As the price of Cryptocurrencies has surged this year, many people have jumped on the bandwagon to make a profit. But, with so much hype, it’s easy to get swept up in all the speculative excitement and lose sight of what’s important. That said, Cryptocurrencies are no place for casual investors—at least not yet. That won’t last long, though. With measures such as the SEC’s trading ban and recent volatility in prices, traders looking to get involved should proceed with caution and adopt a long-term investment mindset. To help you get started down that path, here are five myths about Bitcoin trading that need dispelling:
There’s no way to short-sell Bitcoin
While it’s true that you can’t short-sell any asset that doesn’t have a secondary market for your short position, it’s possible to use a derivatives exchange to short-sell Bitcoin. Several decentralized exchanges do not offer margin trading and do not allow for margin trading short positions. However, some centralized exchanges, such as Bitcoin Smarter App, do allow short positions. Short selling Bitcoin is a bit more complicated than shorting an asset like stocks or bonds. With stocks and bonds, you can short the asset when it’s cash and then buy it back, but with Bitcoin, you have to borrow the currency and then return it.
You need to be an expert to trade Bitcoin
Many people assume that to be successful at trading Bitcoin you need to be an expert. This is not true. If you want to be able to successfully trade Bitcoin and other Cryptocurrencies, you just need to know what to look for and how to interpret it. It’s very similar to how a share trader can become successful. All it takes is a basic understanding of the stock you’re trading and a proper strategy to execute the trade properly.
Bitcoin trades only during volatile hours
There is a misconception that all trading in Bitcoin occurs during volatile hours, such as during times of high trading volume. While some trading does occur during these times, many traders use Bitcoin exchanges outside of these times, including during the day and at night. This is because the trading process is identical no matter the time of day or liquidity. What matters is that there are enough buyers and sellers to make a transaction occur. The Bitcoin market is 24/7, 365 days a year.
Cryptocurrencies are a risky investment
While the Bitcoin price has fluctuated wildly in the past year, most experts agree that it’s still too early to call the cryptocurrency’s long-term future. That’s because Cryptocurrencies are a new asset class that’s still developing, especially in terms of regulation. That said, as Cryptocurrencies become more mainstream and are adopted more widely, they’re likely to stabilize and be more stable investments.
You need to pay a fee for using a cryptocurrency exchange
Most cryptocurrency exchanges charge a fee for using the service. Some exchanges, like Coinbase, charge a fixed fee that varies with the amount you trade. Others, like Bitmex, charge a percentage fee based on the volume of the trade. While it is true that some exchanges charge fees, it’s important to remember that it’s not just the exchange that benefits from your trading. You can use a broker to help you trade Bitcoin and other Cryptocurrencies. Brokers, like Fidelity and TD Ameritrade, can help you navigate the waters of cryptocurrency trading by providing access to Coinbase and other exchanges.
Bitcoin trading is a volatile investment, so you need to be careful. However, it’s not an inherently risky investment, and you can protect your portfolio by using a margin trading platform to borrow money. The most important thing you can do is stay informed. Read your news sources and discuss Cryptocurrencies with like-minded people so you can stay on top of the latest trends and regulations. And, most importantly, don’t put all your eggs in one basket.