How to Trade Bitcoin and Blockchain Suppliers

Bitcoin is now available to trade on many exchanges globally, although GDAX and Coinbase are the most commonly used in the U.S.  Bitstamp, Kraken and Gemeni, along with Coinbase and GDAX are among the few that allow direct conversion from Bitcoin into U.S. Dollars.  

Several other exchanges allow you to convert only into other cryptocurrencies or local currencies.  While it is fairly simple to trade on an exchange although it is also very expensive.  Trading fees are typically around .25% of the value which is approximately $45 for one Bitcoin.  Larger volumes would reduce the fee somewhat, and if you are adding liquidity to GDAX it is free.  

There are other issued to be aware of, such as significant arbitrage, and hacking which is a real threat.  

Futures

The two largest derivatives exchanges in Chicago, the CME and the CBOE recently both opened Bitcoin futures.  While this makes it easier to trade on the price of Bitcoin it is still quite costly.  With margin requirements of 40%, you must have more than 40% of your position value on deposit at all times.  

Leverage

The new futures contracts grant 2+:1 leverage while some exchanges will afford 3:1.   Then there are also the CFD or contracts for difference which is similar to futures and are available at 10:1.  With the swings we’ve seen in Bitcoin, the odds are pretty good that a 10% change in price could wipe out an entire account at that leverage.  In fact, there have been many price drops of 10% or more in 2017, and the 20x runup this year would have taken out any short sellers many times over.  

Blockchain Suppliers

Just like in the days of the 1800’s gold rush, companies of value were the ones selling Levi jeans and pickaxes.  Finding companies that are jumping into the cryptocurrency and blockchain space is an option to consider.  

Bioptix is a biotech company that made diagnostic equipment for the biotech industry, they just announced in October of this year that they are changing their name to Riot Blockchain and delving into the crypto/blockchain space.  Since that announcement, their price has run up over 300%.  Reminds us of the dot-com days when companies would double their stock by adding .com to the end of their company name.

While it is getting easier to trade Bitcoin and cryptocurrency, it still is the Wild West when compared to stocks, options and futures.  

To learn more information on trading Bitcoin such as what Blockchain really is, the real situation on arbitrage, the very real threat of hacking, check out our post What You Really Need to Know About Trading Bitcoin.  Contact Great Point Capital to learn more about successful and proven trading strategies.  

Great Point Capital has been serving the trading community since 2001, specializing in equities and equity options.  We and are one of the very few firms able to offer access to Takion Software Platform, enhancing the trading performance of our 100+ prop traders.  Contact us today to learn more about our proven strategies to help you earn to your maximum potential.  

How to Trade Bitcoin on the Exchanges

Bitcoin is available to trade on many exchanges worldwide.  Coinbase and GDAX are affiliated and are the most widely used in the U.S.  GDAX, Coinbase, Gemeni, Kraken and Bitstamp are just a few exchanges that allow conversion of Bitcoin into US dollars directly.  

Some exchanges will only convert into local currencies or other cryptocurrencies.  It is fairly simple to trade on a single exchange, although quite expensive.  Typically, trading fees are running around .25% of the value which for one Bitcoin would equal approximately $45.  Larger volume brings the fee down slightly, while GDAX is no charge if adding liquidity.  

Arbitrage

Different exchanges can have vastly different prices for extended periods, as you might see prices for trading Bitcoin at $17,000 on one exchange and $16,000 on a different exchange.  This seems like easy arbitrage, but it is not easy in practice.  There are only a few select exchanges that allow Bitcoin to be shorted, if the higher price isn’t on one of them, you would have to move Bitcoin there to sell it.  During this time, which can take anywhere from thirty minutes to several hours depending on how overwhelmed the Bitcoin network is, you would be exposed to all of the swings in price of Bitcoin.

You also must have cash to buy Bitcoin at the lower priced exchange, which is not very easy when the exchange will not accept cash deposits but only take cryptocurrency such as Binance, take days to verify bank deposits, charge an outrageous fee for transfers or maybe they just do not allow any customers from the U.S. such as Bitifinex.  

Hacking is a Real Risk with Bitcoin

The Blockchain technology provides an anonymity that makes it virtually impossible to trace any coins that may be stolen.  Your coins and cash are out of your control when they are in the hands of the exchange, this is not a worry when trading stock with your balance with a trusted broker.  

Crypto exchanges are open to the real threat of hacking, however, and you may lose your coins.  This has already happened, with sever exchanges having been hacked since 2012:

• 2012 at BitFloor
• 2014 at Mt. Gox
• 2015 at BitStamp
• 2016 in Bitfinex

These exchanges are new to this business, and may not have a real transparent business structure, so buyer beware when depositing money with them.   Crytocurrencies are not backed by SIPC insurance for the Bitcoin brokers, so it is up to the exchanges to make customer whole in the event of a loss due to foul play.  

To learn more about trading Bitcoin, Blockchain, and a list of the exchanges currently trading Bitcoin, check out our post What You Really Need to Know About Trading Bitcoin.  

Great Point Capital has been serving the trading community since 2001 with expertise in equities and equity options.  We provide Takion software and a network of experienced traders with proven trading strategies to enhance your performance.  Contact us today to learn more and to earn your maximum potential.  

What Traders Need to Know About Bitcoin and Blockchain

We have been seeing Bitcoin as a featured topic of discussion in the trading community quite a lot over the last few months, with astounding price runups in alt-Coins and particularly Bitcoin.  We could produce another story on how much money you would have if only you had invested five or six years ago, but what we really want to talk about is the trading related information.  

Here is what you really need to know about Bitcoin and how to trade on exchanges. First, let’s review what it is and how it works.

Bitcoin, Bitcoin Mining and Blockchain

Bitcoin is just a way to keep track of transactional records without the middleman such as a central authority like a bank or federally regulated office.  Each transaction that has ever been done in Bitcoin is available to anyone that downloads the Blockchain.

The blockchain is a way of keeping track of transactions, sort of a public ledger that is continuously growing with each and every transaction building off of the other.  The chain is segmented into approximately 1 MB blocks of information with protocol for validating new blocks.  Since all the blocks are linked together with secure communication, links to past blocks and time stamps, it is quite resistant to tampering.  By design, the Blockchain cannot be retroactively altered without joint collusion of a wide network.

Bitcoin mining is how bitcoins are created and verified.  People that solve extremely difficult calculations that take about 10 minutes to verify each transaction in a block are Bitcoin miners.  The first miner to solve the problem correctly is rewarded with a new Bitcoin.  Over time, the rewards decrease and eventually no new Bitcoins will be created.  

There are currently approximately 16.8 million Bitcoins in circulation with the supply limited to about 21 million.  

Runup in Price

We don’t want to spread the fever of FOMO (fear of missing out), as no one likes to hear about what they missed, so we will give a brief explanation for the recent hype over the cryptocurrency.  

One of the early developers of Bitcoin wanted to order some pizza with his Bitcoins in May of 2010.  He offered 10,000 Bitcoins to anyone that was willing to bring him a pizza.  Someone decided to accept the payment and delivered those pizzas.  That was the first transaction in the real world of someone accepting Bitcoins.  Some retailers are now taking the coins as form of payment, but this is rare and was unheard of in 2010.  

Early in 2011, Bitcoin was valued at $1, by July of 2011 it had run up to $31 but crashed back down to $2 by December.  It passed the $1,000 mark in November of 2013, dropped back down to $200 by March of 2015, and then set off on the recent historic run to almost $20,000.  There has been several corrections of 30%+ along the way,

So, all these articles that like to tell you how much your $100 investment in Bitcoin from 2011 would be worth today, they neglect to tell you that it felt like you would lose it several times over.

Find out which exchanges trade Bitcoin, learn about the real risks of hacking, and more in our post What You Really Need to Know About Trading Bitcoin.

Contact the trading experts at Great Point Capital to learn more.  We have been serving the trading community since 2001, with more than 100+ prop traders trading the firm’s capital.  We offer access to Takion Software and a network of experienced traders with proven strategies to enhance your trading performance.