Is Bitcoin a trade?

The world of trading can seem fast-paced and hectic. However, contrary to how trading is sometimes portrayed in popular culture, it usually does not invoke instant wealth. Rather than the sporadic pushing of buttons, trading requires informed decision-making strategies.

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Trading is a broad term and covers a multitude of financial markets. For example, the markets for stocks, foreign exchange, exchange-traded funds, options and contracts for difference (CFD). Cryptocurrencies have added another element to traders’ portfolios, particularly with the advent of bitcoin trading.

The difference between trading and investing

Despite their differences, it's possible to be both a trader and an investor. Trading and investment have different aims and consequently, they follow unique strategies that set them apart. The primary difference between trading and investing relates to the timeframe over which assets are held.

Investment implies a long-term commitment to assets, whereas trading generally implies short to medium-term involvement. Investors seek to gradually build profit through buying and holding assets for a long period of time, which is called hodling in the crypto world.

What is the price of bitcoin?

There is no single global price for bitcoin. Its price is determined by exchanges around the world. The price you pay for bitcoin is determined by the exchange that you choose to use. Exchanges typically show the bid price when buying bitcoin. The bid price or the buying interest is the highest price that someone is willing to pay on the exchange. The ask price or the selling interest is the lowest accepted price for a sale. The highest and lowest prices are derived from trends over 24-hour periods.

Before getting involved in bitcoin trading, it’s necessary to familiarise yourself with the market and become aware of what moves bitcoin’s price. As already discussed in our academy article How does bitcoin work, the price of bitcoin should not be mistaken for the value of bitcoin. Bitcoin’s value is derived from the significance of its underlying technology - blockchain, its modus operandi and its benefits as a new method of transacting value across the globe.

The price of bitcoin is determined by how much people engage with it, and how much people are willing to pay for it. Additionally, bitcoin’s scarce nature, which likens it to gold, will influence its price in the long-run. However, there are additional factors that contribute to the price fluctuations of the young market.