Bitcoin: Getting Started In Trading

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My intention in writing about Bitcoin in these pages each week is to make the subject as boring as possible. Not the articles, of course; I hope that they will be lively and entertaining, with just the right balance of humor and gravitas and some serious discussion of weighty issues, leading to fabulously successful recommendations. Such is the way that those who write for a living dream. No, what I want to make boring is the subject matter itself.

It seems to me that the day is long overdue when Bitcoin commentary moves beyond the sensational and into the mundane. It is a currency and an actively traded instrument, albeit a unique one, and as such the price action and the influences on that action are of the most interest to me. That said, though, my first attempt at taking a neutral, trader’s approach, or rather the reaction to it, showed the danger inherent in that approach.

That reaction showed me that it is dangerous to make assumptions about the knowledge of others when writing on the subject and to be anything other than crystal clear about the things that make it unique. I will, in future, attempt to be clearer about the advantages and disadvantages of the market and the currency itself, even as I attempt to focus on the things that drive the price.

If you have an interest in Bitcoin, though, and wish to trade it, you have to have some belief in the basic utility of it as a currency. It is possible to short Bitcoin if that is your view, as was pointed out in the lively discussion that followed last week’s piece referenced above, but in order to start out trading you will probably need an account that contains both a fiat currency of some kind and Bitcoins. That presupposes that you accept that while the relative value of Bitcoins to other currencies may fluctuate, the concept itself has legitimacy and that the Bitcoins you buy and sell have some intrinsic value.

If you cannot accept this then what I write is not for you. Similarly, if you have a fundamental distrust of fiat currency issued by central banks and see Bitcoin as a store of value to guard against inflation, or as a potential savior of the world, then trading, as opposed to amassing, Bitcoin will be anathema, and, once again, my writing will not appeal.

If, on the other hand, like me, you believe that the 75,000 businesses that Bitpay and Coinbase report as accepting Bitcoin payments indicates that it is around to stay, and that the algorithm that limits issuance, as detailed here, ensures some intrinsic value, then it is only the relative value of the currency that matters to you, and trading Bitcoin becomes more like trading any other currency. In that case, you will need an account with a broker that offers Bitcoin trading. I cannot make specific recommendations here, but this Forex News comparison should give you a good idea of the pros and cons of the leading brokers.

It should be said that the volatility that has been seen in the Bitcoin market, particularly over the last couple of years, makes trading in the market inherently risky, so, from a trading perspective, only money that will not materially affect your lifestyle should be used. This is still a young market, with much controversy surrounding it, and, as of yet, little regulation of the major players. That is not a unique situation. The interbank currency market where I started my career in the early 1980s was also lightly regulated and the value of currencies backed only by the full faith and credit of the issuing nations was still not understood and questioned by some at that time. That market, however, grew to be the largest in the world by volume.

With that disclaimer out of the way, though, I do believe that Bitcoin represents a good trading opportunity for those with a trader’s mindset and skill set, and I look forward to analyzing the market in as boring a way as possible over the coming weeks and months. Boring may be hard, though. I am already aware that the Bitcoin community is passionate and vocal and I encourage you to remain so. Sometimes I will no doubt take a bearish view and sometimes bullish. Feel free to disagree with me either way and voice your reasons in the comments section. There are, after all, always two sides to every trade and the Bitcoin market is no exception.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

Read Martin's Bio