Bitcoin is a popular and highly volatile cryptocurrency. Discover everything you need to know about trading bitcoin with the the No.1 CFD trading provider.
What is bitcoin trading?
Bitcoin trading is how you can speculate on movements in the cryptocurrency’s price. While this has traditionally involved buying bitcoin through an exchange, hoping that its price will rise in time, cryptocurrency traders are increasingly using derivatives to speculate on both rising and falling prices – in order to make the most of bitcoin’s volatility.
With IG, you can take a position on the price of bitcoin with financial derivatives like CFDs. This product can enable you to take advantage of price movements in either direction without taking ownership of the underlying coins – meaning you won’t need to take responsibility for the security of any bitcoin tokens.
Learn what moves bitcoin’s price
To get in on a surging opportunity or short the latest bubble, you first need to understand the factors that have an impact on bitcoin’s price:
- Bitcoin supply. The current bitcoin supply is capped at 21 million, which is expected to be exhausted by 2140. A finite supply means that the price of bitcoin could increase if demand rises in the coming years
- Bad press. Any breaking news which concerns bitcoin’s security, value and longevity will have a negative effect on the coin’s overall market price
- Integration. Bitcoin’s public profile depends on its integration into new payment systems and banking frameworks. If this is carried out successfully, demand might rise which will have a positive effect on bitcoin’s price
- Key events. Regulation changes, security breaches and macroeconomic bitcoin announcements can all affect prices. Any agreement between users on how to speed the network up could also see confidence in bitcoin rise – pushing the price up
Pick a bitcoin trading style and strategy
How to day trade bitcoin
Day trading bitcoin means that you’ll open and close a position within one single trading day – so you won’t have any bitcoin market exposure overnight. This means that you’ll avoid overnight funding charges on your position. This strategy could be for you if you’re looking to profit from bitcoin’s short-term price movements, and it can enable you to make the most of daily volatility in bitcoin’s price.
How to trend trade bitcoin
Trend trading means taking a position which matches the current trend. For example, if the market is in a bullish trend, you’d go long and if the trend was bearish, you’d go short. If this trend started to slow or reverse, you’d think about closing your position and opening a new one to match the emerging trend.
Bitcoin hedging strategy
Hedging bitcoin means mitigating your exposure to risk by taking an opposing position to one you already have open. You’d do this if you were concerned about the market moving against you. For example, if you owned some bitcoins but were concerned about a short-term drop in their value, you could open a short position on bitcoin with CFDs. If the market price of bitcoin falls, the gains on your short position would offset some or all of the losses on the coins you own.
HODL bitcoin strategy
The ‘HODL’ bitcoin strategy involves buying and holding bitcoin. Its name derives from a misspelling of ‘hold’ on a popular cryptocurrency forum, and it is now often said to stand for ‘hold on for dear life’. However, this phrase shouldn’t be taken too seriously – you should only buy and hold bitcoin if you’ve got a positive outlook on its long-term price. If your research or trading plan indicates that you should sell your positions to take profit or limit loss, you should – or you could set stop losses to close your positions automatically.