More and more people are interested in investing in cryptocurrencies – this also applies in Germany. Bitcoin is of course particularly popular. This digital currency has existed since 2009, which is not controlled centrally and was therefore unique from the start. However, the price of Bitcoin is very volatile. Again and again there are enormous swings up and down within a very short time. Traders can benefit from this and achieve enormous profits with the right forecast.
Of course, bitcoin trading is not about a long-term investment. Anyone who assumes that Bitcoin will increase in value over a period of several years should not pay attention to the daily price fluctuations. Trading, on the other hand, is all about short-term positions. These can also be opened or closed around the clock – trading with cryptocurrencies has no fixed trading hours.
Trading and analysis methods
There are different methods of trading and you should know the advantages and disadvantages of each. In so-called day trading, investors want to make profits on the basis of short-term falling or rising prices. Spread over the day, you usually conclude several trades, which should be closed at the end of the day. Scalping, on the other hand, relies on positions that run even shorter. Here the focus is on very small profits, so returns require many successful trades. At the same time, the risk can be minimized. Finally, swing trading, which involves larger price cycles, should also be mentioned. Individual positions are held for weeks or months.
Regardless of the type of trading you decide to do, it’s important to keep an eye on breaking news. After all, the collapse of the crypto exchange FTX in November 2022 was hardly foreseeable, but it caused enormous falls in the price of Bitcoin and other cryptocurrencies within a few days. These setbacks also came at the end of a year that had seen little good news for the industry as a whole. In 2023, traders should therefore expect that news and even rumors about the regulation of certain aspects of cryptocurrencies can cause high price movements in the short term.
Looking at the year as a whole, some analysts assumed in early 2023 that the price of Bitcoin could even fall as low as $10,000. In this case, the market value of Bitcoin would still be around $200 billion, but the drop would still be dramatic. However, even when prices are falling, traders can make profits with the right tools. Falling prices are more of a problem for long-term investors.
Entry into trading
In the course of January it became apparent that long-term forecasts for the Bitcoin price are very difficult. This rose so much that only a few experts had predicted. This development has shown once again that trading depends on the right strategy. In any case, you should always keep an eye on your own risk and not make trades based on a gut feeling.
Anyone who follows this rule has already taken an important step. Practical things like analyzing charts or recognizing patterns are then the next aspect. However, the work that you put into it can definitely pay off investing in cryptocurrencies