Bitcoin or stock trading?

The most popular trading asset of the moment is Bitcoin.

It seems that more and more people want to join the cryptocurrency party.

Even I joined it and started to do some trades in Bitcoin.

Some years ago I wrote an article about investing in Bitcoin (original article in Spanish), in which I gave my opinion about Bitcoin and the fact that the chance of becoming rich with it had already passed.

However, when I wrote that article, bitcoin had suffered a severed correction, and was quoting at 250 dollars after being traded at 1,000 several months before.

At that moment I did not discard the possibility that the Bitcoin bubble had ended, but I was wrong.

It is not that you would become rich by investing in Bitcoin at that time but the truth is that if you had bought at that moment, you could have multiplied your account by 26, which is not a bad trade at all.

Someone who had invested 1,000 would have 26,000 today.

Not bad at all.

You would not be rich but you could get yourself a nice car, for example.

Rich were those who bought Bitcoin when it was 1 USD and sold it by 1,000 a couple of years late, but that is another story.

The truth is that some time after writing the article I realized that the bear market in Bitcoin was not the end of the bubble but a mere correction in an epic bull market.

Well, as a trader, I could not help it and started doing trading in the long side, of course.

When an asset rises the way Bitcoin does, a trader has to be bullish, and whatever opinions he can listen to.

We should always remember Mr. Porridge words: “Well, we are in a bull market, you know”.

Bitcoin monthly chart
Bitcoin bull market is getting wilder by the moment

Bitcoin trading in a bull market

Seeing the chart in the last two years we can confirm that Bitcoin rise is getting exponential.

From a trading point of view, it is a very good thing, because we are in front of an asset that is rising like mad, just as traders like.

On the other side, the fact that the rise is getting exponential is not so good because it means that the likelihood of a significant correction is very high.

For instance, in 2013, Bitcoin was rising spectacularly, in a similar way, with a rise getting more dramatic every month, which took the price to 1,000 dollars before crashing a whopping 90%.

When Bitcoin crashed that way there was a lot of pain but the truth is that there were huge profits before also.

Despite the fact that we are in a major bull market, and that possibly Bitcoin goes to 10 or 20 thousand dollars, we should be able to face a significant fall in any moment, because there is no asset that rises 100% indefinitely, and Bitcoin is not an exception.

Well, after some introduction about this asset of the cryptocurrency market let us compare it with stock trading.

I am not going to talk about Forex because this one is much more complicated than the Bitcoin one. This is for the simple fact that contrary to Bitcoin or the stock market, the Forex market do not have a defined and clear trend, and that is very complicated to discern, even for those traders with a lot of experience. That does not mean we cannot do trading in Forex but the grade of complexity is much higher.

Going back to stock trading, it is evident that we have some parallel with Bitcoin: both markets have a very clear market trend.

In the case of the stock market it is a trend that lasts more than 200 years and in the case of Bitcoin it is just some years.

From a trading point of view, both markets are very interesting.

Those are the markets any trader is interested in trading.

Two bull markets in which you can cut losses short and let profits run.

Very simple and complicated at the same time.

If we want to trade Bitcoin we have to use some specialized brokers or CFDs and Forex brokers.

The question is that if those assets are more efficient for trading than the classic ones, like stocks or futures.

CFDs Bitcoin and stcok market trading

In the case of CFDs there are many intersint brokers offering trading in Bitcoin. Cases like Xtb Brokers, IG Markets, etoro or Ayondo.

Let us compare Bitcoin trading with one of the most popular markets in the world: DAX 30.

Bitcoin and DAX 30 in eToro

In the case of eToro, the most popular social broker in the World, we find that the typical spread in Bitcoin is around 46 points out of 6.300, which would leave us a spread of 0,007.

With DAX we can get a spread of 1 point, which for an asset quoting in 13,200 units, represents a spread of 0.000074.

Therefore, in this case the spread of Bitcoin is 100 bigger than that of the DAX.

Is that important?

Of course it is very important; because that means that trading DAX is more efficient than trading Bitcoin.

Perhaps, Bitcoin has volatility 5 or 10 times bigger than DAX or the Nasdaq, but the cost of doing trading in many of the most important CFD brokers is a log higher; in the case of eToro, 100 more.

Not only that but also we have the change of using leverage with DAX, whereas in most brokers you cannot really use it for Bitcoin. It is such a dangerous asset that not many people are willing to offer trading in it.

DAX 30 and Bitcoin in Ayondo

The case of Ayondo is a bit more balanced that etoro.

Ayondo DAX spread is 2.5 and Bitcoin 20 points, which is equivalent to 0.003, meanwhile DAX spread is equivalent to 0.00018.

This means that Bitcoin Ayondo spread is at least 16 times bigger than the one of the DAX.

A less exaggerated difference than the case of eToro but still significant.

Another Bitcoin and stock market brokers

 

Another broker that shows a good spread for Bitcoin is XTB, with quite a stable spread of 10 points, we is quite interesting.

However, the DAX spread in this broker is 0.9, which means that Bitcoin spread is 20 bigger than that of the DAX.

Again, we can see that despite the fact that DAX does not multiply itself by 10 in a year, it offers us good short term trading conditions, probably better than Bitcoin.

Kraken is one of the leaders in Bitcoin trading.

This broker offered a spread of 4 points quite constantly.

This is a quite decent and acceptable spread to do trading.

As we see the spread is less than 0.1% of the asset which is very good.

With the DAX future we can get a spread of 0.50 normally, so the difference is not that big as in the case of CFD brokers.

However, we should not compare Bitcoin trading with the DAX future, where leverage and security are bigger.

In the broker Bitstamp I even found 1 point spreads, but the truth is that it was just a temporary thin, being spreads quite variable, with jumps of 5 or 10 dollars, which would eventually be the real cost of trading.

bitstamp traing bitcoin
Bitstamp order book
Coinfloor Bitcoin

Other brokers that offer Bitcoin trading are the binary options ones, but these ones offer us trading conditions quite worse than the previous ones, and it is not something worth commenting here.

Conclusion

As we see, Bitcoin trading is not as good as it seems when we compare it with DAX trading, for example.

Something similar would happen if we compare it to S&P500 or Nasdaq.

It is possible that the DAX does not rise 800% a year but the cost of doing trading is much less.

If we add the fact that in stock futures we can have leverage, we find out that the conditions for trading are as good as or better than those of Bitcoin.

If I had to choose, I would probably choose stock market trading.

Nonetheless it does not mean that Bitcoin is not an attractive market for trading.

On the contrary, Bitcoin is a good asset for trading.

Trading the long side, of course.

Regards and good trading.

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