain amount of fiat currency and asserting that bitcoin's value could rise or fall. It is a hybrid form of betting because if the price behaves as the trader predicted, he receives the money he wagered and interest. Brokers like Olymp Trade offer contracts for different services via either binary option trading or forex trading.

For people who cannot get bitcoins

In binary options trading, the trader wagers his fiat currency and predicts the behavior of bitcoin in a given time frame. If he predicted a rise in the value of bitcoin relative to another currency in a given time interval, and there was a rise in the given time interval, he wins and his account is credited.

Trading bitcoin is not a transaction limited to individuals sitting in front of computers. In fact, the highest amounts of bitcoins changing wallets daily are made to change wallets by big corporations, banks and investment companies. These establishments typically employ quants and data scientists who read the market and make more informed and accurate predictions. The employed quants build and use algorithms, indicators and many other tools to study the market and ensure that their firm's bitcoins are sold or bought in times that ensure maximal profit. Aside from building and using indicators, analysts also follow news stories developing in the political and financial sector. They use these news stories to predict the behavior of currencies under the jurisdiction of the country the news is emerging from.

Trading bitcoin is not a transaction

Some strategies employed by bitcoin traders to maximize profit include: day trading and swing trading. Day trading is used by traders trying to take advantage of short term changes in the market and short term trends. Traders using the day trading strategy take note of little changes in the market. When done with analysis of the data from the market, day traders make predictions on how these changes would affect the price of bitcoin at the end of the day. On the other hand, swing trading involves looking at structured data in charts coming from the market, they look out for emerging trends, and place their money on the trend continuing. They close out the deal as soon as the trend has lasted Swing trading must be careful because many supposed new trends are short term fluctuations of an old trend.

Indeed, Bitcoin is a volatile virtual currency whose volatility can fetch huge profits or losses in a relatively short time. There are two major ways of trading bitcoins in these present times. One involves strategically buying bitcoins and trading them with other currencies when their value has grown (or fallen). The other way of trading bitcoin is the CFD method, and to trade via this method, you don't necessarily need to have bitcoins in your wallet. In trading bitcoins, strategically aiming to buy or sell at the right time is indispensable. It is important to be guided by quants and data scientists in the process of buying or selling bitcoins because they are trained professionals whose job is to observe data coming from the market, and detecting when to make profitable sales or purchases.