Learning to trade crypto has become popular with traders looking to invest in either volatile bullish and bearish markets. Numbers never lie. In the last few years, volatility has made Bitcoin trading a more lucrative opportunity over more traditional markets.
From January 1 to June 6, Bitcoin is around 25% up. This figure even includes the massive correction from an all-time high of $64,900 reached in April 2021. In the same period, the S&P 500 rose by 12%, less than half of the gains we saw with BTC/USD.
Let’s break the situation down with an example. Imagine you invested $1,000 in an S&P 500 tracker fund on January 1, 2021. This investment would have made $120 in profit by June 6. If that $1,000 investment was in Bitcoin, you would have made $250 by June 6.
Trading Bitcoin and other cryptocurrencies is profitable in bearish markets too. A trader shorting BTC on April 15 at around $64,000 and closing their position at $30,300 on May 19 would generate a 50% return in just five weeks.
In 2020, Bitcoin rose an outstanding 302%, Ethereum 464%, and BNB 155%. Of course, where and when to exit a market is easy in hindsight. Bullish or bearish, there’s always an advantage in crypto. Before you invest your money, we strongly recommend you do your research and understand the core concepts of crypto trading.
Why Should You Learn Crypto Trading?
There are two ways to invest in cryptocurrencies. You can buy the underlying asset, hold and speculate the price will go up, or you can trade crypto and profit off the difference between the opening and closing prices of your position.
Trading crypto provides you with long and short term opportunities. No matter what kind of trader you are, you can place positions that can last months or even years if you’re focused on the big picture.
If you’re a short-term or even a day trader, you can open trades that will last just hours, minutes, or even seconds. Long term or short term trader, you should still learn the nuances of the crypto market to avoid getting burned by volatility.
As blockchain is primed to disrupt industries in a way we have never seen before, cryptocurrencies will affect everything in the following years and decades. Learn the crypto market today and you’ll be prepared for the future of finance.
Remember that knowledge is power, especially in crypto. Train your understanding of cryptocurrencies and their behavior. Identify market players, positive and negative news, market corrections, massive liquidity levels, and the tokens market's particularities and their impact.
What is Crypto Trading?
There is a wide-range of options for trading cryptocurrencies. Some platforms offer spot trading, derivatives, and OTC markets focused on retail traders, while others offer quantitative trading for institutions. A few like Binance have a broad series of products for each type of investor. .
The different types of trading include:
1. Spot trading: Crypto spot trading is where traders buy and sell digital assets with the current value as the settlement price. All transactions are made in real-time, your position is affected by the variation of price and the result of your trade comes when you close the position.
2. Quantitative trading: Quantitative traders typically work in teams or institutions, relying on quantitative analysis and mathematical models to determine probabilities. The mathematical focus enhances data usage for trading and reduces the emotional decision-making factors.
3. Derivative trading: Crypto derivative trading deals with derivative assets, which represent the value of the underlying asset or a set of assets. Derivative trading is typically used for hedging, allowing traders to reduce their risk when exposed to other investments. You don't have to own the assets and it can be a tool for speculation.
4. OTC trading: Over-the-counter trading is a market traded in a decentralized network of brokers and dealers instead of a centralized exchange. OTC markets usually offer higher liquidity than traditional exchanges.
5. Crypto futures contracts: You can buy and sell crypto futures contracts, also known as futures, on Binance and make money in the process. Futures are financial derivative contracts for a specific asset, in this case, crypto, where the parties set an agreed price to buy or sell an asset at a determined date in the future.
Traders can gain exposure in the crypto space without having to buy and hold the underlying asset. You can also trade futures contracts for specific dates such as monthly or quarterly contracts. More details about futures trading can be found here.
Learn How to Trade Crypto The Right Way
Legendary investor Warren Buffett once gave his two basic rules for investing: Rule number one: Never lose money. Rule number two: Never forget rule number one. Sounds easy, right? Well, it’s not.
You will face big wins and losses when trading or investing in the financial markets. There is no holy grail to always winning in the market or we’d all be rich by now. The real secret is to have a positive win/lose ratio where your wins are more prominent than your losses. Before you start trading with your hard-earned money, you’ll need to learn some of the basics.
Here are some of the basics you need to know:
Risk management: Knowing how to correctly manage your risk will prevent you from suffering big losses that will put your portfolio at risk. Never go all in! Every expert agrees that traders shouldn’t risk large portions of their portfolios in a single asset.
Keep training: The only way to learn and understand crypto trading is through experience and practice. Try different trading strategies and practice them in demo accounts before using real money.
Follow the markets: Stay up to date on the latest news and updates in the crypto industry, including technology developments and price charts. Follow experts and influencers who provide good advice and tips to help you make informed trading decisions.
Trading vs. Investing: What's the Difference?
We already know that trading is the art of speculating the fluctuation of prices but never owning the actual asset. Now, let's see the differences between the different ways of investing in crypto assets.
As Binance Academy mentions in its Complete Guide to Cryptocurrency Trading for Beginners, investing is allocating resources with the expectation of generating a profit in the long term.
"In the financial markets, this typically involves investing in financial instruments with the hopes of selling them later at a higher price." Unlike crypto trading, you’ll never make money if the asset declines in value.
The major difference when investing in crypto is that you actually own the underlying asset. If you buy bitcoin, you store it in a wallet, manage the security, and then go to an exchange to sell it. In this case, investors usually see returns in the long term and they’re not concerned about short-term volatility.
Where do I Start Learning More About Crypto?
As mentioned earlier, education is the most fundamental part of trading. Anyone who wants to start trading cryptocurrencies should learn how to do it the right way. Ethereum, BNB, Dogecoin, or Bitcoin trading can provide you with investing opportunities if you know how to identify the right market conditions and take advantage of them.
Binance Academy is one of the top resources to learn more about trading crypto and the tech behind blockchain and crypto, giving you a holistic understanding of the entire crypto ecosystem and its different assets.
Another excellent resource for beginners and advanced traders is the Binance Blog. You’ll find news and updates from the world's leading cryptocurrency exchange, plus commentary and opinion pieces about the industry and different assets in the crypto market.
Crypto Trading and Price Interaction
High volatility, market conditions and decentralized governance make crypto an interesting area for investment. Before you start placing orders, learn the art of crypto trading, understand the news and study how different assets react to new developments.
What moves crypto prices?
Crypto supply: Check how many coins are in the market and understand how the pool works. For example, Bitcoin mining will stop when 21 million are finally mined, which means no more bitcoin will be produced. Learn about halvings. In the case of bitcoin, the last halving was in May 2020, and the next one will take place in 2024.
Press: Follow news about the crypto world, good and bad press, and what influencers are saying about bitcoin and altcoins.
Key events: Most cryptocurrencies face regulation, hard and soft forks and technical developments such as smart contracts progress, all of which can affect price fluctuations.
Integration: Any crypto technology and blockchain integration and development will affect the price of the related digital asset. Remember that an Altcoin or Bitcoin is often tied to the network's value.
The biggest gain from learning crypto trading won’t be money, but a new version of yourself. Trading will help shape you into an independent thinker, requiring you to manage your emotions, test different opinions, come to your own conclusions and make better informed decisions.
Read the following helpful articles for more information:
Cryptocurrency investment is subject to high market risk. Binance is not responsible for any of your trading losses. The opinions and statements made above should not be considered financial advice.
