The digital currency breaks its three-year-old record. Investors have used the recent price slump to re-enter the market.
Bitcoin is more valuable than ever. In December 2020 the Bitcoin price finally rose above the old all time high and currently it keeps rising high beyond 20k. On Bitstamp, this week we saw nearly 24k already. On other platforms, of which there are numerous, the respective record highs differ somewhat.
“The recent price slump is being used to re-enter the market,” says analyst Timo Emden of Emden Research. “Fresh money from investors who have missed the bitcoin rally so far is now flowing into the market.” Last Thursday, the oldest and best-known cryptocurrency was still trading at around $19,200.
For the year, bitcoin is up more than 150 percent, compared to just $4,000 in March. Two factors in particular have been fueling the rally since then: first, volatility on the stock markets is high and global central banks are pumping trillions of dollars into the markets through their aid programs in the Corona crisis. This is driving investors into alternative investments.
On the other hand, proponents of cryptocurrency are hoping that it will become mass marketable. In 2020, trading in Bitcoin & Co became increasingly professionalized. More and more crypto start-ups are cooperating with traditional banks, and the traditional financial world is merging with the crypto universe.
How to trade Bitcoin and Cryptocurrency
Cryptocurrencies and especially Bitcoin trading are becoming more and more popular. Traders can trade BTCEUR and BTCUSD and optimize them with chart analysis.
Do you know how many people on earth know the term Bitcoin?
It has already been 36% of adults surveyed in 2016, according to Statista. In 2017, Bitcoins in circulation already increased to 16.6 million.
The virtual monetary unit Bitcoin is created decentrally in a computer network (mining) and can be exchanged for other currencies on online exchanges. Bitcoin is also a cryptocurrency that is not controlled or managed by banks or state institutions.
First stores and service providers accept Bitcoins as a means of payment. I can acquire Bitcoins via Bitcoin exchanges such as the bitcoin.de platform and see them as a classic investment.
However, this article is primarily about trading with Bitcoins and not about a long-term investment or other acquisitions.
The CEOs of various banks are quite critical of the speculation. Attached are a few quotes on bitcoin and cryptocurrencies:
- Blankfein (CEO Goldman Sachs): “I don’t like [bitcoin], I’m not comfortable with it, I don’t trust it.”
- Thiam of Credite Suisse: “From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble.”
- J.P. Morgan’s Dimon: “It’s a fraud.”
Still, investment banks are generally interested in cryptocurrencies. While some market participants still see uncertainty due to the high level of anonymity involved in trading cryptocurrencies and hacking attacks cannot be ruled out, investment bank Goldman Sachs recently spoke positively about blockchain technology and bitcoin.
If a major Wall Street player officially enters the digital currency trading business, it could help propel cryptocurrency from the niche to the mainstream. There is also talk of creating a tradable futures contract through the CME, the world’s largest futures exchange. Should this come to pass, the first ETFs on Bitcoins might also not be long in coming.
BaFin, on the other hand, has issued a warning, saying that trading in Bitcoin carries the risk of total loss. It should be noted, however, that the supervisors were talking about ICOs (Initial Coin Offering) and not about Bitcoin itself.
Which Bitcoin trading software and broker are suitable?
As in classic forex trading, traders need an online broker for Bitcoin trading, which provides the quotes and processes orders.
In both classic forex trading and cryptocurrency trading, two currencies are always traded as a pair against each other. In EUR/USD trading, a “buy” ensures that the EUR is bought and the USD is sold at the same time. In this case, one bets on a rising EUR and a falling USD. If you sell the pair, it is correspondingly the other way around.
In crypto trading, it works the same way.
Here is a short comparison of forex vs crypto trading.
The most popular online brokers offer trading of BTC/EUR and BTC/USD. So you trade Bitcoin (BTC) against EUR or USD.
Caution: Bitcoin’s sister currency, Bitcoin Cash, has its own exchange rate, but is not yet widely offered for trading – please do not confuse the two.
Serious means that a German or British regulation is given (BaFin or FCA) and the conditions are fair. A German customer service is not a must, but helpful if there are problems.
When it comes to trading software, I can recommend Metatrader from Metaquotes for forex trading and bitcoin trading. The software is free and is offered by various brokers. Praiseworthy is the possibility to practice trading with Bitcoin, Ethereum and Co. on the basis of free demo accounts without having to risk real money.
Almost all brokers offer the demo accounts. You should take advantage of this, because it allows you to get used to the trading software and your first beginner’s mistakes will (hopefully) only happen once, when trading with play money.
Only when you have developed a proven Bitcoin trading strategy and feel confident, you should start live trading with small(!) real money. Because now comes the psychological component in trading.