How to Trade BTCUSD
The USD appears to be at a crossroads. With discussions on de-dollarisation becoming more commonplace these days, the USD still remains the global reserve currency.
Meanwhile, Bitcoin is where the phenomenon of cryptocurrency really began. It is what made ‘blockchain’ a buzzword. When someone says that the price of Bitcoin is $30,000, they are referring to the price of Bitcoin in USD.
In what ways does this impact how to trade BTCUSD?
Both Bitcoin and the USD are at critical junctures. Traders may find that interesting. Let’s dive deeper into this topic and gain a better understanding of how to trade BTCUSD.
Table of Contents
How to Trade BTCUSD: An Introduction
Let’s discuss one pair that has generated a lot of interest among traders during the last 5 years or so: BTCUSD.
Crypto enthusiasts already appreciate the importance of Bitcoin. For the ones who are new to Bitcoin or the USD, we will enlighten you here with a comprehensive introduction.
The United States is the largest economy in the world and the USD is the world’s reserve currency. Meanwhile, Bitcoin is the original cryptocurrency with the highest market capitalization.
We will explore where the US economy currently stands and what the USD is doing. We will also discuss a few basics of Bitcoin.
Understanding such factors should help the average trader and investor understand how to trade Bitcoin vs the USD.
Lastly, we will look at some trading strategies which could be used to trade BTCUSD.
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The US Economy and the Dollar
As inflation becomes an issue across the world, the US has been trying to fight the same through most of 2022 and early 2023.
The sharp rise in interest rates seems to have its casualties with the recent fall of SVB Bank, an event which caused major disruption to global banking.
Inflation continues to be a headwind, however, there are now widespread expectations that a recession might be around the corner.
The US dollar finds itself in an interesting situation. On one hand, US treasury yields are rising due to rising interest rates.
On the other hand, there is a lot of talk of de-dollarisation and countries outside of the G7 diversifying their reserves. There is also talk of countries conducting trade in currencies other than the US dollar.
The dollar index has been on an upward trajectory since mid-2021. It hit a peak around October 2022 before pulling back.
Those who think the dollar will strengthen point to the fact that in a risk-off (or, lower exposure to potential losses) environment, safe haven assets will be in demand pushing up the dollar.
On the opposing side, those who think the dollar will continue its downward trend point out that the Fed may end up cutting interest rates if a recession does happen. They also point to the fact that the dollar is losing its dominance.
Overall, the dollar seems to be at a critical point in today’s economy.
A Closer Look at Bitcoin
Bitcoin continues to be the most popular, most traded, and most prominent cryptocurrency in the world. It also has the largest market capitalization among all cryptocurrency coins.
It also has been very volatile lately. From a high of USD $60,000 in 2021, the price went into the $16,000s in late 2022. Since then, however, the price has recovered back to around USD $30,000. That price, though, is still half of what it was in 2021 in the current moment of 2023.
The prospects of cryptocurrencies appear to depend on how the Federal Reserve’s monetary policy pans out in the near future.
Global liquidity may also play its part in the pricing of risk assets. The chart for Bitcoin as far as May 2023 seems to suggest that the USD 30,000 level could act as a resistance. A breakout from that level could lead to a trend while a reversal from there could lead to a trend in the opposite direction.
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How to Trade BTCUSD: Various Options
Trading BTCUSD can be done by directly buying or selling Bitcoin in US dollars or through a CFD.
It is possible to trade the BTCUSD pairing using the actual currency asset directly on a cryptocurrency exchange.
On the other hand, it is also possible to trade BTCUSD via Contracts for Difference (CFDs), which is a derivative contractual product based on the movement of the price fluctuations (increase or decrease).
BTCUSD is like trading forex. When you trade USD/GBP or USD/JPY, you are essentially buying or selling USD using either the GBP or the JPY. The USD is the base currency and GBP or JPY is the quote currency.
It means the number of GBP or JPY needed to buy one USD. In the same way, BTCUSD means the number of USD needed to buy one Bitcoin.
Through a CFD (Contract for Difference) you can trade the price movement of Bitcoin without owning the underlying asset of the actual cryptocurrency.
A Bitcoin CFD can allow you to trade a range of long or short strategies with leverage; leverage can maximise your market position, however, in the same regard it can also increase your risk and potential for much larger losses.
However, when trading leveraged instruments like CFDs, you may want to ensure proper risk management.
Whether it is establishing and monitoring stop losses, sizing your positions, or defining your risk, risk management is all about protecting your trading capital.
See the TradingView widget, below, in order to have a better understanding of the BTCUSD Daily price fluctuations:
*Past performance is not reflective of future results.
How to Trade BTCUSD: Different Indicators
Let us now talk about some strategies that could be utilised when trading BTCUSD. Strategies could be categorized as either discretionary or system-based.
Discretionary strategies are based on you reading the chart and then deciding, at your discretion, whether to take a trade or not.
Systematic strategies are based on certain rules. If those rules are met, a trade has to be taken and exited regardless of what your emotions tell you.
You can construct such strategies using technical indicators or backtesting price data to find statistically significant results.
Examples of some basic strategies include moving average crossovers, the use of Bollinger bands, and the use of RSI to find overbought and oversold zones.
Combining these indicator-based results with your own chart analysis can give you even more confidence to take a trade.
How to Trade BTCUSD: Conclusion
We hope that you now have a good idea of what it means to trade BTCUSD and how the ever-changing economy and global dynamics affect price fluctuations.
With a tradeable pair like BTCUSD, the leading cryptocurrency by market cap and the world’s leading currency, there is sure to see some volatility.
Please ensure to follow your risk management strategy closely while trading.
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What does BTCUSD mean?
The acronym BTCUSD refers to the ticker symbol of Bitcoin vs the US Dollar in regards to the exchange rate.
How can I trade BTCUSD?
An individual can trade BTCUSD by registering with a trusted online broker (such as Admiral Markets) to have the option to trade BTCUSD Contracts for Difference (CFDs). One can also trade BTCUSD on traditional cryptocurrency exchanges.
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INFORMATION ABOUT ANALYTICAL MATERIALS:
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4. The Analysis is prepared by an independent analyst (hereinafter “Author”) based on Brandie E Blackler, Financial Analyst, personal estimations.
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