Bitcoin (BTC) is known as the first cryptocurrency to be introduced in the virtual market. Today, it’s considered one of the most popular and valuable virtual coins. Its trading has significantly increased globally over the last few years, and Canadians haven’t been left behind.
For most people, there are various other reasons why they’re attracted to BTC trading besides its value. For instance, this investment has better security, and the transactions are considered fast and easy with only minimal fees, if any. Some also prefer it because it’s an inflation hedge, it could offer more returns, and it can be an excellent way to diversify one’s investment portfolio.
That said, bitcoin trading also has its risks. If you’re a new investor, you also have to be aware of these. Cyber theft and the currency’s volatile price are some of the risks you have to be mindful of before you start BTC trading. Besides that, since this venture is legal in Canada, you also have to pay taxes. You could get in trouble with the law if you fail to do so.
To make things less complicated for you, here are six tips to help you successfully engage in bitcoin trading in Canada:
Choose A Safe Method To Buy, Sell, Or Trade Bitcoin
Firstly, you have to choose a safe method to buy, sell, or trade BTC. This may be a cryptocurrency broker, exchange, or automated teller machine (ATM). Since Bitcoin has become quite popular and more acceptable today, several options are available for you in Canada. But this may also make it challenging for you to identify the best choice to go with. One tip to help you identify good BTC brokers, exchanges, or ATMs is to check their reputation and reliability.
For instance, some BTC enthusiasts share their online feedback about various trading, buying, and selling platforms. Take time to go through these reviews first before considering any trading platforms. Also, you could seek helpful information from a trusted friend who invests in BTC or good bitcoin sites that offer reliable data on cryptocurrencies.
Decide Whether To Trade Short Term Or Long Term
It’s also a good idea to decide early on whether to trade BTC in the short or long term as a beginner. The former involves selling and buying BTC on the same day, taking advantage of the coin’s price swings. On the contrary, the latter involves holding your BTC for an extended period with the hope of using or selling later when its value becomes much higher.
Short-term BTC trading may have quicker and more significant rewards but is also highly risky. On the other hand, long-term trading can be less stressful and may offer more returns. That said, you might also miss out on opportunities with potentially high profitability.
Therefore, before you start BTC trading, it’s best to find out first which strategy will work better for your skills, lifestyle, and available resources. If you find it difficult to decide, talk to an experienced investor.
Report Your Bitcoin Earnings To The Relevant Authorities
Unlike in other countries, Bitcoin is legal in Canada. As a citizen, the government may consider your revenue accumulated from BTC taxable. Generally, you may be required by the CRA (Canadian Revenue Agency) to report your earnings after disposing of your BTC in these ways:
- Changing the cryptocurrency to Canadian dollars
- Exchanging or trading BTC for another virtual coin
- Purchasing services or goods using BTC
- Gifting or selling BTC
Note that the CRA considers BTC mining, exchanging, and trading as a form of business. They might require you to pay business income tax for BTC if:
- You intend to make profits, even though you might not do so in the short term
- You’re promoting a service or product
- You’re carrying on your activity in a business-like manner or for commercial purposes.
In such cases, 100% of your profits are subject to tax. However, if you haven’t finished setting up your business, the CRA might not require you to report your earnings yet. You must first do something recognizable as part of your revenue-generating process.
On the other hand, the CRA may consider your BTC earnings as capital gains. This might happen if you didn’t sell your coins for commercial purposes, but you acquired a profit from your transaction. In this case, you’re only taxed half of your total capital gains. If you incurred losses, you could offset them with your profits.
Plan How To Manage Your Risks
It’s also crucial to managing your risks as a trader. This means you should limit the amount of cash you invest in BTC. In most cases, experienced professionals advise beginners not to put more money than they’re comfortable to part with into the trade.
This is a strategy you could consider, too. This will help you avoid substantial financial losses if you aren’t successful in your day’s trade.
Have Profit Targets And Set Stop-Loss Levels
Besides spending only what you can afford to lose in BTC trading, it’s also recommendable to set stop loss levels and profit targets. These two will allow you to exit a trade whether you’re winning or not.
Setting stop-loss levels enables you to limit how much you can lose. For instance, you may have gained USD$100 in a particular trade and set that as your stop loss level. If BTC prices start falling, you’ll only part with your selected amount. Hence, your initial investment will be safe.
On the other hand, a profit target is a point at which you exit a trade after a successful gain. This also helps to manage your risks. Some experienced investors may encourage small but consistent profits, especially if your risk appetite is low. A BTC gains estimator could be helpful here.
Stay Informed
News on current events can affect BTC investors’ perception of the virtual currency in some cases. This means the sentiments created by the developments could cause traders to make decisions that may affect BTC’s price.
Therefore, as a trader, you need to stay informed on the latest trends, especially those affecting the economy. Although not all developments cause significant changes, it’s best to know what kind of news can impact BTC’s value. This way, you’ll make better trading decisions.
Conclusion
Investing in BTC can be a highly profitable venture. However, there are also several risks involved. As a Canadian BTC investor, it’s best to conduct extensive research before getting into this trade. This way, you’ll know the strategies that could help increase your chances of success. That said, not all approaches may work for you, especially because Canada’s laws on crypto trading may be different from most countries.
This article provides some strategies that may help make things easier for you as a new Bitcoin trader in Canada. As advised above, you have to select a safe method to buy, sell, or trade bitcoin and choose whether to trade in the short or long term. Additionally, always ensure you report your BTC earnings to the relevant authorities and manage your risks. Lastly, have profit targets, set stop-loss levels, and stay informed.