Want to start trading Bitcoin in Canada or some other country in the world? Consider these 6 things about Bitcoin and cryptocurrencies first!
From the day that an anonymous person with the pseudo name of Satoshi Nakamoto released the proposed idea of Bitcoin in 2008, this digital currency has grown to be popular all over the world. There is much to learn about this currency, from having no intrinsic value to being worth thousands of dollars.
Although some countries still consider Bitcoin a risky investment, many people worldwide, such as in Canada, continue to invest in it. There’s no doubt that there’s potential for profits and risks. Here are some key things to keep in mind when trading Bitcoin in Canada.
#1 – Not All Crypto Exchanges Are Fully Regulated
Although some exchanges are fully regulated in Canada, there are still exchanges inside and outside Canada that aren’t. Since it’s easy to open an online crypto trading account to buy Bitcoin and other cryptocurrencies, people should do their research to make sure the exchange they’re using is legitimate and has a good reputation. You may want to visit https://netcoins.ca/ or other reputable sites for a safe and easy way to buy Bitcoin and other cryptos.
However, people should know that not all unregulated exchanges are scams. Some are just young and not yet registered with financial regulators; others just don’t have a physical presence in the country.
Additionally, decentralization is part of cryptocurrency’s essence. That’s why some might not be regulated because of their structure. But that doesn’t mean they’re not a good option. But, if you’re a person who values safety and doesn’t want to take too many risks, then it would be best to stick with regulated exchanges.
#2 – Price Is Extremely Volatile even when Trading Bitcoin in Canada
Cryptocurrencies are known for their high volatility. Though it’s the most valued and popular, Bitcoin isn’t an exception. The prices can go up and down in a matter of minutes, and even though people can make profits in minutes, they can also lose them in seconds.
If there’s too much volatility, how will you be able to protect your funds and profits from trading Bitcoin? Many people use different tools to minimize risks. Below are some of the most common tools used to hedge against volatility:
- Stop-Loss Orders
These orders are set to sell Bitcoin when it reaches a particular price automatically. For example, someone buys Bitcoin at USD$9,000 and sets a stop-loss price at USD$8,500. When Bitcoin reaches USD$8,500, the stop-loss order is automatically executed. That way, the person won’t lose too much money if the price of Bitcoin falls.
- Take-Profit Orders
Take Profit Orders are the opposite of stop-loss orders. They’re set to automatically sell Bitcoin when it reaches a particular price in favor of the trader. For example, someone buys Bitcoin at USD$9,000 and sets the take-profit price at USD$10,000. When Bitcoin reaches USD$10,000, the trader’s take profit order will automatically execute to take profits. That way, the person will secure the gains.
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#3 – Bitcoin Is Not Just A Digital Currency
Bitcoin is more than just a digital currency- it’s a technology. The Bitcoin network is decentralized, meaning that there’s no central authority controlling it. Transactions are verified by miners, who use special software to solve mathematical problems, and they receive rewards with new bitcoins for their work.
Bitcoin uses cryptography to secure its network, and there are different types of keys and wallets used for storage and transfers.
In simple terms, cryptography is the practice and study of techniques that make data safe for communication. It also helps to conceal information and make it private.
Cryptocurrency wallets are digital or physical storage for digital currencies, containing a public key and a private key. The public key is your crypto wallet address, which you use to receive funds. While the public key is to receive funds, the private key is what you use to prove you own the wallet and authorize transactions.
There are different types of cryptocurrency wallets. Hard wallets or cold storage wallets are physical devices that store your cryptocurrencies offline. People consider them more secure because you don’t have to connect them to the internet. However, you can only access them during a transaction if you also have their private key.
On the other hand, hot wallets are online and connected to the internet, making them less secure. However, they’re more convenient because you can access them from anywhere.
Understanding the above terms will help you better understand Bitcoin and all other cryptocurrencies and their underlying technology. This knowledge will also help you make wiser decisions in trading.
#4 – There Are Many Promising Cryptocurrencies Other Than Bitcoin
Bitcoin is the most popular cryptocurrency, but it’s not the only one you can trade. There are many other cryptocurrencies out there that are also worth looking into, such as Ethereum (ETH), Tron (TRX), Cardano (ADA), and a lot more. Trading cryptocurrencies other than Bitcoin can be a great way to spread your risk and profit from different coins.
#5 – Bitcoin Uses Proof Of Work (POW)
Proof of work is the algorithm used by Bitcoin and other cryptocurrencies to verify transactions. This algorithm uses a lot of computing power to solve complex mathematical problems. Mining Bitcoin requires a lot of electricity, and the more miners there are, the more power it takes. Proof of work is considered one of the most energy-consuming methods of processing transactions.
So, if you’re concerned about the environment and believe that projects that promote sustainability are the ones who’ll survive the market, then trading Bitcoin might not be the best option for you.
#6 – Bitcoin’s Supply Is Capped, At 21 Million
Bitcoin’s total supply is capped at 21 million units, and this number will never increase. Experts estimate that the last Bitcoin will be mined in 2140. What does it mean for investors and traders?
The effect of Bitcoin reaching its maximum supply is still unknown. Some say it’ll be good since it will restrict the supply of Bitcoin and increase its value. However, others say it can make Bitcoin lose its value because there won’t be any new coins entering the market.
Whatever the final result is, the scarcity of Bitcoin will affect its price. Traders should plan for this eventuality to be ready to trade effectively when the time comes.
Trading Bitcoin in Canada for profit is not an easy task. It’s not like buying and selling other financial assets which prices are more stable. To be a successful Bitcoin trader and survive a volatile market, you need to understand how Bitcoin and other cryptocurrencies work.
Know that not all people who trade Bitcoin make a profit, and there’s always the risk of losing your investment. Choosing a reliable exchange and safeguarding your funds are some of the most important things you can do to minimize your risk.
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