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How to Trade Bitcoin CFDs in 3 Easy Steps
- Open a trading account with AvaTrade
- Fund your account
- BUY Bitcoin (go long) or SELL it (go short)
AvaTrade is an industry-leading broker, with some of the most competitive conditions available, including very low Crypto spreads.
The Journey of Bitcoin
On Halloween of 2008, the Bitcoin white paper, describing a peer-to-peer decentralised digital currency, hit the headlines. A monster was born! It was a revolutionary idea that promised to shake the financial world in the same manner that the Internet shook the smart computing space. Bitcoin was a digital currency that promised security and integrity of transactions. It would be manned by no central authorities, such as governments or central banks, and as such, it promised to open its doors for the unbanked global population who could send money within minutes.
The idea was genius, and the timing was perfect. The world was in a global crisis triggered by financial deregulation, and as a result, Bitcoin offered hope for the future. Bitcoin was as mysterious as its founder, Satoshi Nakamoto. The first-ever cryptocurrency was intended to be the future of money but as soon as Satoshi ‘disappeared’ around 2011, his peers quickly understood the unique potential that cryptocurrency held in the world of investing. The quality of cryptocurrency as a store of value emerged.
In late 2009, $1 was the equivalent of over 1,300 Bitcoins. From being valued at a fraction of the dollar, one Bitcoin crossed the $10,000 valuation price point within 8 years – an abnormal rate of return by every measure. By late 2017, Bitcoin became a household name as it flirted with the $20,000 price level. Bitcoin, alongside other cryptocurrencies, was now a must-have in the portfolios of every investor. Late investors, however, watched in horror as the entire crypto market retraced after years of incredible gains by 2018. Cryptocurrencies became mainstream financial assets though, and the pullback would later prove to be short-lived.
At the beginning of 2020, the coronavirus pandemic struck the entire world. Economies around the world were literally shut down as governments instituted curfew and lockdown restrictions. As other financial assets dwindled in value, Bitcoin and other cryptocurrencies sprung to life. Bitcoin proved to be the proverbial ‘digital gold’ and its value rose from lows of around $4,000 in the Q1 2020 to over $23,000 in December of the same year, smashing the previous highs printed in late 2017. In a year that investor portfolios suffered the effects of COVID-19, Bitcoin provided the much-needed cure! We offer you the ability to trade Bitcoin on both MetaTrader 4 and MetaTrader 5 platforms, where you can trade it against the US Dollar, and other currencies 24/7.
The year 2021 proved to be a blockbuster year for the primary cryptocurrency, Bitcoin. Bitcoin’s price sharply rallied to above $55,000 in February 2021, and headlines hit the wires that Tesla had bought $1.5 billion worth of the digital coin. There was a brief market correction, but the Bitcoin trend continued upward, and it again jumped above $60,000 ahead of the public listing of Coinbase, the biggest crypto exchange in the US. However, negative regulatory news and a far-reaching electricity blackout in China saw Bitcoin overextend a pullback to just above $30,000 by July 2021. There was a regulatory crackdown in the UK and China, but there would soon be positive news.
In June 2021, El Salvador announced that BTC would be considered legal tender within the country, and there would be no capital gains tax levied on crypto exchanges there. Furthermore, a blockchain-related job advert by Amazon saw investors speculate that the retail giant was looking to start supporting crypto payments. Together with the Taproot upgrade on the Bitcoin blockchain, these factors provided massive headwinds that saw the coin rally to its all-time high at around $70,000 in November 2021.
A correction followed, but Bitcoin continued to spiral downwards in 2022. By late January 2022, Bitcoin had tumbled to below $35,000. A brief recovery saw the coin trade above $45,000 in early May 2022, but it has since fallen just below $30,000 as of May 2022. This comes as a result of China, which has continued its regulatory crackdown on cryptocurrencies and the fall of TerraUSD (a stablecoin backed by LUNA), which has impacted investors’ confidence.
Understanding Key Factors Influencing Bitcoin Price
Like any financial asset, the price of Bitcoin is dictated by the laws of supply and demand. Bitcoin has always been compared to gold in this regard, in that there is a finite number of coins that will ever be available. Beyond that, market participants will, over time, determine the fair value of Bitcoin depending on its use cases and adoption. Another major price influencer is media coverage. In its early years, the price of Bitcoin was constrained as the media branded it a passing cloud and a coin for the dark web. In this age of social media, such negative coverage can scare potential investors. However, positive media coverage of both Bitcoin and its underlying blockchain technology has provided favourable fundamentals for the foremost cryptocurrency and emboldened investors.
Bitcoin trading may be decentralised, but the power of major governments around the world cannot be ignored. Bitcoin has been the subject of frequent changes in regulation in various aspects, including taxation. Part of the reason the price of Bitcoin fell sharply after the highs of late 2017 was massive regulatory pressures from China. But regulation is not necessarily a negative fundamental. In some instances, positive regulation serves as a tool to legitimise Bitcoin as a mainstream financial asset, and this can lead to increased demand.
Bitcoin’s price is also influenced by what happens within the Bitcoin community. Part of the reason the price of Bitcoin surged during the COVID-19 pandemic can be linked to the halving that happened in May 2020. Bitcoin halving is when the reward for mining Bitcoin is halved. This theoretically limits the supply of Bitcoin as the incentive to mine is reduced. With supply limited, demand increases, and the price of Bitcoin increases as well.
How To Profit from Bitcoin Trading When the Market Goes Down
Bitcoin is a highly volatile asset, with changing sentiment capable of driving prices from one extreme to another. The market can experience overzealous optimism one moment and then quickly change to dark pessimism. At the end of the day, though, investors have to file their taxes whether prices are rising or falling.
Luckily for investors, Bitcoin is subject to capital gains tax. This presents a unique opportunity for claiming tax deductibles when prices are plunging. If you suffer a loss from your Bitcoin investment, you are entitled to include the details so as to reduce your overall tax liability. For a Bitcoin loss to be ‘valid’, it has to be realised. This means that you have to liquidate your position. You can only suffer a loss when you sell Bitcoin at a lower price than you bought it. If prices fall, but you do not sell, that is an unrealised loss and does not qualify for a tax deduction.
For instance, if you bought 1btc at $40,000, but the price is now $35,000, and you sell it, you will have realised a loss of $5,000. If you file your returns, you can claim a capital loss worth $5,000. In the US, capital losses can be claimed up to a maximum of $3,000. But the good thing is that excess loss can be rolled over to subsequent years indefinitely. So, if in 2020 you suffered a loss of $5,000, you are entitled to tax-deductible of up to $3,000, and you can carry forward the additional loss of $2,000 to 2021.
Bitcoin and other cryptocurrencies are inherently volatile. The good days are cherished, but the bad days need not be stressful. By using this tax-harvesting trick, you will be able to reduce your tax liability when Bitcoin prices fall.
There are different ways to buy Bitcoin and gain exposure to the opportunities this exciting asset provides. There are crypto exchanges that allow investors to buy Bitcoin using credit/debit cards or bank transfers. Exchanges were initially the only way to buy Bitcoin, and they have evolved as the foremost cryptocurrency has attracted interest globally. When you buy Bitcoin via an exchange, you will be required to open and secure a crypto wallet. You will fully own the coins and can benefit from forks that generate ‘dividends’ for Bitcoin holders.
There are also peer-to-peer Bitcoin exchange sites where people trade Bitcoin for cash between each other. These sites have grown in popularity because they match local traders who can conveniently exchange Bitcoin using local payment methods. Peer-to-peer Bitcoin trading sites usually offer the coin at premium prices (higher than the market spot price), but they are easy and convenient for anyone to use. There are also Bitcoin ATMs that resemble traditional ATMs. However, they are not connected to any bank, but rather to a Bitcoin wallet or exchange. Bitcoin ATMs allow investors to buy Bitcoin with credit/debit cards as well as cash.
In most cases, it is easy to locate Bitcoin ATMs near you using maps. While this may increase convenience for some, many Bitcoin ATM users have lamented the high fees charged (usually more than 5%). With Bitcoin becoming a mainstream financial asset, investors can also be exposed to its price changes by trading Bitcoin derivatives like CFDs and the crypto10 index. In this way, investors do not own Bitcoin, they only speculate on its price changes. If you buy, you earn profits when prices go up; and when you sell, you earn profits when prices decline.
Bitcoin trading via derivatives is attractive for many investors because it allows for profits to be captured whether prices are rising or falling. Derivatives can also be traded with leverage, which makes it possible to gain bigger profits when prices move in your favour. So how should you buy Bitcoin? This entirely depends on your investing goals and ambitions. When you buy Bitcoin via an exchange, ATM, or a peer-to-peer trading site, you are essentially a HODLer.
“HODL” is a term in the bitcoin community that means holding the coins for a long term. You essentially believe in the future of bitcoin and will never be concerned by periods where the price is declining. You are in for the long haul and will cash out when you reach a predetermined target or when it makes sense to do so. But if you are a short term, active trader, derivatives such as CFDs will suit you better. Bitcoin is generally a volatile asset whose prices fluctuate wildly. This means that short-term bitcoin traders are exposed to more opportunities when the prices swing between different highs and lows.
Why Trade Bitcoin with AvaTrade
At AvaTrade, you can trade Bitcoin as a CFD. Here is why you should trade Bitcoin with us:
As a CFD brokerage firm, we do not provide crypto wallets to store your Bitcoin. We simply provide access to intuitive platforms for you to trade real-time price changes of Bitcoin. We are also regulated in various jurisdictions around the world, which ensures that we comply with the highest standards of safety, including holding customer funds in segregated bank accounts.
We offer a leverage of up to when you trade Bitcoin or any other cryptocurrencies. This means that you can extract and maximise your trading during marginal price changes or when you have limited capital.
- Choice of Assets
Alongside Bitcoin, we also offer a selection of other coins and tokens that can be top additions to your portfolio. They include Ethereum, Litecoin, Dash, IOTA, NEO, Stellar Lumens, Ripple, EOS, and Bitcoin Cash.
- Lower Charges
We enable our clients to trade Bitcoin at competitive spreads. This is because, unlike exchanges, we do not need to charge miner fees or other transaction costs.
- Faster Transactions
Open and close Bitcoin trades in an instant. We are backed by multiple, large liquidity providers which makes it possible for us to guarantee fast execution on all Bitcoin trades.
- Trading Platform
Trade Bitcoin on world-class trading platforms such as MetaTrader 4 and MetaTrader 5. Our platforms are advanced and stable, and investors can trade Bitcoin using numerous advanced order types such as limit and buy/sell stop. We also support automated trading strategies as well as offer numerous technical and fundamental analysis tools.
- Trading Resources
Bitcoin is an exciting yet volatile currency. This is why we offer various handy trading resources to help stay on top of your Bitcoin trading. We have a comprehensive education section where there are numerous relevant crypto eBooks and videos to help you gain the necessary knowledge to navigate the crypto market. We also have an Economic Calendar that will help you stay on top of news and events that may impact your crypto portfolio.
Trade Bitcoin with the exclusive AvaProtect risk management feature. This unique feature gives you your money back on losing trades during the protected time period.
- Trading Central
Identify the best technical setups on your Bitcoin chart using Trading Central which is integrated on all our platforms.
- Multiple Pairs
Trade Bitcoin vs. various fiat currencies and get exposed to even more trading opportunities via arbitrage.
Bitcoin in the News
- November 2012 – WordPress started accepting bitcoins
- November 28ᵗʰ 2012 – First Halving Event took place. This is where the amount of mined Bitcoins was halved, causing half the rewards for miners, for performing the same amount of work. It also prompted an increase in the price of Bitcoin over time.
- July 2013 – Launching of a joint project in Kenya, linking bitcoin with M-Pesa, a popular East African mobile payments system.
- September 2014 – TeraExchange, LLC, received approval from the U.S. Commodity Futures Trading Commission to begin listing an over-the-counter swap product based on the price of a bitcoin, marking the first time a U.S. regulatory agency approved a bitcoin financial product.
- March 2016 – The Cabinet of Japan recognised virtual currencies like bitcoin as having a function similar to real money.
- July 9ᵗʰ 2016 – Second halving event
- August 1, 2017 – First fork in Bitcoin was created: Bitcoin Cash
- October 24, 2017 – The second fork in Bitcoin was created: Bitcoin Gold
- December 10, 2017 – CBOE Futures Exchange (CFE) starts offering Bitcoin futures trading
- December 28, 2017 – Third fork in Bitcoin created: New coin on SegWit2x chain called B2X
- May 11ᵗʰ 2020 – Third Bitcoin Halving Event
- February 19th, 2021 – Bitcoin market cap tops $1 trillion
- June 9th, 2021 – El Salvador becomes the first country to adopt Bitcoin as legal tender
- October 19th, 2021 – The first futures-based Bitcoin ETF is launched in the US
- November 2021 – The Taproot upgrade is implemented on the Bitcoin blockchain, the first significant upgrade since 2017
- February 2nd, 2022 – Bitcoin price crashes after Russia launches attacks on Ukraine
- April 27th, 2022 – Central African Republic (CAR) adopts Bitcoin as legal tender
- Expected 2024 – Fourth Bitcoin Halving Event
Need Help Trading Bitcoin?
AvaTrade offers you the opportunity to BUY (go long) or SELL (go short) on all Bitcoin trades. This service is available to you 24/7. You can use your preferred trading strategies to buy or sell Bitcoin CFDs regardless of which way the currency is moving. We encourage you to learn more about Bitcoin trading by visiting our Trading Conditions & Charges page. Please note: The Cryptocurrency market’s high volatility can offer ongoing trading opportunities.
Due to price fluctuation, certain Crypto pairs may be suspended and/or removed from our trading platforms periodically.
When trading with AvaTrade you are trading on the price changes of the digital coin, and not physically purchasing it.
Bitcoin trading FAQ
- Is the Bitcoin market subject to manipulation by a handful of investors who control the majority of Bitcoin?
If a financial asset is majority-owned by a handful of investors, their collective actions could theoretically shape demand, supply, and pricing. When the ‘Bitcoin Whales’ decide to hold their stores of Bitcoin, they effectively remove their share from circulation, and from trading activity. This reduces the amount of Bitcoin being bought and sold, which in turn affects pricing. When supply exceeds demand, prices go down, and when demand exceeds supply, prices go up. Long-term investors comprise 56% of Bitcoin holdings, 18% of Bitcoin has been lost, traders make up 15% of holdings, and 11% of Bitcoin remains to be mined.
- Why can you trade Bitcoin 7 days a week but you can’t trade forex 7 days a week?
Bitcoin is the world’s premier cryptocurrency, but it still is a relative newcomer to the scene. Unlike forex, Bitcoin has yet to gain mass adoption. Like forex, Bitcoin is also decentralised. It’s worth pointing out that Bitcoin is not directly controlled by governments or central banks. And, trading is not subject to regular business hours since Bitcoin is a P2P cryptocurrency, and BTC exchanges run around-the-clock. Forex markets run 24 hours a day, 5 days a week for retail traders, but not for institutional traders. Forex trading takes place from 5PM EST Sunday to 5PM EST Friday for retail traders.
- What made Bitcoin’s price rise above $50,000 in 2021?
On Tuesday, February 16, 2021, the price of Bitcoin surged above $50,000. Many cryptocurrency analysts attribute the sharp rise in the price of Bitcoin, and altcoin, to increasing interest from institutional investors. In Q1 2021, major companies like MasterCard, PayPal, and Tesla indicated strong support for cryptocurrencies. In hindsight, the 2017 rally which pushed Bitcoin’s price to $20,000 was driven by speculative retail sentiment, while the 2021 rally was driven by institutional demand. Previously, retail demand for Bitcoin was fuelled by leveraged trades, making the market inherently volatile. Regardless, it remains a speculative asset with questionable intrinsic value.