Understanding Key Factors Influencing Bitcoin Price
Like any financial asset, the price of Bitcoin is dictated by the laws of supply and demand. Bitcoin has always been compared to gold in this regard, in that there is a finite number of coins that will ever be available. Beyond that, market participants will, over time, determine the fair value of Bitcoin depending on its use cases and adoption. Another major price influencer is media coverage. In its early years, the price of Bitcoin was constrained as the media branded it a passing cloud and a coin for the dark web. In this age of social media, such negative coverage can scare potential investors. However, positive media coverage of both Bitcoin and its underlying blockchain technology has provided favorable fundamentals for the foremost cryptocurrency and emboldened investors.
Bitcoin trading may be decentralized, but the power of major governments around the world cannot be ignored. Bitcoin has been the subject of frequent changes in regulation in various aspects, including taxation. Part of the reason the price of Bitcoin fell sharply after the highs of late 2017 was massive regulatory pressures from China. But regulation is not necessarily a negative fundamental. In some instances, positive regulation serves as a tool to legitimize Bitcoin as a mainstream financial asset, and this can lead to increased demand.
How To Profit from Bitcoin Trading When the Market Goes Down
Bitcoin is a highly volatile asset, with changing sentiment capable of driving prices from one extreme to another. The market can experience overzealous optimism one moment and then quickly change to dark pessimism. At the end of the day, though, investors have to file their taxes whether prices are rising or falling.
Luckily for investors, Bitcoin is subject to capital gains tax. This presents a unique opportunity for claiming tax deductibles when prices are plunging. If you suffer a loss from your Bitcoin investment, you are entitled to include the details so as to reduce your overall tax liability. For a Bitcoin loss to be ‘valid’, it has to be realized. This means that you have to liquidate your position. You can only suffer a loss when you sell Bitcoin at a lower price than you bought it. If prices fall, but you do not sell, that is an unrealized loss and does not qualify for a tax deduction.
Buying Bitcoin
There are different ways to buy Bitcoin and gain exposure to the opportunities this exciting asset provides. There are crypto exchanges that allow investors to buy Bitcoin using credit/debit cards or bank transfers. Exchanges were initially the only way to buy Bitcoin, and they have evolved as the foremost cryptocurrency has attracted interest globally. When you buy Bitcoin via an exchange, you will be required to open and secure a crypto wallet. You will fully own the coins and can benefit from forks that generate ‘dividends’ for Bitcoin holders.
There are also peer-to-peer Bitcoin exchange sites where people trade Bitcoin for cash between each other. These sites have grown in popularity because they match local traders who can conveniently exchange Bitcoin using local payment methods. Peer-to-peer Bitcoin trading sites usually offer the coin at premium prices (higher than the market spot price), but they are easy and convenient for anyone to use. There are also Bitcoin ATMs that resemble traditional ATMs. However, they are not connected to any bank, but rather to a Bitcoin wallet or exchange. Bitcoin ATMs allow investors to buy Bitcoin with credit/debit cards as well as cash.
Bitcoin trading via derivatives is attractive for many investors because it allows for profits to be captured whether prices are rising or falling. Derivatives can also be , which makes it possible to gain bigger profits when prices move in your favour. So how should you buy Bitcoin? This entirely depends on your investing goals and ambitions. When you buy Bitcoin via an exchange, ATM, or a peer-to-peer trading site, you are essentially a HODLer.
“HODL” is a term in the bitcoin community that means holding the coins for a long term. You essentially believe in the future of bitcoin and will never be concerned by periods where the price is declining. You are in for the long haul and will cash out when you reach a predetermined target or when it makes sense to do so. But if you are a short term, active trader, will suit you better. Bitcoin is generally a volatile asset whose prices fluctuate wildly. This means that short-term bitcoin traders are exposed to more opportunities when the prices swing between different highs and lows
Why Trade Bitcoin with AvaTrade
Security
Regulated in various jurisdictions around the world, which ensures that we comply with the highest standards of safety, including holding customer funds in segregated bank accounts.
LEVERAGE
We offer a leverage of up to 2:1 when you trade Bitcoin or any other cryptocurrencies. This means that you can extract and maximise your trading during marginal price changes or when you have limited capital.
Lower Charges
We enable our clients to trade Bitcoin at competitive spreads. This is because, unlike exchanges, we do not need to charge miner fees or other transaction costs.
Multiple Pairs
Trade Bitcoin vs. various fiat currencies and get exposed to even more trading opportunities via arbitrage.
Trading Central
Identify the best technical setups on your Bitcoin chart using Trading Central which is integrated on all our platforms.
AvaProtectTM
This unique feature gives you your money back on losing trades during the protected time period.
