As the Bitcoin market continues to attract more traders, it is crucial to learn the key differences of trading versus owning Bitcoin.
Here are some of the key differences:
Bitcoin Trading
Perhaps the most significant difference between trading Bitcoin and purchasing it is that when trading you can be either long or short at any given time depending on your outlook. If you buy Bitcoin outright, you obviously can only be long, and will usually just be compelled to hold through all the volatile ups and downs in Bitcoin's price.
Traders will attempt to take advantage of all the potential opportunities of Bitcoin’s volatility.
Bitcoin analysts are divided as to whether the cryptocurrency will continue to shoot up in value or if it will drop sharply instead. As a Bitcoin trader, you can nimbly position yourself in either direction or take directional trading opportunities as they arise.
Relatedly, when you trade Bitcoin, you can trade the price swings on a short-term basis instead of purchasing Bitcoin at a certain price and holding long-term, hoping for further price appreciation.
Margin and leverage are another way trading Bitcoin can be more flexible than buying it outright. Depending on the price of each Bitcoin at any given time, owning just one Bitcoin could be prohibitively expensive. Trading Bitcoin with leverage allows you to take a position with less capital but remember, increased leverage increases your risk.
Finally, trading Bitcoin actively allows the use of entry orders, stop losses, profit-limit orders, and risk management techniques that are just not possible when simply purchasing Bitcoins.
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