What is Bitcoin Trading and Why Does Bitcoin Price Fluctuate?

What is Bitcoin trading and how does it work? 

Bitcoin trading is the buying and selling of Bitcoins. Bitcoin trading allows customers to trade cryptocurrencies for other assets, such as digital currencies or traditional fiat money.

The purpose of Bitcoin trading is to capitalize on the opportunity to buy bitcoin when it is priced low and sell it when its price is high.

Bitcoin trading has added a new dimension to currency trading with its dynamic force and volatility.
Bitcoin price is determined by supply and demand. When the demand for bitcoins increases, the price increases, and when the demand drops, the price drops. 

Bitcoin trading

What is Bitcoin Trading and Why Does Bitcoin Price Fluctuate?

Bitcoin Trading vs. Investing 

Before deep dive into this subject, what we want to do is understand what is the Bitcoin trading, and how it differs from investing in Bitcoin. 

When people invest in bitcoins, it usually means that they are buying bitcoins for long periods. In other words, they believe that despite the ups and downs going on the way the price will eventually increase. 

Generally, people invest in bitcoin because they believe in the team behind posture, ideology. Thus, bitcoin investors do HOLD for long-term currency.

Bitcoin traders, on the other hand, buy and sell bitcoins in the short term, whenever they think that profit can be made. Unlike investors, traders see bitcoin as a tool to make profits. Sometimes, they are not bothered to study technology or ideology behind the product that they are doing business. 

By saying this, people can trade bitcoin and still care for it, and many people can invest and trade at the same time. 

Bitcoin for a sudden increase in the popularity of the business - there are some reasons for this. 

First of all, bitcoin is very unstable. In other words, if you expect the market to be correct, you can earn a good profit. 

Second, unlike traditional markets, the Bitcoin business is open 24/7. Most traditional markets, such as commodities and stocks, have an opening and closing time. With Bitcoin, you can buy and sell whenever you want. 

Finally, the irregular scenario of bitcoin makes it relatively easy to start a business without requiring long-term recognition-verification procedures.

Day trading: This method involves conducting many businesses throughout the day and trying to take advantage of short-term value movements. 

Day traders spend a lot of time traveling around on the computer screen, and they usually close all their trades by the end of each day.

Scalping: This day-trading strategy is getting popular lately. Scalping attempts to make substantial profits on small value changes, and it is often called “pennies in front of a steamroller". 

Scalping is focused on very short-term business, and it is based on the idea that small profits often limit the risks and make profits for the traders.  Scalpers can do dozens or even hundreds of business in a day. 

Swing Trading: Swing trading is a speculative trading strategy in financial markets that tries to capture a profit in a stock or any financial instrument from a few days to several weeks.

Swing traders try to find the beginning of a specific price movement and then enter into business. They hold on till then the movement dies, and they take advantage. 

Swing traders constantly try to see the bigger picture without monitoring their computer screen. For example, swing traders can open a business position and keep it open for weeks or months until they reach the desired result.

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Is Bitcoin a Bubble?

The sharp increase in price does not constitute a bubble. An artificial super-evaluation that will suddenly improve towards the bottom, a bubble is formed. 

On the basis of individual human action by hundreds of thousands of market participants, the option is due to the price fluctuation of Bitcoin because the market wants to search for value. 

Bitcoin can be a loss of self-confidence due to changes in emotions, a big difference between price and value based on the basic principles of the economy, increased stimulus press coverage, fear of uncertainty, and old-style, irrelevant "zeal, and greed".

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Is Bitcoin Unsafe for Quantum Computing?

Generally, most systems rely on cryptography, including traditional banking systems. However, quantum computers are not yet present and probably will not be for a while. 

On traditional computers, Bitcoin takes command of 2¹²⁸ basic operations to associate Bitcoin private keys with public keys.

If there is a potential risk for quantum computing bitcoin, then the protocol can be upgraded to use post-quantum algorithms. 

Given the importance of this update, it can safely be expected that it will be highly reviewed by developers and will be adopted by all Bitcoin users.

Quantum computing has always been the main innovation that has the potential to break Bitcoin and its contemporaries.

The most dangerous attack by quantum computers is against public-key cryptography. If quantum computers managed to crack the encryption sent to distributed ledgers, it is likely that Bitcoin will end.

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What Determines Bitcoin’s Price?

Bitcoin price is determined by supply and demand. When the demand for bitcoins increases, the price increases, and when the demand drops, the price drops. 

Circulation has a limited number of bitcoins and new bitcoins are made at an estimated and declining rate, which means that to keep the demand constant, this level of inflation should follow. 

Since bitcoin is still a relatively small market, which can be, it does not take enough amount of money to move the market value up or down, and thus the price of bitcoin is still very unstable.

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Can Bitcoin Be Worthless?

History is full of currencies that have failed and are no longer used, such as during the German Mark Weimar Republic and more recently, Zimbabwe Dollar. 

Although previous currency failures usually make bitcoin impossible, due to such hyperflexion, there is always a possibility for technical failures, competitive currencies, political issues, etc. 

As a fundamental rule of thumb, no currency should be considered absolutely safe from failures or difficult times. 

Bitcoin has proved to be reliable for years since its inception and there are many possibilities for the development of Bitcoin. However, there is no one in the position to predict what will be the future for Bitcoin.

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Is Bitcoin a Ponzi Scheme?

A Ponzi plan is a fraudulent investment operation that pays its investors with money, or money paid by later investors, in return for the profit earned by the people running the business. 

Ponzi schemes have been prepared for the collapse of the value of previous investors when there are not enough new participants.

Actually, Bitcoin is a free software project with no central authorities. Consequently, no investment is in the condition of fraud about the return. 

There is no guaranteed purchasing power like other major currencies like Gold, United States Dollars, Euro, Yen, etc. and the exchange rate floats freely. 

This increases volatility, where Bitcoin owners can earn or lose money unexpectedly. Beyond speculation, Bitcoin is a payment system with useful and competitive features that are being used by thousands of users and businesses.

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Doesn't Bitcoin Unfairly Benefit Early Adopters?

Some early adopters have a large number of bitcoins because they took the risk and invested time and resources in a non-proven technique which was rarely used by somebody and it was very difficult to properly secure it. 

Many early adopters had spent some time before becoming valuable, or only bought a small quantity and did not earn huge profits. 

There is no guarantee that the price of bitcoin will increase or fall. It is similar to investing in the initial startup, which can either get value through its utility and popularity or can never break. 

Bitcoin is still in its infancy, and it has been designed with a very long look; It is difficult to imagine how this can be less biased towards early adopters, and whether today's users can be the early adopters of tomorrow.

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Are Speculation and Volatility a Problem for Bitcoin?

It is a chicken and egg position. To stabilize the price of bitcoin, the economy needs to grow on a large scale with more businesses and users. To develop economies on a large scale, businesses and users will seek value stability.

Fortunately, instability does not affect the main advantage of bitcoin as a payment system for transferring money from point A to point B. 

It is possible for a business to convert bitcoin payments into local currency immediately so that they can benefit from the benefits of bitcoin, subject to price fluctuation. 

Because bitcoin offers many useful and unique features and properties, so many users choose to use bitcoin. 

With such solutions and incentives, it is possible that bitcoin matures and develop to a degree where price instability will be limited.

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Can Anyone Buy All the Existing Bitcoins?

Only a fraction of the bitcoin issued on the date is found for sale on exchange markets. Bitcoin markets are competitive, which means that the cost of bitcoin will increase or fall depending on supply and demand. In addition, new bitcoins will be issued for the coming decades. 

So even the most determined buyer could not buy all the bitcoins in existence. However, this situation is not to suggest that the market is not weak for manipulation; it still does not take significant amounts in order to move the market value up or down, and thus the bitcoin remains a volatile asset so far.

What if Someone Creates a Better Digital Currency?

For now, Bitcoin remains the most popular decentralized virtual currency so far, but there is no guarantee that it will maintain that position. 

There is already a set of alternate postures inspired by Bitcoin. Although it may be right to believe that in order to overcome bitcoin in the established market, significant improvements will need to be made for a new currency, even if it remains unpredictable. 

As long as it does not change the fundamental parts of the protocol, Bitcoin can also accept the improvement in a competitive currency.

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