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WHAT IS CRYPTOCURRENCY?
Let’s not go into details about complicated technical matters and try to figure out what a cryptocurrency is and how it works.
A cryptocurrency is digital or virtual money which is an alternative to fiat money. A striking feature of a cryptocurrency is its decentralized nature that makes it resistant to government interference or manipulation.
In contrast with conventional money, the amount of virtual money is strictly limited. It is impossible to issue an infinite number of digital tokens. For this reason, a cryptocurrency is mostly compared with precious metals but not with the US dollar or euro.
HOW DO CRYPTOCURRENCIES WORK?
- The core principle of cryptocurrencies is the blockchain technology which is used to store an online ledger of all the transactions that have ever been conducted. All blocks are connected to each other and safely protected.
- Any bitcoin transmission is instantly recorded on a public ledger. Every user is able to keep track of his/her transactions by means of public and private keys.
- The blockchain is freely available to people. This technology allows users to buy and sell goods without involvement of third parties, for example, banks.
- Balances in bitcoin are kept in digital wallets, using public and private keys which are long strings of numbers and letters, generated through the unique encryption algorithm.
- Digital currencies are easily exchanged for fiat money. Besides, cryptocurrencies have won favor with investors as lucrative assets. Availability, low transaction costs, and anonymity are widely viewed as a new standard of financial operations. The blockchain technology has been robustly used in various fields of activities.
WHAT IS BITCOIN?
Bitcoin is the first decentralized digital money. This cryptocurrency was created in 2009. It was originally mentioned on October 31, 2008 when a person who calls himself Satoshi Nakamoto and who is considered to be a founder of Bitcoin published an article under the title Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin gave a start to the whole new era of cryptocurrencies. Subsequently, the first block and the first 50 bitcoins were generated. Then, the first transaction and the exchange for fiat money were conducted. On April 25 2010, 1,000 bitcoins were sold officially for the first time. At that time, bitcoin was valued at 0.3 cents. Since then to late 2017, the bitcoin price skyrocketed above USD 19,000.
Miners all over the world generate bitcoins. Millions of computers perform certain operations on a daily basis, creating new blocks and recording transactions. Along with that, the system is regulated in such a way that a particular predictable number of bitcoins is created. The amount of bitcoins is strictly limited to 21 million coins – this is why it is called digital gold.
In 2016 and 2017, trading bitcoins has been growing quite popular with retail traders and major investors. The leading trading floors such as CME Group and CBOE Global Markets have already introduced trading futures on bitcoins. Bitcoin is the most sought-after digital currency. It has been recognized as a tradable asset and has become an integral part of the global financial system.
HOW DOES BTC WORK?
HOW TO TRADE BITCOIN?
Traders can earn from fluctuations of the bitcoin price even without buying the cryptocurrency. As an alternative, a trader can buy a contract for difference (CFD) on the bitcoin price. As long as the contract is kept open on your account, you will gain the same profit provided that bitcoin rises in value as if you owned the cryptocurrency. The only condition is to make the right forecast for a direction of the bitcoin price.
Despite being a new asset on Forex, here are several recommendations which will give an insight into trading this popular cryptocurrency. First and foremost, bitcoin is highly sensitive to news. Interestingly, this instrument does not depend on macroeconomic data from the US. However, bitcoin instantly responds to news about cryptocurrencies. So, before opening a position, a trader should take notice of massive investment by large companies, cyber-attacks on cryptocurrency exchanges, and remarks from central banks and state authorities. Choosing a strategy, be sure to opt for a simple trading system. Money management and stop loss are certainly out of the question.
If you are a newcomer to financial markets, make sure you get to know analytical recommendations before opening a position. For instance, InstaForex analysts post reviews and forecasts for bitcoin on a daily basis.
To sum it up, trading bitcoin is not a highly complicated matter. Changes in the bitcoin price do not depend on an increase or decline in the US dollar versus other currencies. Day after day, this cryptocurrency attracts more and more attention in the world of finance. An investment portfolio of traders has been recently complemented with bitcoin. What we are witnessing now is the dawn of the digital currency market. Seize a chance to benefit from it!