Don't trade away all your Bitcoin

With all the ups and downs and sharp swings in the cryptocurrency markets, they may seem like a gold mine for traders. But just like with gold mines, only a few people make money with it, and those few are most likely the ones selling the tools for mining rather than those trading the currencies themselves.

Consider that while the markets are on their way up, almost everybody makes money, no matter what their trading strategy. It is, however, difficult to beat the market, and on the way down, everyone loses money (except for the exchanges).

A valid strategy might be to buy and sell Bitcoins on an exchange and then sell them at a markup over the counter to people who do not have access to a Bitcoin exchange. However, this carries significant fraud risks, and you must carefully study the laws in your country, as you might have a duty to collect personal information on the people you trade with or even register as a foreign currency exchange.

Over the long run, the dominant strategy is to buy and hold, and not to try to beat the market. There is no legal investor protection in Bitcoin, and most exchanges exist in a legal gray area where the laws of stock and commodities markets do not apply. Price manipulation and trickery exist everywhere.

  • Keep your Bitcoins in a wallet that you exclusively control, and never on an exchange

  • Buy and sell when you have to, but don’t try to time the market unless you have significant training in trading volatile and risky assets

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