Bitcoin Trading for Beginners – The Step by Step Guide

Overview and what Bitcoin is

Bitcoin is a cryptocurrency, or digital form of currency, which is can be bought and sold, or traded on a cryptocurrency exchange or trading platforms. It can also be traded through a broker that offers it as a tradable financial instrument.

The exchange of cryptocurrency is internet-based, and it uses cryptographic functions to conduct financial transactions. Blockchain technology is used in cryptocurrencies to gain decentralization, transparency, and immutability.

Cryptocurrency and the exchange, trade, buying, or selling thereof cannot be controlled by a central authority and this provides cryptocurrencies with a type of immunity where government control and interference is concerned.

The exchange, or trade of cryptocurrencies, can occur directly between two parties by using private and public keys. Such transactions can mean lower processing fees, which allow the traders to avoid fees charged by traditional financial institutions, such as brokers.

Although, when considering the nature of cryptocurrency trading and the fact that exchanges fall prey to hackers along with the existence of scams, traders are always warned of the security threats and the risks involved with cryptocurrency trading.

Although regulated brokers often charge some fees when trading cryptocurrency, for the safety of the client, and the security of their funds, it is recommended to make use of regulated brokers to facilitate the trade and exchange of cryptocurrency.

There are, however, numerous cryptocurrency exchange platforms that provide a safe trading environment despite the lack of regulation, although there are exchanges that are regulated or covered in regulation due to their affiliation with regulatory entities.

Due to the advances in technology in a Digital Age, cryptocurrency, and especially Bitcoin trading, has become a global phenomenon that is known to most people.

Cryptocurrencies have been researched by numerous establishments such as major banks, accounting firms, prominent software companies, and even governments and many have embarked on blockchain-projects.

Smaller units of Bitcoin

Bitcoin can be split into smaller units such as millibitcoin or mBTC which is one-thousandth of a Bitcoin, or 0.001 BTC, and further into microbitcoin or µBTC which is one-millionth of a Bitcoin, or 0.000001 BTC.

The smallest Bitcoin sub-unit is that of Satoshi, or one-hundred-millionth of a Bitcoin. This ensures that instant transactions can take place whether it is either making payments or receiving funds.

Why is Bitcoin coded?

Bitcoin is encoded to ensure that there is no inflation and that it can be self-sustaining. It also means that the virtual space is not flooded with Bitcoins and by Bitcoin being coded, it allows for purchase at Bitcoin exchanges.

A list of 7 Bitcoin Wallets for Beginner Traders in South Africa (2025)

1. 🥇Desktop Wallets
2. 🥈Mobile Wallets
3. 🥉Cold Wallets & Hot Wallets
4. Online Web Wallets
5. Physical Wallets
6. Hardware Wallets
7. Bitcoin Clients

Bitcoin –  Brief History and Insight

Bitcoin first emerged in the registration of the domain name bitcoin.org in mid-2018. Later during the same year, a link to a paper which was authored by Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System”, was posted on a cryptography mailing list.

Contained in the paper were methods of utilizing peer-to-peer networks to generate a system intended for electronic transactions without the focus being reliance on trust.

The Bitcoin network officially came into existence in early 2009 when Satoshi Nakamoto mined the “Genesis of Bitcoin” and block number 0, which held a reward of 50 Bitcoins.

The day that the software was released, Hal Finney, who was one of the first supporters, adopters, and contributors of Bitcoin along with being the first Bitcoin transaction receivers, downloaded the software and received 10 Bitcoins in the world’s first Bitcoin transactions.

Bitcoin was handed over to the developer Gavin Andresen after Nakamoto mined an estimated 1 million Bitcoins and Andresen subsequently became the Bitcoin lead developer for the Bitcoin Foundation.

The foundation was the closest thing to an official public face for the ‘anarchic’ bitcoin community and the value of the first Bitcoin transactions had initially been negotiated by individuals who were part of the Bitcoin forum.

Bitcoin’s Growth through the years

• In 2011 other cryptocurrencies started emerging based on the open-source code of Bitcoin with WikiLeaks and other organizations beginning to accept donations made in Bitcoins.
• In 2012, Bitcoin had been featured in The Good Wife and the Bitcoin Foundation was launched in September, followed by BitPay reporting over 1,000 merchants accepting Bitcoin followed by WordPress accepting Bitcoins as well.
• In 2013, US$1 million worth of Bitcoins were reported having been sold by Coinbase and The Internet Archive started receiving Bitcoin donations, followed by numerous developments in cryptocurrency and Bitcoin during the same year.
• By 2014 more announcements were made in using Bitcoin as a payment method and more companies started accepting payment in Bitcoin followed by the release of The Rise and Rise of Bitcoin with featured interviews with Bitcoin users.
• By 2016, the network rate had exceeded 1 exahash per second and by March, the Cabinet of Japan recognized virtual currencies such as Bitcoin as possessing the same function as real money.
• 2017 saw the number of businesses that accepted Bitcoin increase with increases in BitPay’s transaction rates. Bitcoin gained substantial legitimacy among both lawmakers as well as legacy financial companies and an increase in trading volumes.
• By 2019 there were around 5,457 Bitcoin ATMs worldwide with the highest number in the U.S, Canada, the UK, and Spain.

Crypto or Bitcoin Wallets Overview

A Crypto or Bitcoin wallet is a software program, considering that cryptocurrencies are digital of nature and not actual money, in which Bitcoins can be stored.

Cryptocurrencies cannot merely be stored anywhere as they require a private key or secret number which is designated for every individual who has a balance in a Bitcoin wallet. This private key corresponds to the Bitcoin address of the wallet.

Bitcoin wallets are intended to facilitate both the sending and the receiving of Bitcoins along with providing ownership of the Bitcoin balance to the user.

Bitcoin wallets are not conformed to only one platform and can be spread across desktop, mobile, web, and various hardware.

To be able to trade Bitcoins, traders need to first own a corresponding Bitcoin or digital, wallet which is analogous to a physical wallet.

Instead of storing physical currency, the wallet stores relevant information such as the user’s private key to access various Bitcoin addresses as well as carrying out transactions.

Different Bitcoin Wallets

1.   Desktop Wallets

These types of Bitcoin wallets are created with the purpose that they can be downloaded and used on both personal computers and laptops. The wallets can be accessed regardless of an internet connection and they are available for the following:

• Ubuntu
• macOS, and
• Microsoft Windows

Due to its vast and notorious safety features and ease of use, Armory is one of the most popular and recommended wallets in the industry although there are numerous others and various traders have their own preferences where Bitcoin wallets are concerned.

2.   Mobile Wallets

These wallets are developed specifically for use with smartphones and they provide substantial convenience and ease of access on the move regardless of an internet connection.

Two of the most popular Bitcoin wallets for mobile devices are Blockchain and Mycelium, and they are downloadable on both Android and iOS devices. For users of Blackberry, there is the Bitcoin app which is compatible and one of few available.

Another benefit of using a mobile wallet is that it allows the user to scan QR codes and to make instant payments from their Bitcoin wallets.

3.   Cold Wallets and Hot Wallets

The reference to either “Cold” or “Hot” wallets may seem like a foreign term especially to beginners, but it can be defined quite simply as follows:

• A “Cold” Bitcoin wallet refers to a wallet that is by no means connected to the internet, and thus offline. It is considered the most secure wallet out of the two as it provides more protection against hackers.
• A “Hot” wallet is therefore one that is online and connected to the internet, which poses some security threats as these are often targeted by hackers.

4.   Online Web Wallets

These wallets require an internet connection to be accessed although they are provided on the cloud by third-party providers of Bitcoin wallets. Such wallets are provided by exchanges or companies such as Circle and Coinbase.

5.   Physical Wallets

These are also known as paper wallets and seeing that Bitcoin is not only limited to being a digital currency, these wallets can be generated by Blockchain.info and Bitaddress.org and they can be kept in a deposit box along with valuables.

Once the wallet has been created, it can be printed onto paper and stored safely.

6.   Hardware Wallets

There is a substantial emergence of hardware wallets in the form of small devices that store the user’s Bitcoin and can be used for sending and receiving online transactions as well. One such device is Trezor, which is becoming a popular portable physical crypt.

7.   Bitcoin Clients

These wallets are more commonly known as the original wallets which were used for Bitcoin by the founders of the currency.

Numerous computers are sold with these wallets installed, which provide online trading clients with access to all transactions executed through the Blockchain.

How are wallets kept safe and secure?

Regardless of a Bitcoin wallet storing digital currency, it should not be any different than keeping an actual wallet with banking cards and cash safe.

The convenience associated with Bitcoin is making it possible to transfer value anywhere in an easy way should not provide traders with a false sense of security in believing that they will not fall prey to hacking attempts.

When used correctly, Bitcoin provides high levels of security, and despite how the trader goes about using their Bitcoin, or how they trade it, whether, through an exchange or a broker, it is the trader’s responsibility to adopt good and secure practices.

Some tips on improving and maintaining Bitcoin wallet security include:

• Heeding caution with online services that are designed to store currency online as many exchanges and online wallets are targets for hackers. Traders need to choose their service carefully and read up on providers extensively.
• Making use of as many security features as possible such as two-factor authentication, locks, pins, biometrics, and all other security features to prevent ease of access by an external party to the Bitcoin wallet.
• Making use of small amounts for everyday uses by only keeping small amounts of Bitcoins on a computer, mobile, or server for everyday use to keep the remaining balance in a safe environment, such as a cold wallet.
• Backing up a wallet may protect the trader against both computer failures as well as human mistakes and it allows for wallet recovery when the wallet has been encrypted and in such an event, a computer or mobile device is stolen.
• These backups should be of the entire wallet as there are various internal hidden private keys. Backups done online must be encrypted to avoid ease of access by hackers and backups should be done over numerous secure locations, not only one.
• Wallet encryption is an imperative step that must never be skipped or taken lightly as it prevents any withdrawals or fund transfers by anyone except the user. Making use of strong passwords and other security options is highly recommended.
• Traders need to make use of offline, or cold, wallets for their savings as it is highly secure for large amounts of funds. Traders are recommended to keep small amounts in their hot wallets for everyday use and purchases.
• In addition to using cold storage, traders are also advised to use offline transaction signing and to also make use of hardware wallets, which are small portable devices on which Bitcoins are stored, for added security.
• Software on devices must be kept up to date to ensure that security features are updated, and that software remains stable.
• To further protect traders from theft or hacking attempts, multi-signature features are recommended as it requires that transactions be approved through multiple independent approvals.

Bitcoin Trading

Why is Bitcoin valuable?

Bitcoin was the first decentralized digital currency in the world and its value is primarily derived from it being the very first digital currency that no person, organization, or authority has control over.

It can be bought and received, but no one can be told what they should do with their Bitcoins or what they are not allowed to do, or how they should spend or invest it.

Bitcoins are free from dictatorship, oppression, as well as hyperinflation and it serves as a financial Safe-haven for those who live under such circumstances.

Also, Bitcoin is limited as there is only a supply of around 21 million total Bitcoins and this will never change. There is also knowledge of how many are released into the world along with the rate at which they are released.

There is also knowledge available about when the last Bitcoin will be created. The transparency that exists in the knowledge surrounding Bitcoin is another factor that increases its overall value.

Another factor to be explored is the substantial leverage that Bitcoin has over Fiat currencies as any money is controlled by a central bank and this leaves a lot of space for problems such as governments having control over monetary systems.

Monetary systems are controlled and manipulated in the supply of money, the fact that value is backed by the word of governments and numerous other controversial issues to be considered.

Bitcoin is designed in a unique way that means that it is poised to have an impact on people’s lives even in the most unstable economies where monetary systems experience substantial manipulation by governments.

Fiat currency cannot simply fall away and although digital currency and the use and acceptance thereof is increasing, monetary systems are still important as it has been used through the ages and it is still considered the most stable grounds for exchange and trade.

Fiat currency is heavily impacted by inflation whereas Bitcoin is not, amidst other differences which show that Bitcoin is the strongest contender of the two in paving the way forward to a more digitized society and monetary system.

Why is Bitcoin traded?

Quite simply answered, trading Bitcoin may be an efficient way to make a profit. A lot of stigmas surrounded how profit can be made by only trading major currency pairs until more brokers started embracing the cross pairs.

A lot of successful traders do not place sole focus on trading a single currency pair, but a lot of traders have started trading cross pairs due to the high level of market volatility that has built up around these pairs in the market.

High volatility is only one of the reasons why traders should consider trading Bitcoin. Other reasons include:

• That it is very easy to understand market movements as the focus is not solely on the major trends and buying Bitcoin is an easy way to make a high profit once traders have learned more about trading by making use of demo accounts.
• Bitcoin is less vulnerable to high-impact news and traders do not have to spend a substantial amount of time conducting the fundamental analysis.
• Access to lower leverage decreases the high risk of substantial losses that may exceed the trading account balance.
• Bitcoin has a global market as it is not centralized or based in a single economy of a country such as with Fiat currencies.
• The Cryptocurrency market is open 24/7 unlike traditional markets such as Forex or stocks and there is no official exchange, but a variety of exchanges around the globe, and neither are there fixed closing times.
• The Bitcoin market is volatile with a quick burst of ups and downs in a short period of time which provides ample opportunity to traders who harness this volatility with strategies that accommodate such conditions.

These are merely a few reasons why traders should investigate trading Bitcoin and traders need to understand that some basic knowledge of trading is still needed to survive in the industry as there are still risks involved with trading Bitcoin.

How are new Bitcoins created and generated?

The Bitcoin network is secured by miners who also process all transactions. Bitcoin would be vulnerable to attack otherwise and it would inevitably become worthless.

These miners, for all their efforts, security, and processing services, are rewarded with new Bitcoins as well as transaction fees.

Every time Bitcoin’s proof of work algorithm is successfully solved by a miner and a miner subsequently mined a ‘block’, that particular minor or a mining pool that has mined a block is rewarded through what is known as a ‘block reward’.

This reward consists of a set number of Bitcoins which is agreed upon by the network and all the Bitcoins that make up the block reward are new.

The Block reward initially consisted of 50 Bitcoins per block and it halves every 210,000 blocks which means that every block up until 210,000 will reward the miner with 50 Bitcoins but thereafter, for instance from 210,001, will only reward the miner with 25 Bitcoins.

There is a certain level of Bitcoin difficulty in place with ensures that blocks are only found on an average of 10 minutes. Keeping in mind that block rewards halve with every 210,000 blocks, it means that the halving only occurs every four years.

New Bitcoins are therefore generated every 10 minutes, and anyone can publically verify this creation by making use of a block explorer. With the block reward halving a set amount of times, it would mean that it becomes so small that new Bitcoins cannot be created.

How is Bitcoin traded?

There are a variety of ways in which Bitcoin can be bought due to its increasing popularity including:

• Bitcoin and other brokers – a variety of brokers offer the trade of cryptocurrency by offering traders competitive and comprehensive trading conditions with the benefit that a lot of these brokers are strictly regulated.
• Bitcoin Exchanges – Bitcoin can also be bought and sold through an exchange such as Coinbase, Binance, Kraken, and numerous others. It requires a short registration and verification before trading can commence.
• Peer-to-Peer – Bitcoin cannot always be traded or exchanged on all exchanges and some exchanges such as LocalBitcoins allows for the buying and selling of Bitcoin which requires a short registration along with verification of the account.
• Bitcoin ATMs are becoming more popular in larger cities around the world in the U.S, Europe, Asia, and even in South Africa from where Bitcoins can be bought.

Is paying with Bitcoin better than using Bank transfers and other methods of payment?

When considering that Bitcoin can be used as a method of payment, it is important to look at how Bitcoin weighs up to other payment methods seeing that it is becoming increasingly popular and more merchants and companies are allowing for payment in Bitcoin.

In contrast to other payment methods, Bitcoin holds the following benefits and advantages over other methods:

• The transactions between Bitcoin wallets are not linked to an individual bank account.
• Bitcoin can be used by anyone and there is no need for account verification, identity checks, or proof of residence although this may differ between brokers and cryptocurrency exchange platforms.
• There is no central authority directing how Bitcoin can or cannot be spent.
• The Bitcoin account can neither be seized nor closed and the user is the only one who has control.
• Users’ privacy is enhanced when using Bitcoin and it reduces the chances of identity theft.
• Bitcoin transfers can be done in mere minutes, unlike bank transactions which may take several days.
• There are no international boundaries where Bitcoin is concerned, and it can be sent and received anywhere in the world without any additional fees charged on transactions.
• There is unlimited access and users have full control of their funds at any given time, from anywhere in the world.
• High banking and transaction fees are absent along with monthly, annual, overdraft, or over-limit fees.
• There is no maximum or minimum involved with transactions.
• Purchases have the benefit of being completely anonymous as the user’s name is not tied to their transaction, and
• Transactions cannot be reversed once processed which frees retailers from the worry of chargebacks on credit cards.

Which other Cryptocurrencies are there other than Bitcoin?

Although the most valuable and popular, Bitcoin is only one of the numerous cryptocurrencies that are exchanged, bought, and sold daily. Other popular cryptocurrencies include:

• Litecoin or LTC was created in 2011 after Bitcoin. Although like Bitcoin, Litecoin has a faster block generation rate and offers traders faster transaction confirmation due to the increased rate.
• Ethereum, or ETH which was launched in 2015. Ethereum is decentralized and allows Distributed Applications and Smart Contracts through which to build and operate fraud, downtime, and control from third parties.
• Zcash or ZEC is decentralized and open-sourced. It was launched in 2016 and offers privacy and selective transparency of transactions.
• Dash was originally known as Darkcoin. It is a substantially more secretive version of Bitcoin which was launched in 2014 and allows for more secrecy in operating through a master code network allowing for nearly untraceable transactions.
• Ripple or XRP, which was launched in 2012 and is a real-time global settlement network that offers international payments that are instant, certain, and low in costs.
• Monero or XMR, which is another open-source cryptocurrency that was released in 2014. The digital currency is not only secure and private but untraceable.

Bitcoin and Cryptocurrency trading through a Broker

The process involved with choosing a broker through which to trade a cryptocurrency can be tedious as there is a great variety of brokers that each has their own trading conditions.

It is also imperative to ensure that the broker chosen is well-regulated, and not a scam, as client funds protection must be ensured.

In choosing a broker to facilitate the trading of cryptocurrency, and Bitcoin, traders need to ensure that they look at various factors apart from trading conditions and regulation, namely:

• Cryptocurrency pairs offered
• A wide range of different coins offered
• Accessible and reliable payment methods
• The quality and usability of trading platforms, and
• The level and quality of customer support offered.

These are but a few points that traders need to investigate before deciding on a broker.

Bitcoin and Cryptocurrency trading through an exchange

There is no singular or official exchange for the trading, buying, or selling of Bitcoin and instead, there are numerous exchanges that accommodate traders, buyers, and sellers right across the globe.

When looking at an exchange, traders and investors need to consider a few vital factors namely:

• The liquidity and the market depth of the exchange must be adequate as it ensures that orders are filled and there are decreased chances of a quick dip in the market that may lead to losses.
• Trading fees charged by the exchange as lower fees allow the trader to take exit regardless of how small the movements are, and this will not only cover the fee but may provide the trader with a small profit.
• Location and where the exchanges are based along with whether the exchange allows deposits in Fiat currency especially in that of the trader’s local currency as it will allow for easy deposit and withdrawal in the trader’s own currency.
• Regulation and trust – for the major part, exchanges are not regulated but this does not mean that they cannot be trusted. Traders need to investigate the history of the exchange along with their trust through reviews from organizations and individuals.

Frequently Asked Questions

What is Bitcoin?

It is a consensus network that allows for a new payment system along with currency and money that is completely digital. Bitcoin is a digital currency, also known as Cryptocurrencies.

Who created Bitcoin?

The official specification and proof of the concept were published by Satoshi Nakamoto in 2009, although Wei Dai first described the concept of cryptocurrency in 1998 on a cypherpunks mailing list.

Who controls the Bitcoin Network?

No one owns the Bitcoin Network although it is controlled by all Bitcoin users globally.

Is Bitcoin legal?

In most jurisdictions, there are no legislations that prohibit Bitcoin, but there are some jurisdictions that restrict foreign currencies severely, or they are banned within these jurisdictions.

Can Bitcoin be regulated?

The protocol with Bitcoin itself cannot be modified without the unanimous cooperation of all users who control and choose the software that they use according to their own preferences which makes it practically impossible to regulate the entire Bitcoin network.

However, numerous brokers who offer trade-in cryptocurrency have regulation and authorization along with some exchanges that may be regulated or at the very least licensed or registered with entities.

Can I make money with Bitcoin?

Bitcoin is not a way to make a substantial amount of money in a short amount of time. It does allow for some profits but there are still risks involved which may lead to substantial losses.

 Am I liable to pay taxes on Bitcoins?

Bitcoin is not a Fiat currency and therefore does not conform to the same legal tender status in jurisdictions, there are however tax liability accrues despite the medium which is used.

 Is Bitcoin safe to use and trade?

Yes, but it is imperative to consider that the extent to which it is safe will depend on various factors, and despite the security features employed, there is a constant risk associated with cybersecurity threats where online activities are concerned.

Is Bitcoin anonymous?

The design behind Bitcoin allows that users can send and receive payments with a level of privacy that is acceptable although it is not as anonymous or private as cash.

What happens if I lose my Bitcoins?

When Bitcoins are lost, they remain on the blockchain, but they remain dormant forever as there is no way for the private key or keys to be found to allow for the coins to be spent again.