How to make money on the bitcoin rate: the best and proven ways

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03.06.2021 13:52
Profiting from the bitcoin exchange rate

    The price of bitcoin is constantly changing. In one day, bitcoin can change by 10% more than once, both upwards and downwards. Traders use the volatility of the first digital currency to make a profit from exchange rate fluctuations using the techniques and tricks learned from trading in familiar currencies such as dollars, euros, and other currencies. The list of these techniques includes:

    • Bitcoin trading on specialist platforms
    • Arbitrage
    • Bitcoin derivatives trading

    These techniques have varying levels of return and varying degrees of risk. Less risky and less profitable is

    Bitcoin trading on specialist exchanges

    Special trading platforms - cryptocurrency exchanges and swaps - have been created to trade bitcoin and other digital currencies. They allow any player to implement a simple strategy to make money from bitcoin price differences - to buy bitcoin when the rate goes down and sell it when the digital currency goes up. 

    This strategy does not require any special knowledge, but it works on a steady price rise. An investor can earn twice as much by buying bitcoin as he invested when the exchange rate doubles. Such rate hikes have happened before, but according to cryptocurrency market analysts, there is no reason to expect such surges shortly.

    Bitcoin and cryptocurrencies, in general, are growing in popularity, but so far the digital currency market has had little contact with the real-world economy. An investor expecting a significant rise in bitcoin's price will have to be patient. 

    Experienced investors use a different method to capitalise on price differences during trading on a cryptocurrency exchange. During daily trading, they make multiple trades with the same rule, selling a purchased cryptocurrency as soon as it rises in value by a few points. These trades take place in short intervals of no more than a minute. This trading technique is called scalping. 

    The method works on exchanges with low fees for liquid digital assets such as Bitcoin. A lot of trades produce small results - both profits and losses.

    The main goal of a trader who chose scalping as their earning strategy is to close the trading day with a positive balance. It is possible to achieve it by fully implementing the process, monitoring quotes and making prompt decisions.

    Scalping trading experience will help you make money on the bitcoin exchange rate by using

    Arbitrage

    Around three hundred cryptocurrency exchanges are operating in the digital currency market. All of them focus on the current level of supply and demand for a digital asset within their marketplace. However, the current bitcoin exchange rates on different cryptocurrency exchanges can vary quite significantly.

    An experienced trader can make a profit by buying bitcoin on one exchange and selling it at a higher rate on another exchange by taking advantage of the variation in prices on different exchanges.

    For successful exchange arbitrage, a trader needs to quickly assess and react to the situation and be aware of the transaction and withdrawal fees.

    An additional risk of exchange arbitrage is the need to transfer significant amounts between cryptocurrencies of different exchanges. If a trader makes a mistake, he or she risks losing their asset with no way to get it back. Cryptocurrency transfers, even erroneous ones, cannot be reversed.

    Bitcoin exchange-traded derivatives

    Bitcoin exchange-traded derivatives are called Contracts for Difference, or CFDs. 

    With CFDs, the trader does not buy or sell the cryptocurrency, but rather makes a deal to determine whether the rate will rise or fall. If the trader predicts a rise, he enters into a buy contract. The profit in this case will be the difference between the bitcoin price at the time of opening the trade and the price at the time of closing.

    Using CFDs, the trader can also make money on a fall in the value of the cryptocurrency. In this case, a deal is made for the drop in the rate. In this case, the price at the moment of closing the transaction must be lower than the opening price, then the trader can earn on the price difference. 

    With CFDs, one can make money both on the rise and fall of the exchange rate. 

    An important advantage of trading Bitcoin exchange derivatives is the opportunity to earn with the leverage provided by the broker.

    Leverage is a type of credit, which allows you to trade more money than you have in your account. Leverage is provided by a broker, on whose platform bitcoin exchange derivatives are traded. 

    Bitcoin CFDs are currently traded by the leading brokers in the traditional financial markets - Forex club, Alpari, Exness. Apart from them, financial brokerage services are provided by cryptocurrency exchanges - Binance, CEX.IO and others.

    Before starting to trade CFDs, a trader should get experience in earning on bitcoin exchange arbitrage or scalping on a cryptocurrency exchange.

    Those who do not have such experience and do not want to risk their money, are suitable for

    Investing via specialist platforms

    Investing in cryptocurrency does not require any specialised knowledge. However, the investor should have some patience - since reaching a high of $20,000 in 2017, bitcoin has not managed to surpass the figure for 3 years. It wasn't until 2020 that the digital asset renewed its record. In 2021, BTC reached $ 65,000 - the profit of those who entered the market in December 2017 was more than 200%.

    A specialist platform, Broex, offers its services to investors. Its users are offered safe custody of funds, a functional mobile app and service for selecting promising assets.

    SIGN UP ON PLATFORM

    Conclusion

    The cryptocurrency market is characterized by high dynamics and a short history of existence, which makes it difficult to make predictions and analyze the rate. Full immersion in the process of investing and trading, learning the terminology and history of the asset will provide the necessary basis for successful earnings on bitcoin exchange rates.

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