| Updated: October 30, 2024There are several reasons why Bitcoin is considered as a superior trading instrument compared to other asset classes (commodities, stocks and even Forex):
First, Bitcoin trading is global, spread across electronic exchanges worldwide and, as we noted earlier, the market is active 24/7. In other words, traders worldwide are able to take advantage of Bitcoin movement whenever it is convenient for them (outside of business hours, during weekends or holidays).
Second, another aspect of Bitcoin, which lures on-line traders worldwide, is its high volatility. Very often the cryptocurrency demonstrates movements of 3% or even larger within a single trading day. At times of exceptional volatility, these movements may exceed even 10%. Seasoned traders know that such volatility equals tremendous gains in a shorter term, if an appropriate strategy is used.
Third, Bitcoin is probably the most affordable instrument to trade. Fees associated with Bitcoin exchanges are far lower in comparison with traditional exchanges. In addition, Bitcoin deposits and withdrawals are usually processed in a matter of a few hours, regardless of your location on the globe. And what also appears as an advantage is the fact that personal data requirements at Bitcoin exchanges are less strict, especially if you do your deposits and withdrawals exclusively in Bitcoin.
Fourth, traders can operate with Bitcoin by using leverage. This combined with high volatility and constant availability provides good opportunities for private traders who usually have limited spare time and, of course, limited funds. We shall pay special attention to leverage and leveraged products such as contracts for difference (CFDs) in the next articles of the present guide.
Fifth, the price of Bitcoin, in general, is not correlated with the price of commodities, stocks, bonds or currency pairs. External news flow, which impacts other market segments, tends to be of little to no importance for Bitcoin traders. This is why the cryptocurrency is particularly suitable to trade based only on price action setups and other strategies utilizing technical tools and indicators. If you have the ability to read price data on charts correctly, you will be able trade Bitcoin or other cryptocurrency. In other words, you do not need to constantly keep track of every major macroeconomic report, corporate or political news, press release or speech by central bank officials in order to predict in what direction Bitcoin or other cryptocurrency is headed.
There are fundamental factors, which affect the price of Bitcoin, as we noted earlier in the guide. However, they tend to occur with much lesser frequency compared to the abovementioned events.
Sixth, when you trade the price movement of Bitcoin with conventional currency (by using products such as CFDs), all your gains and losses will be denominated in the national currency you have chosen. Additionally, all deposits and withdrawals you do from the exchange will be in conventional currency. In this case you need to remain complaint with tax legislation that is widely understood and well-established. Thus, you will probably not need to contact a tax specialist for advice. As we noted earlier in the guide, regulation and taxation of Bitcoin transactions and earnings tends to be quite specific.