Explaining How Bitcoin Trading Works

Bitcoin is the largest cryptocurrency on the market. Not only is it superior to regular payment methods, but it also ranks higher than any other digital asset on the market. Compared to other cryptocurrencies, Bitcoin has greater stability and liquidity, is more valuable, focuses on user security more than any other cryptocurrency, and the institutional interest in it is very high as thousands of companies, global brands included, accept it as a payment method.

As for the advantages that it boasts over regular payment methods, they involve user anonymity, instant transactions, fantastic security, money-saving thanks to the fact that users don’t have to pay for additional fees, and of course, the chance to make a profit through trading.

In some countries, you can use Bitcoins as a separate mode of payment, just like how you use your credit card, mobile banking, and others. While in a few other countries, it is illegal to use bitcoins and other cryptocurrencies. Speaking of trading with Bitcoin, we wanted to share a few words on this process because thousands of people register to Bitcoin’s network just so they can dive into this world and start making money. Here’s how trading works.

Bitcoin Supply


Ever since Bitcoin was introduced in 2009 by the unidentified creator, Satoshi Nakamoto, it was revealed that Bitcoins have a limited supply of 21 million coins. As of now, around 18.8 million Bitcoins are owned by investors, which means nearly 89.5% of the pre-decided supply is already in use. Crypto specialists speculate that the remaining supply of Bitcoins will be over in a short period.

Earning Bitcoin

Logically, to trade Bitcoins, you need to earn them first. The first way to earn them is to mine them. On average, it takes 10-20 minutes to mine one Bitcoin, but this process is very complex and has a lot of behind-the-scenes expenses, which is why not many people resort to it.

The second option is to register and buy Bitcoins at trading sites, then wait for their price to grow, and thus, re-sell them and make a profit. Sometimes, you can get high returns from Bitcoin investments within days. However, there are other times where the Bitcoin price can decline because of its highly volatile nature.

Bitcoin Mining


People who mine Bitcoins are called “nodes.” They are the holders of high-performance and speedy computers that can verify each transaction unassisted. For every transaction, one “block” will be added to the “chain,” which retains a precise, public, and infinite record of all the Bitcoin transactions.

The Bitcoin miners get rewarded with Bitcoin for their effort, which stimulates the decentralized network to solely analyze the transactions. Plus, the autonomous network of miners lessens the possibility for cheating or incorrect information to be listed. It is because almost all the miners have to verify the realism of every block of data even before adding to the blockchain, in a procedure called “proof of work.”

Using Trading Sites To Your Advantage

Speaking of trading sites, they are more than just marketplaces where you can connect with buyers from around the world. Reputable platforms use automated systems that can increase the chances of making a profit, such as

Here’s how.

The automated system scans the world wide web and collects every bit of information about Bitcoin. This data is analyzed and used to determine what the near future holds of Bitcoin in terms of whether its price will go up or down.

We are sure that you are well familiar with this fact, but Bitcoin has a very high volatility rate which means that its price can rise, but it can also drop. Volatility is one of the biggest challenges that traders face, and the automated system helps them battle it to some extent. Now, it is vital to know that these services will not guarantee you a profit, but they are a valuable asset that can help you determine when is the best time to sell.

Where Do You Store Bitcoins?


Bitcoins are stored in storage units known as e-wallets. They can only be accessed by a private key, which is a unique passcode given to you. Private keys are different from public keys in the sense that public keys are used so that you can connect with other traders, while private keys are a secret that only you can know. Hot and cold are the two available types.

1. Hot Wallets

Hot e-wallets operate online, or in other words, they are cloud-based. You can access them from any device as long as you are certain that the device is secure. For instance, you can open them from your registered computer, desktop, or mobile device app. In the hot wallet, the digital currency is stocked in the cloud on a reliable exchange or service provider. It can be accessed through a computer browser, desktop, or smartphone app.

2. Cold Wallets

On the other hand, the cold ones are hardware units, and they store your Bitcoins offline. Think of them as a USB drive. In other words, cold wallets are encrypted portable appliances which enable you to download and hold your bitcoins. Hence, you can carry cold wallets with you, and you can plug them into a device to gain access to your Bitcoins. Practically, a hot wallet is engaged to the internet, while a cold wallet does not need an internet connection. However, you will require a hot wallet to download your Bitcoins into a compact cold wallet.

Bitcoin ATMs Are Also Available


Finally, it is worth mentioning that trading sites are the first option for trading with Bitcoin. The second option is called Bitcoin ATMs, and they operate in the same way as a normal ATM. These units are connected to the Internet, and once you enter your credentials and sell your assets, they will cash out the price. But they come with high fees and are not easy to access, which is why people opt-in for trading sites.

Bitcoin Transactions

For several individuals joining the Bitcoin network, the blockchain, mixture prices, and Bitcoin mining are not especially suitable. Unlike miners, Bitcoin investors generally buy the crypto coins from a Bitcoin exchange. The Crypto exchanges are online platforms that stimulate Bitcoin transactions, including other cryptocurrencies.

While making Bitcoin transactions, it is vital to include correct details. For instance, if you accidentally send your Bitcoins to the wrong wallet address, there is little to no chance for you to get them back. It is because there is no specific authority to ask for a refund due to its decentralized network. In addition to that, once you have started a transaction, there is no way to cancel it.

Bottom Line

After much observation, we have tried to include everything about how Bitcoin trading works. Starting with its supply to where to buy Bitcoins, we have incorporated all the essential information, making it beneficial for you. If you want to acquire Bitcoins, it is better to create a crypto trading account in a reliable and trusted exchange app.

About Carolyn Lang