As soon as the merchants of the day realized that Bitcoin could be here to stay, a large number of them decided to start exchanging bitcoins in several Bitcoin exchanges. Although the early days of Bitcoin were plagued with scams in which exchanges or wallet providers escaped with bitcoins overnight, the reality is that we are now seeing a much more mature market for trading bitcoins.
If you are looking to enter your operations manually or have some bots do all the work for you, it is important to understand how the Bitcoin trade really works before you dive into the bottom.
Choose a Bitcoin exchange
The first thing you should do when you want to learn how to exchange bitcoins is to find out where you are going to operate. Although it is supposed to be a decentralized P2P currency, the reality is that it is currently impossible to perform high frequency operations without the help of a centralized server. These centralized servers are known as a point of weakness for the Bitcoin market in general, but improvements in security have been slowly extending to several exchanges over time.
If you are going to exchange bitcoins on a regular basis, you will need deposits in one or two Bitcoin exchanges at all times. While the characteristics of the platform and unique trading options may be the most important aspects of exchanges in other markets, the reality is that security is the most important feature to think about when exchanging bitcoins in a hot wallet. Factors such as longevity, two-factor authentication and the reserve test will be the most important characteristics to consider when choosing an exchange.
Longevity and two-factor authentication are two factors that you probably have in the back of your head for traditional exchanges, but the reservation receipt is a new feature for Bitcoin exchanges that should be viewed with the utmost importance. Bitcoin exchanges can show that they actually have the bitcoins they claim to have by signing Bitcoin address messages that contain large amounts of bitcoins, so this should ease some of their fears when it comes to the possibility of an exchange by running a Ponzi scheme . Certain exchanges that offer proof of reservation, such as Kraken and Bitstamp, should be at the top of your list.
Buy and maintain Bitcoins?
Once you have registered for a Bitcoin exchange and have verified your account, you can start thinking about your own trading strategy. There are many operators that try to synchronize the market on a daily basis, but the reality is that the strategy of buying and maintaining is the one that has paid off for the largest number of Bitcoin holders in the past. You never know when a Chinese regulatory news or a recently announced killer app could cause a big price change one way or another, so it’s usually a good idea to throw your emotions out the window and simply buy bitcoins on a regular basis. base. This will be weekly for some merchants, while others will decide to pick up some bitcoins the first of each month.
Trying to exchange bitcoins without understanding why you bought them at first can also be a big problem. It is known that Bitcoin has dropped in price by up to 50% in a single day, so it can not be tempted to get out of the market when these types of events occur. Trading bitcoins without an opinion that the price will eventually increase as the price increases can be problematic due to the fact that you will probably end up buying expensive and selling low.
Report your earnings
One last thing to remember when it comes to exchanging bitcoins is that this currency is not really anonymous when using a centralized exchange. After all, the exchange knows everything about its true identity because of the various AML and KYC regulations that everyone must follow. Having your bitcoins increase in value in terms of dollars is not something that is easy to hide from your local government during tax season. These earnings are considered capital gains in most countries, so you should remember to complete your annual tax return considering that fact.