Bitcoin trading is one of the hottest investments right now. With some predicting that the coin will increase in value up to $100,000 per coin, it’s no surprise that people are still fighting to get onboard.
Yet what does trading Bitcoin involve? What do you need to know before you get started to maximize your chances of success?
In this article, we’re going to show you how to trade Bitcoin and offer you some key facts that you need to know before you start investing your hard-earned money. Are you ready to learn more? Then read on!
1. Where Can You Buy Bitcoin?
If you want to start investing in Bitcoin, you need to trade your fiat currency for Bitcoins. Think of it like visiting a currency exchange before you go to a foreign country.
Yet where can you buy this cryptocurrency? You’ve got a few different options available to you, and some are definitely better than others.
A Bitcoin ATM
Your first option is a Bitcoin ATM. These let you swap cash from your account for Bitcoins. All seems well, right?
The problem is that Bitcoin ATMs charge expensive fees, and when you’re dealing with tens of thousands of dollars, these fees can soon become very expensive indeed. While ATMs are okay for small transactions, you’d do well to avoid them, in general.
If you don’t want to pay the ATM fees, you can buy from a P2P exchange. This is where you buy Bitcoin directly from another person, with no middleman involved. This does cut down on fees by a great deal but also opens up opportunities for quite spectacular fraud.
If you’re new to Bitcoin, avoid P2P exchanges.
Your best option is to buy Bitcoin through an exchange app like Binance or Coinbase. These exchanges hold coins from other users and then swap them with you for fiat currency.
The exchanges act as a middleman to cut down on the risk of fraud by regulating these trades.
2. Bitcoin Isn’t the Only Crypto
If you’re new to cryptocurrency, you may think that Bitcoin is the only cryptocurrency around. While it’s certainly true that Bitcoin is the most famous, there is a range of other coins that you could invest in too. These altcoins, as they’re known, have a lower cost of entry than Bitcoin and could still hit a very high exchange rate.
Some very well-known altcoins include Litecoin, Chainlink, and Ethereum. We’d recommend that you check out these coins before deciding which to invest in, as each coin also comes with different features, which may be of interest to you.
3. Cryptocurrency Is Not Stable
While Bitcoin and other cryptos can make you very rich, it’s important to note that the market is far from stable. The market fluctuates a lot from hour to hour, which means that you can easily lose your money fast.
Bitcoin crashed in 2018, losing 65 percent of its value over one month. There’s no reason to assume that this won’t happen again, and with the value of Bitcoin at an all-time high, the crash would likely be far worse.
We often hear about crypto millionaires and it is possible to join their ranks. However, you should make your investments in a considered fashion: rushing into any investments, especially in the world of cryptocurrency, could cost you your savings in the blink of an eye.
4. You May Still Need to Pay Taxes
It’s easy to think that because Bitcoin is an anonymous currency, that you won’t need to pay taxes on any money you make from your investments. This is incorrect. Like any other investment, the money that you make on crypto is still subject to capital gains tax.
While you will need to make more than a certain amount of money for this to be taxable, this amount varies from jurisdiction to jurisdiction, so take a look at your laws and know what taxes you need to pay.
The anonymity of Bitcoin is only present if you’re using Bitcoin to buy things, and even then, you’ll still need to include a shipping address, which means the purchase is traceable. If you’re going to sell your Bitcoin later on, the IRS or the equivalent in your country will be able to see the money you’ve made.
Don’t risk big penalties: pay your taxes.
5. You Cannot Reverse Transactions
Due to the anonymous nature of Bitcoin, you can’t reverse any transactions that you make with Bitcoin. Let’s say that you trade your Bitcoin for another coin and then want to reverse the transaction, you won’t be able to.
The same applies with refunds (at least from individuals). If you buy something from someone with Bitcoin, they may honor a refund but if they don’t, there’s no way for you to get that money back.
This is because there’s no central bank of Bitcoin. The whole point of the currency is that it is decentralized: while this comes with some great advantages, it also means that there’s no one for you to appeal to.
If you make any transactions, be sure that you want to make them. All transactions are final.
Understand Bitcoin Trading Before You Start
Bitcoin trading can make you a lot of money but you need to know what you’re doing before you get started. Don’t start trading Bitcoin until you understand it and the market, or many problems could be in store. For more great informative articles like this, check out the rest of our site!