Bitcoin Trading Risks, Benefits and Other Things You Should Know

Bitcoin trading has been a revolutionary addition to the world of currency trading. Last year, cryptocurrencies took the financial market by storm, particularly the Forex market. Bitcoin, in particular, went mainstream and lured tons of investors to trade and invest in it.

The price of Bitcoin skyrocketed in a matter of months; thus, made Bitcoin trading more appealing than ever. Despite the rapid change in its performance, investors are still into this cryptocurrency. However, not everyone understands the underlying risks as well as the benefits that this asset holds.

In this article, we will look through the risks, the benefits and other important aspects that you should know about Bitcoin trading.

The Risks

1)     Extreme Volatility

Volatility is essential in trading as it offers good trading opportunities. But just like anything else, having too much of it is not good for you. Bitcoin has undergone tremendous volatility in a rapid rate.

Bitcoin price in November 2017 stood at $6,400. It surged by mid-December and reached a whopping $19,200 record high. Just a couple of weeks passed and prices fell to $13,400.

This volatility created high level of uncertainty which made it hard for investors to enter and exit trades at the right time.

2)     Limited Supply

When Bitcoin was launched in 2009, there were only a total of 21 million coins created. As of 2018, there are already 16.8 million Bitcoins in circulation, which leaves us just below 5 million left.

3)     Hacking Threats

Another undeniable threat not just to Bitcoin, but to other cryptocurrencies is the possibility of theft through hacking. Cyber-attacks could derail the market and make the prices of all cryptocurrencies fall.

The Benefits

1)     Anonymity

Trading Bitcoin doesn’t require you to reveal your identity. Unlike typical bank accounts, Bitcoin wallets are not linked to your personal information. Transactions are registered through addresses which are only for one time use so you can be rest assured that your identity is safe.

2)     Low Transaction Costs

Bitcoin transfers have extremely low costs unlike wire transfers or debit/credit card payments. In fact, the amount of Bitcoin you transfer is not relative to the fee you will have to pay, which is why you can send even thousands of dollars’ worth of Bitcoin and just pay a single transaction fee.

3)     High Leverage

Financial brokers often offer high leverage in Bitcoin trading. However, keep in mind that high margins should be met with caution as they can also increase your potential losses.