Users of cryptocurrencies, such as Bitcoin SV (BSV), have been growing because of their full range of applications. Bitcoin SV or Bitcoin Satoshi’s Vision is among the top of the thousands of cryptocurrency types under the hundred-million market cap. As its name implies, Bitcoin SV is considered the purest representation of the original Bitcoin protocol as envisioned by its creator, Satoshi Nakamoto.
Just like traditional currencies, these digital assets serve as a medium of exchange. That means you can use BSV for payments of goods and services with individuals or merchants that own a wallet to receive crypto-based funds. Even companies like Tesla and Paypal support the use of Bitcoin and other cryptocurrencies as a mode of payment.
Cryptocurrency trading is another way of leveraging Bitcoin. Many investors who have bought bitcoin early on have already profited from their investment, as the cryptocurrency’s value significantly increased in recent years. Sure, cryptocurrencies have their share of price drops but are quick to bounce back to record-breaking levels thanks to their high store of value.
Price volatility aside, cryptocurrencies have great potentials in the trading market. To get into cryptocurrency trading, you must familiarize yourself with the ins and outs of the industry, including the tools and methods to use as well as the steps to get started in buying and selling bitcoin.
Cryptocurrency: What is it and how does it work?
A cryptocurrency like Bitcoin SV is a digital currency that uses an encrypted ledger to verify transactions. For example, if person A intends to send money to person B, everyone on the blockchain—the technology that powers cryptocurrencies—receives a coded notification about the transaction while their ledger gets updated and synced with everyone else’s.
Every cryptocurrency account is tied to a public address and private address. The former is a cryptographic code that allows the user to receive cryptocurrencies in that account, while the latter is a private address that you use to send bitcoins to another address. Note that these addresses are composed of a random string of letters and numbers instead of names to guarantee confidentiality.
Cryptography makes every transaction possible by creating a signature containing alphanumeric codes that can be traced back to the private key. That signature is checked and once verified, allows the transaction to be completed. There is no way a signature can be replicated or used in the future since every transaction generates a unique signature.
Users have a chance to receive a predetermined amount of bitcoin for verifying pending transactions. This process is known as mining, and it is one of the ways you can earn digital currencies.
Where to Buy or Sell Bitcoin
Trading bitcoin is typically done either through exchanges or brokers. These services allow traders to exchange bitcoin for other digital currencies as well as fiat money. In return, exchanges and brokers earn commissions and charge fees for facilitating buying and selling transactions.
Signing up on an exchange also provides you a place to hold your cryptocurrency. However, some crypto exchanges allow you to withdraw and transfer your digital assets to an online wallet that’s separate from your exchange account.
You’ll also encounter exchanges that operate using a Know Your Customer (KYC) feature, so be ready to submit an ID such as your Social Security number or driver’s license. Other exchanges also request information about your employment or source of funds. But don’t worry, your user information remains confidential since, as mentioned, your account will only show your public address.
Other methods of buying and selling bitcoin include:
• Bitcoin ATMs – These machines work like bank ATMs, but the transactions are dedicated to the buying and selling of bitcoin.
• Other bitcoin owners – You can also buy bitcoin from other bitcoin owners, either directly from them or using peer-to-peer technology.
• Futures trading – This method involves using futures contracts, which allow traders to buy or sell cryptocurrencies at a future date. This is done to lock in a price and protect traders from fluctuating prices, so experts are the ones who typically resort to this strategy.
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Cryptocurrency Trading Essentials
Besides creating an account on your chosen exchange, you’ll also need the following items to trade crypto:
1. A linked payment option
You’ll need to link your exchange account to your bank account’s debit card or credit card to facilitate your purchase of crypto. Just do your due diligence to ensure that your bank allows or supports making deposits at crypto marketplaces. Check for transaction fees, as exchanges can charge every transaction with either a flat rate or a percentage of the traded amount.
2. A storage wallet
Although you can always store your cryptocurrency assets in a wallet that comes free with your exchange account, there are risks involved. Note that anyone can see how much balance you have in the public address you use, making you an attractive target for cybercriminals.
If someone gets ahold of your private keys, they can easily authorize transactions on your behalf or steal your funds. Thus, it’s recommended that you keep your holdings at another address that’s not tied to the one you’re using for your trading transactions. A safe place to store your cryptocurrency holdings is in a Bitcoin wallet. You have the option to use either a hot wallet or a cold wallet.
• Hot wallet
A hot wallet is also known as an online wallet. This type of wallet lets you keep your bitcoin in the cloud, which is managed by a third-party provider. You can download a hot wallet as you would with an app and use it via your phone, tablet, or computer—depending on whether the wallet is mobile-only or works with any internet-connected device.
Since a hot wallet is stored in the cloud, your private key is also accessible online. That means it’s possible that your wallet can be hacked, so consider choosing a hot wallet provider that offers insurance for potential loss of funds due to security breaches and fraudulent transactions.
• Cold wallet
Unlike online wallets, cold wallets are not connected to the internet. Also called offline wallets, this type of cryptocurrency wallet is classified into either a paper or hardware wallet.
When you generate a paper wallet via a website, you’re given a public key and a private key that you can then print out on a piece of paper. Needless to say, you must ensure not to lose your copy of your public and private addresses. Otherwise, you’ll no longer be able to access your cryptocurrency wallet.
You can store your paper wallet in your bank’s safety deposit box or a vault at home. Here, you have to be willing to trade the lack of easy access to your wallet to keep your crypto assets secure. That makes a hardware wallet an option worthy of consideration.
With a hardware wallet, your private key is kept in a physical device such as a USB drive. Besides the fact that it’s harder for anyone to access your private keys, another advantage offered by a hardware wallet is that it’s not likely to be affected by malware since it’s not connected to your computer. If you need to access your digital currencies, you simply insert the flash drive to your chosen device.
All things considered, a good practice of storing your holdings is to choose a hot wallet for short-term trading transactions and a hardware wallet for long-term ones.
As with any other first-times, cryptocurrency trading requires research, planning, and developing a strategy. Be sure to practice caution to help you protect your digital currencies, including choosing a trusted exchange, creating strong passwords for hot wallets, and using secure internet connections.
Finally, keep in mind that cryptocurrencies like Bitcoin SV can be subject to highs and lows, so best to manage your risks and expectations.