Cryptocurrency is taking the financial world by storm, and few would argue that bitcoin was
at the forefront of this wave. Bitcoin is a digital currency that primarily exists in what is
known as ‘the cloud’ or in other words: it doesn’t require any physical currency to exist, just
some code stored on a computer. Trading in bitcoin has become a very profitable way to
generate income, and whether you’re just starting out, or have been at it for a while, there
are some tips that can enhance your bitcoin trading strategy.
1. Short Sell Bitcoin
Short selling is an effective way to generate income, and a lot of brokers are incorporating
shorting of bitcoin into their trading platforms. This means that a trader can bet against the
price of the currency going up, and thus generate some income if they’re correct.
However, bitcoin makes it easier than ever before due to the fact that there is less risk
involved with this financial instrument than others. Short-selling bitcoin involves borrowing
some amount of bitcoin from someone at an agreed-upon interest rate and then selling it in
the market for a higher rate. Some might compare it to selling futures since the bitcoins are
then bought back at a lower rate for you to return to the lender, pocketing the difference as
profit. It’s not a new strategy – it has been widely used for decades – but because bitcoin is
so new, the margin of profit is higher.
While highly lucrative, this strategy is perhaps best reserved for those with more experience
in the market. If you’re just starting out, it’s good to learn about it, but it may be better to dip
your feet first into some other strategies to get a feel for how the market works.
2. Mining And Buying
Miners are the lifeblood of bitcoin – they keep the system running. Admittedly, the more
popular a cryptocurrency is, the harder it is to mine for it. Still, if you have the proper tools,
mining is a great way to generate income.
Since they are making at least some profit on what they mine, many people share their
hashing power (how much processing power they use in order to generate bitcoins) with
mining pools. What can make this strategy even more profitable is when you also happen to
be one of the people mining, then you will be able to generate some extra earnings just by
doing what you’re already doing. This is far from a robust strategy but can improve your
income in excess of simply buying bitcoin on an exchange. The way it would work is that you
sell your bitcoin on an exchange then immediately buy it back before returning the coins to
their original owner.
Mining can produce a lot of results – you can either mine for yourself, or join an organization
that mines, and the profits will be shared between members.
3. Timing Is Everything
Just like any other market, timing is everything in the bitcoin markets. If you have the
patience to wait for the right opportunity, then you can earn a lot of money through very little
There are some strategies that work better depending on what time of day it is – some
people even swear by certain times of the day. This doesn’t mean you should only trade at
those times, but you should be aware that if something is generating very few trades during
low activity hours, then it might be the perfect time to try and generate some income. One of
the biggest mistakes a trader can make is acting too early or too late into a trend. For
instance, you may realize that your chosen cryptocurrency has been going up in price, but if
the market is not very liquid, it may be better to wait until a more convenient time to enter
The same can be said for entering a trade too late – you don’t want to buy bitcoin when
everyone else has already started selling because by this point there isn’t likely to be much
4. Set Your Goals Before Entering A Trade
As with any market, your ultimate goal should be to maximize the value of your investment. If
you don’t have a clear strategy before entering into a trade, then it’s likely that you’ll just end
up losing money on a bad gamble instead of gaining some income from the trade itself.
Of course, if you aren’t interested in taking a gamble on your bitcoin, then the smartest thing
you can do is to simply hold onto it for as long as possible. This may mean locking up your
bitcoin or not trading at all depending on what your goals are. Still, this will help protect you
from losing money and give you a good chance of earning a profit at the end of the year.
In almost all cases, buying bitcoin from an exchange will come with commissions and fees –
it’s how they make their money. Exchanges that have a low fee structure for small
transactions are usually going to be worse than exchanges that have high fees for large
transactions. The difference in the exchange is that some charge a percentage of your trade
while others will place a lower commission on trades that are larger than others.
5. Research Altcoins
While you should definitely try and maximize your profits, it may be best to do some
research on the different cryptocurrencies that exist before investing in bitcoin.
While many people think of bitcoin as gold or silver, there are actually many other cryptos
out there that could help diversify your portfolio. This will help minimize risk and give you
more opportunities to earn some income – especially if you want to start trading daily. If you
see an altcoin on the rise, it might mean nothing, but it could also mean that bitcoin is
beginning to lose its momentum because the attention has shifted away from it.
By this point, you should have already done your research and know whether or not you
want to invest in that particular altcoin or cryptocurrency. It’s always a good idea to have one
main focus in your trade, but to never put all your eggs in one basket.
Trading bitcoin is not as simple as it sounds – there are many things to consider before you
start buying and selling bitcoin. If you want to make the most out of your bitcoin trading, then
it may be best to do some research on what works for others, but also plan your strategy
according to what will work for you. Like the more traditional kind, it also has a lot to do with
talent and a little bit of luck. All in all, bitcoin trading is a great way to make some extra
money and can be done from the comfort of your own home!