Not so long ago, Bitcoin – the first and still de facto cryptocurrency in the world, was nothing but a pipe developer’s dream. Rewind to 2021, and digital currency is now a class of assets worth billions of pounds.
Not only can you buy, sell and trade Bitcoin on independent cryptocurrency exchanges, but the asset class now has a fully regulated, regulated futures market.
Note that while bitcoin trading is becoming increasingly popular in the online space, it is still a very speculative and unstable asset. In fact, it is not uncommon for cryptocurrency to rise or fall in value by more than 10% in one day.
However, if you want to discover how you can start your cryptocurrency investing career with your right foot – be sure to read our detailed Bitcoin Trading Guide . Within it, we cover details of how bitcoin trading works, what risks you need to consider, how you make money, on which platforms you need to trade and much more.
What is Bitcoin?
before we delve into the specifics of digital currency trading, let’s make sure we understand what Bitcoin really is. In its most basic form, Bitcoin is a cryptocurrency created by an anonymous developer in 2008. The basic technology is called “blockchain” and allows the Bitcoin system to function in a “decentralized” way.
In layman’s terms, this means that no person or authority controls the Bitcoin network, nor does it support any government or central bank. In contrast, transactions are confirmed and confirmed by “miners”. Anyone can become a bitcoin miner as long as they have the necessary hardware device.
In exchange for contributing to excess electricity, successful miners are rewarded with Bitcoin. Bitcoin as a currency is virtual, which means that it does not exist in a physical form like the pound or the US dollar. Instead, all transactions and account balances are kept on a blockchain – which is not only immutable to threats of abuse, but allows for anonymous, fast and cheap transfers.
In this regard, the main case of use in between so far has been for speculative means. That is why it is now a multi-billion pound asset class that can be traded by both retail and institutional clients.
What is bitcoin trading?
If an asset has value, there is probably a market to trade. Whether it is oil, gold, wheat, sugar or grain – most commodities that have value investors can buy and sell – with the primary goal of making money. This concept is no different in the case of Bitcoin and other cryptocurrencies.
As such, you can now trade BItcoin in the same way as any other asset class. In this regard, trading Bitcoin is also somewhat similar to trading Forex, in that you will trade Bitcoin against another currency. It can be fiat currencies like GBP, USD or EUR, or against alternative digital currencies like Ethereum and Ripple.
Similarly, if you want to trade your bitcoins against the US dollar, you can do so on your chosen cryptocurrency exchange. Another option is to withdraw your Bitcoin into your private wallet for safekeeping. This option is for those who want to invest in Bitcoin in the long run, with the hope that it will be worth much more in the future.
Trading CFDs on Bitcoin
If you are a seasonal investor who wants to access the Bitcoin space on a daily basis, we recommend that you consider CFDs (contract for difference). CFDs allow you to speculate on the future price of an asset without having to own or store it. Not only CFDs are available in the Bitcoin arena, but also almost every existing asset class that is traded.
Whether it’s stocks and stocks, gold, oil, natural gas or the S&P 500 – CFDs allow you to trade funds with a single click. The benefits of trading Bitcoin through a CFD broker are abundant. First and foremost, unlike independent cryptocurrency exchanges, the CFD brokerage industry is a strictly regulated battlefield.