What is Bitcoin and How Do You Trade It?

Bitcoin (BTC) was launched in 2009 with a net worth of $0. In two years, it hit the level of $1 for the very first time. Ten years later, the price of Bitcoin would hit almost $60,000. Here are other interesting facts about the Cryptocurrency:

• Bitcoin has a global market cap of $750 billion, as of August 2021
• In the first quarter of 2021, global daily Bitcoin transactions hit an all-time high of 367,536.
• Between 2012 and 2020, Bitcoin has gained over 193,639.36%

BTC is now one of the most sought-after Cryptocurrencies for investors. The main reason is its long-term, liquid, and reliable store value. Since Bitcoins are available in a limited amount, it is impossible for the authorities or any external parties to dilute its value via inflation and interest rates, further attracting traders and investors to acquire the digital currency.

If you still haven’t dived into Bitcoin trading, then it's time to consider entering the market. Let’s get into more details about what Bitcoin is and how it works.

What is Bitcoin?

Bitcoin is an intangible digital currency, which is completely virtual with no paper form. It can be used to buy services and products around the globe, wherever it is accepted.

It is independent of any government or central bank and its transaction records are maintained transparently. Over 900 Bitcoins are mined every day. As of now, 18.7 million Bitcoins have been mined, leaving less than three million left to be mined.

Every Bitcoin has private keys printed inside them, which define its worth. The keys allow you to access Bitcoins and protect you against user theft and unauthorized fund access. Bitcoin balances are available in a blockchain. This blockchain serves as a public ledger that is accessible to everybody.

A blockchain refers to a record-keeping system for all Cryptocurrencies that you trade. It maintains your identities anonymously and keeps a record of all genuine transactions that occur between you and other traders. The idea behind the blockchain is to track all of the Bitcoins in the market.

How do you trade Bitcoin?

Trading Bitcoin using Contract for Differences (CFDs) enables you to speculate on the prices of Cryptocurrency without having to buy it. It lets you take advantage of its fluctuating price for a specific period. By trading BTC using CFDs, you also need to pay a margin of its actual value.

Bitcoins are traded against regular currencies as pairs. For example, if you want to trade Bitcoin against the US Dollar, it will be traded as BTC/USD.

When you trade Bitcoins through CFDs, you are not required to have a Bitcoin wallet. The broker you are trading with takes the prices of Cryptocurrency from the most reliable exchanges and gives you the opportunity to take advantage of the underlying price difference.

Since you trade Bitcoin without owning or purchasing it, you do not have to worry about any security-related issues that may come with Cryptocurrencies. This process allows you to benefit from Bitcoin trading when the total amount of Bitcoin CFD that you own moves up.

Over the last five years, Bitcoin has witnessed a substantial rise in its price. That being said, if you invested in Bitcoin CFDs in January 2016 at $378.17 per Bitcoin, by putting in a margin amount, you would have reaped $58734.48 in March 2021 for just a single Bitcoin CFD.

For example, Bitcoin’s price against the US Dollar is $1,000/1,050. Suppose you buy 1 Bitcoin CFD for $1,050. Since a single CFD is worth a single Bitcoin, your position equates to $1,050.

Now, let us assume that the prices increase by $500. The new price is now $1,500/$1,550. You close the position at $1,500, making a profit of $500 straight away.

However, if Bitcoin prices fall by $500, to $500/$550, your position size would decrease to $500. When you exit your trade at this level, you would lose $500.

What are the benefits of trading Bitcoin?

1. Trading through CFDs

When you trade Bitcoin through CFDs, you can take advantage of the difference between Bitcoin’s price by the time you open a position and its price at the termination of the contract. Hence, you do not lock in the actual values of Bitcoin but you can still benefit from its fluctuating prices.

2. Using leverage

Trading with leverage allows you to take a position with less capital in hand. Leverage means you use borrowed funds to expand your trading position beyond your initial capital holding. By using leverage for Bitcoin trading, you can get the chance to make evident profits even with small price changes.

3. Hedging risk

You can hedge the risk that comes with trading adverse price movements of Bitcoin by opening multiple positions to offset losses from other trades. If you think closing a position is too drastic of a move, you may consider reducing your position size for now.

4. User autonomy

Unlike other assets like Currencies, Share CFDs, and Commodities, Bitcoin is not issued and regulated by any government authority or central bank systems. This means that it is not directly influenced by a country’s economic health, interest rates, and inflation. The independence it offers from monetary and fiscal policies gives traders more control over how they want to trade and invest their Bitcoin.

Trade Cryptocurrency CFDs today

Most cryptocurrencies, especially Bitcoin, have witnessed rising prices in the last few years. The profits that can be made from investing in BTC are immense, and the trend it is following recently makes it an even more promising investment for the future.

Blueberry Markets allows you to trade Cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Ripple against the US Dollar through CFDs. Sign up for a trading account today to start trading BTC/USD.