When getting started with Bitcoin, you may want to know how trading differs from owning this virtual currency. Bitcoin is a form of digital money. The fact that Bitcoin is decentralized means you can own it. After all, governments and central banks do not control, regulate, or manipulate this cryptocurrency.
Over the years, people have sold and bought Bitcoin on platforms like BitQT using traditional currencies. Also called crypto exchanges, these platforms play a crucial role of making Bitcoin available to people that can’t mine it. This article explains the differences between trading and owning Bitcoin.
|Trading Bitcoin||Owning Bitcoin|
|Trading Bitcoin entails speculating on price movements without taking ownership of the crypto currency.||You purchase and own this virtual currency outright.|
|You trade short or long||Long is the only option|
|Nimbly trade Bitcoin volatile price variations in either direction||Purchase, hold, or close a long position only|
|Use stop losses, entry orders, profit-limit orders, and other risk management practices||Manually purchase or close a long position only.|
|Use a long-term or short-term trading strategy||Long-term purchase and hold only|
|Use margin while leveraging to maximize account equity usage||Find Bitcoin purchase value up front|
Owning Bitcoin means you purchase and keep this virtual currency in a digital wallet. If you’re a loyal fan of this digital currency, sharp value swings are the small price a person must pay for joining the juggernaut that might eventually dominate global finance.
Today, many investors opt to buy and hold onto this virtual currency, hoping its price will eventually increase. After that, they can sell their tokens and reap lucrative returns. The notion is that Bitcoin value will increase as miners near the cryptocurrency’s limit of 21 million coins. Thus, people who buy and hold onto this digital currency now will sell their tokens at higher prices.
The primary difference between purchasing and trading Bitcoin is that the former allows you to take a long or a short position at any time, depending on your outlook. When you purchase Bitcoin outright, you can only take a long trading position. What’s more, you have to hold through volatile swings of Bitcoin’s price.
A Bitcoin trader can try to benefit from the potential opportunities that Bitcoin volatility presents. Bitcoin analysts always have differed on whether this virtual currency’s value will keep shooting up in price or will eventually drop sharply. Bitcoin traders can nimbly position themselves in any direction and take the emerging directional trading opportunities.
Alternatively, they can trade this virtual currency depending on price swings on a short-term basis rather than buy it at a specific price and hold onto it on a long-term basis, hoping its price will increase further.
Leverage and margin also present a way to trade Bitcoin. And these are more flexible than purchasing it outright. Depending on Bitcoin price at a given time, owning it can be prohibitively expensive. But when you trade Bitcoin with leverage, you can take your position with low capital. However, high trading leverage can also increase your risk.
Also, trading this virtual currency enables you to use stop losses, entry orders, risk management methods, and profit-limit orders. All these options are impossible when you purchase and hold onto Bitcoin.
Whether you should buy and hold onto Bitcoin or sell this virtual currency will depend on your financial goals. Nevertheless, people worldwide are purchasing and holding onto this virtual currency while others trade it. Its popularity continues to increase with more countries and merchants accept Bitcoin as an exchange medium. Others see it as an asset they can invest in due to its limit of 21 million tokens.