The rise of Bitcoin has gathered much attention across the globe. As the viable mode of exchange, it has become the favorite and the easy target for investors and merchants Worldwide. If you want to trade with Bitcoin exchange then you should know that there are three types of Bitcoin trading and each method provides a different degree of consumer safety.
The three Bitcoin trading methods are namely:
- Bitcoin exchanges (cash markets)
- Contract-for-difference instruments (CFDs)
- Standardized futures contracts (Bitcoin Futures)
Just like any new financial product, there is a considerable amount of viability and speculations involved in the security of Bitcoin exchange. The foremost doubt that comes to the mind is that is the transactions safe? Will the money vanish into the air? Or may lose into the deep dark internet? Is it safe to actively trade with bitcoins? These questions are liable due to the complex technology on which Bitcoin runs.
Here, we have collected these three methods and their risks involved in Bitcoin exchange.
- Bitcoin Cash Markets
You can exchange Bitcoin through traditional ways of trading Bitcoin is with the help of cryptocurrencies exchange. There are digital exchange platforms like Kraken, Coinbase, and many others. These platforms facilitate billion of bitcoins yearly. They function the same way as the physical community center a trader can purchase Bitcoin from an exchange and store it to use anytime in future.
Bitcoin runs on Blockchain technology which ensures that the transaction and anti-counterfeit integrity to store Bitcoin should be safe and not foolproof. Although the Blockchain technology guarantees the completion of a transaction, the Bitcoin holders may suffer the loss due to security issues. There are many instances of processing errors or malicious hacking have been noted over several times in the last few year.
Also Read: How does Blockchain Works?
In 2016, the foremost incident happened with the Hong Kong based Bitcoin exchange Bitfinex where the hacker attacked in a sophisticated way. In this attack, the thieves hacked more than $66 million of Bitcoin most of them are originated in customer accounts. In the first quarter of 2017, Coinbase customers reported more than thirty instances of theft per month. In November 2017, e-wallet provider Parity suffered from an operational problem that froze massive cryptocurrencies of $280 million.
2. Contract For Difference (CFD)
The contract for difference is also the most popular way for exchanging bitcoins. It is one of the best media to conduct exchanges for international traders and investors. The Bitcoin traders and investors use a derivative product known as CFD. There are many international traders who believe that Contract for differences is the best way of engaging the Bitcoin markets without having to acknowledge the ownership and storage responsibilities.
It is considered as the relative safe way of Bitcoin exchange as the security depends on the brokerage firm. The majority of the brokers organized their transactions under the scrutiny of customer funds and regulation, as the currency is segregated into different accounts. Although the contract for difference trading is not legitimate in the United States, that are chances that the government might adopt friendly policies regarding this.
3. Bitcoin Futures: CME Group and Cboe
For Bitcoin enthusiasts in the United States, soon there will be two exchanges that might be engaged in the opportunity to provide Bitcoin derivatives through futures markets. With the help of these mediums, the traders will find an ideal standardized futures contract that is available Cboe or might be on CME.
● Cboe: the security of Bitcoin exchange is the paramount importance for both the exchanges. They use institutional grade technologies to make sure that the exchange of bitcoins is safe for futures contracts annually. Both the platforms Cboe and CME are regulated and are subjected to the jurisdiction of the US commodities futures and exchange commission.
● CME: The popular platform is associated with the CME group know for the conglomeration of four prominent exchanges. It will offer Bitcoin futures along with metals, energies and another sort of agricultural products. It will also render the US exchange based Bitcoin future products. The Bitcoin futures that will be listed on Cboe will provide traders with the variety of flexibility and contract size.
Thus, in order to flourish the Bitcoin future market on the basis of Cboe and CME, the futures traders must secure the services of a broker. In order to regulate the brokerages, the futures brokerages are regulated by the National Futures Association known as NFA and it is adhered to specific rules for conducting Bitcoin exchanges. Hence, it is essential to select a reputed broker to furnish the aspiring biotin futures trader with many benefits over the edge of Bitcoin exchanges.
- The Bitcoin futures are held in a segregated customer account.
- They have a standardized process for dispute resolution.
The security is quite high in this case. Whether a trader is hedging cash positions or speculating upon forthcoming pricing fluctuations the conducting business through reputable brokerage and the federally regulated exchange provides the highest level of security.
Secure Bitcoin with Cold Storage wallets
Finally, a trader is responsible for performing the necessary due diligence. Besides, the large amount of Bitcoin needs maximum security. Here, the role of cold storage comes in. the term cold storage refers to the action when the trader secures all the Bitcoin keys off from any known server and computers and store them physically on the device which is not connected to the internet.
Also Read: Investment Risk you should know before Investing in Bitcoin
The majority of the people are using USB or hard drives that are not associated with the internet connection. Besides, some of the people even bought a personal computer which is dedicated to storing bitcoins with go through steps to never connect it to the internet so hackers cannot find it and will never be able to access it. Besides, there are also cold storage wallets that are providing offline space to the buyers to store their Bitcoin keys.
Conclusion
Although no exchange market is 100% secure, Bitcoin Futures markets will provide one of the safest ways to trade Bitcoin. Yet, the online threats are always part of this industry, even for those who are technically advanced with Bitcoin.
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