Bitcoin is the world’s first crypto currency, a characteristic that makes it uniquely interesting for all types of trading. Our guide explains how to trade the asset itself, which brokers allow trading with bitcoin and the best strategy for this volatile market.
Bitcoin might revolutionise the world – or it might fail within a few years. Decide for yourself, and take a position.
In this article, you will learn:
What Is Bitcoin?
Why Is Bitcoin Special?
The Disadvantages Of Cryptocurrencies
The Advantages Of Bitcoin
What Does Bitcoin Offer Traders?
With this information, you will be able to understand whether Bitcoin, or Bitcoin cash, is the right investment for you.
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Bitcoin is a crypto currency, which is a unique new type of currency that does almost everything differently than conventional currencies, for example by neglecting a central managing authority.
Conventional currencies such as the Dollar are issued by a central power such as a government. Even newly invented currencies such as the Disney Dollar are backed by one authority that instills faith in the currencies and its purchasing power.
Cryptocurrencies go a different route. There is no authority behind the currency, even its inventor Satoshi Nakamoto remains shattered in obscurity and might just be a synonym for a group of people.
Digital Currency
Bitcoins are completely digital. They exist in a long chain of information packages on computers all around the world that is constantly checked and updated (blockchain). By providing the calculating power for these operations, users can earn more coins, which is how the currency is distributed. This process is called mining.
The technical side of Bitcoin is incredibly complicated and could fill its own book, but we will keep it at that. Bitcoin is an electronic currency that is distributed through and managed by computers around the world and not backed by a central authority – that’s all you need to know.
Accept Bitcoin
Since 2015, more than 100,000 merchants worldwide accept Bitcoin. Among them are such major players as Microsoft, Dell, and Paypal. Bitcoins is not the accepted currency of a country or an area, but it is a niche product that has found significant influence around the world. Bitcoin has become a currency that can do the same things as conventional currencies but still is fundamentally different.
Bitcoin and crypto currencies are the third waves of currency types, decentralising currencies, which has a significant effect on how the currency works.
Until the 1970s, most currencies used the gold standard and defined a fixed exchange rate between the currency and gold. After money was no longer backed by gold, it was backed by the belief in a government’s or an authority’s ability to pay its bills. When we exchange Dollars into Euros or Disney Dollars, we do so believing that the authority behind the currency guarantees its value and purchasing power.
With cryptocurrencies such as Bitcoin, this system no longer exists. The system is backed by the faith in the system itself and by the faith in other people who believe in the same system. Bitcoin decentralises money, which has advantages and disadvantages, depending on what you expect from a currency. There is no central bank and no government behind the currency; it is based on the faith of the people.
Trading Fundamentals
Additionally, this currency is free from fundamental influences. Its exchange rate is solely determined by supply and demand.
Conventional currencies experience strong fundamental influences. For example, when a government prints a lot of money, the supply of the currency will increase and the price will drop. When a government increases the base rate, credits become more expensive and savings more attractive, which leads to lower supply and an increase the currency’s price. Such fundamental influences are strong and can change unexpectedly, which adds a strong sense of uncertainty for traders.
Since Bitcoin lacks a central authority that manages the currency, there are no such fundamental influences. The rate at which new coins are issued is predetermined and self-adjusting. If more people mine new coins, the number of new Bitcoins per operation decreases to keep the overall amount of issued money constant.
The only factor influencing the price of a cryptocurrency is supply and demand. This is a unique property no other currency can match.
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