Bitcoin moves fast and in large percentages.
Trading in Bitcoin offers potential you don’t get with traditional Forex currencies like Dollar, Euro and Pound.
Trading In Bitcoin
I’ve been trading in Bitcoin on and off for a good few years now. I think trading in Bitcoin has great potential – but on the other hand Bitcoin also has a number of problems which are going to have to be resolved if the currency is to have a strong future in the long-term.
Some Problems With Bitcoin
On the problem side of Bitcoin: the ever-growing blockchain size is one such problem, now at over 100GB in size.
Also the time it takes Bitcoin to process transactions is another disadvantage. The new Segwit or “segmented witness” process is supposed to provide some relief here.
Take-up of the Bitcoin currency is also a problem. It’s not proceeding as fast as it could. Partly this is because of the technical complexity involved with Bitcoin, which is still not user-friendly for the average person. We need more cloud-based/app-based services here to assist Bitcoin with this.
Another problem with using Bitcoin as a currency is that it is appreciative. This means it can make more sense to hoard Bitcoin rather than to spend it as its value tends to rise. Indeed traders and investors are speculating on this and the nature of Bitcoin itself makes this inevitable.
So in that sense Bitcoin is more like a commodity like gold or silver than a paper currency suitable for transaction use. It’s great as a commodity, but not so great as a transaction currency.
There’s also uncertainty about the future with Bitcoin’s blockchain technology. The blockchain size issue I just mentioned.
But there’s also uncertainty as to how central banks will act in future. Will blockchain technology be introduced for existing national currencies?
This is unlikely to happen overnight. Banks and central banks especially are cautious and slow-moving, so any such move will take time. But if it does happen, then Bitcoin will lose one of its own unique advantages.
But Bitcoin will still enjoy the advantages of anonymity and security.
Or will it? It remains to be seen how the regulatory framework will change in future if Bitcoin sees wider take up.
In the era of terrorism, increased perception of threats, and the desire of government authorities to know everything about everyone, will the anonymity of Bitcoin still be acceptable to the authorities? I have my doubts.
Should You Diversify Into Other Cryptocurrencies?
Some people say you should diversify into different currencies. The idea is you have more chance of catching a winner than just risking all your cryptocurrency investment or trading stake with Bitcoin.
I have to say I am skeptical about this. Many of these smaller cryptocurrencies or “alt coins” as they are sometimes known are little more than geek tech projects with low market capitalization.
They each have their small band of followers and promoters who of course stand to gain if they can successfully promote and talk up their own currency.
But do the general digital currency public know much about them and are they really that interested in them? I think not. So they will have a problem gaining acceptance, take-up and momentum.
Part of the idea of course is that you get in at the ground floor as an early adopter, then the rest of the crowd then discover it and bundle in. The price then rises and you cash out at a big profit.
Nice in theory, unlikely in practice. This has parallels with the “penny share” concept with promoters trying to sell you stocks in small, unknown, or bombed out companies. 80% of these me-too currencies are not likely to be going anywhere much.
There are also projects like Ethereum, which are interesting more for other purposes than for serving as a digital currency in themselves.
My view as far as digital currencies is concerned is to concentrate on Bitcoin – but watch out for the fundamentals, and always be aware of what is going on both technically as well as in the area of market events, regulation and other issues which can affect it.
Marc de Mesel from Antwerp in Belgium is a financial broker who has an interesting take on this issue. Marc makes some good points in his talk on the subject – and he’s decided to sell all his Bitcoin.
I don’t entirely agree with all his point of view, but he does make some good points and he has a lot of experience with digital currency trading.
His talk by the way is from the Antwerp City Feast Hall or Stad Feestzaal- a grand shopping mall in the centre of Antwerp. I used to visit the food court occasionally on the top floor when I lived in Antwerp a few years back.
There’s an interesting daily Bitcoin chart analysis presented by this guy here . His youtube channel is called Silver Charts and it’s at www.youtube.com/user/endlessmountain.
Here’s one of his daily chart analyses:
And if you’re looking for a chart and price information service, check out www.tradingview.com
Next to their paid-for services, they also offer a basic free service.
Disclosure: The author holds investments in Bitcoin and other financial assets at the time of writing this article.