The safest way to trade bitcoin

I am pretty sure everyone has read articles on how to profit from the cryptocurrency market in particular the one — BITCOIN.

If you look at the chart, you probably lost money or still hanging on with paper losses if you did not buy bitcoin before OCT 2018.

Looking at the trend of bitcoin and other major cryptocurrencies, you shouldn’t be thinking about the word investing at all.

Looking at the same chart, you can technically say that one should be shorting bitcoin from 18000. Of course you should! But did you? Neither did I. Based on most technical strategies, shorting bitcoin should be correct. But when you consider the advancement of cryptocurrency and blockchain, the possibility of prices spiking up is always there. Shorting cryptocurrency prices are mostly for short term traders who can get out within a short time frame.

So what is left? Is there any one can make money from the cryptocurrency market without taking on too much risk?

Well, apparently there is and I have personally tried it. It works, but it is not without its downside. It is the cryptocurrency OTC market. It is a peer to peer buying and selling of cryptocurrencies. Here you can sell your bitcoin at a premium and buy them back on the major cryptocurrency exchanges.

Why do people buy from the OTC market?

1. In some countries, local banks and regulations are not supportive of cryptocurrency transactions. It is impossible to transfer money to these exchanges to buy bitcoin.
2. Buying from major exchanges normally means days and days of waiting for the money to be deposited into the exchange’s account. Meaning that you might miss out when the price comes crashing down and you have no way of purchasing bitcoins.
3. Lack of KYC. Buying from major exchanges require users to do KYC. Not everyone wants to do it for a variety of reasons. It can privacy concerns or personal preferences.

Personally, I use localbitcoin, huobi OTC and UOTC. Apart from creating these 3 accounts, what else do you need?

1. A local bank account. You only want to trade with people who have a local bank account too, as this will eliminate most of the scammers out there. Insist and reject people who use PayPal as PayPal deals often comes with chargeback, disputing and other issues.
2. A reputable exchange account like Bitstamp, OKex and Bitfinex. They must support fiat to cryptocurrency function.
3. Cashflow and existing bitcoins.
4. Understanding of local laws, especially in reporting of taxes. You will be receiving bank transfer from your buyer who is normally unknown to you. You need to know how to report it to your relevant authority. You do not want to be on the wrong side of the law.

This is how you do it.

1. Make sure you transferred money into the major exchanges like Gemini and you are ready to purchase bitcoins from the open market. Most of these USD platforms, so you might need to pay some telegraphic transfer fee.
2. Make sure that you have at least one bitcoin in the OTC platforms like localbitcoin, huobi OTC and UOTC.
3. When you create your advertisements on these platforms, make sure that your selling price is floating or dynamic. It means that your selling price will follow the prices on major exchanges. Do not select fixed selling price as you will risk selling bitcoin at lower prices when the actual market has gone up.
4. Next, premiums. Personally, I try to sell my bitcoins at 3 to 5% above the floating price. This will ensure that I am making money after I less the commissions, overheads and exchange rates. You should not price your bitcoin too high as it may discourage buyers. You want to find a buyer asap.

Process

1. Once an offer comes in to buy your bitcoin on the OTC platform, make sure you are logged in to your account on the major exchange. Make sure you are selling at a price that is around 3–5% above the price on the exchange.
2. You can go ahead and process the trade. Check that the amount is transferred to your local bank account and release the coins to the buyer.
3. Switch to the other account and purchase the same amount of bitcoins from the market.
4. Transfer the bitcoins to your OTC platform to sell it in the market again
5. Transfer your local currency to the major exchange to prepare for the next trade and the cycle repeats itself.

Note

1. Do understand your local tax laws and make sure that you follow the rules. Unknown transfers and cash deposits are easily flagged when the accumulative amount is too big. My suggestion is that this business can be a good side income but to do it as a full income business, please do consult a competent accountant and lawyer. Get the setup in place before you grow out of control. :) It is very addictive to keep trading.
2. If you transfer too little money to your bank and you lose out on the TT charges, but if you transfer too much, you are taking too much risk with this exchange (After all, they are not a real country backed bank). I recommend transferring maybe 1–3 bitcoin worth.
3. Make sure you plan your schedule when you do the bank transfers to the major exchanges. They require KYC and transfer lead time of up to 3–10 working days.

That is pretty much it for now. If you are pricing your coins well, you should be able to earn an easy sum of 2–4 thousand monthly.

Good luck and leave your comments below if you see any errors. Or you can say hi too!

Cheers.