Bitcoin was the first cryptocurrency, and its creation paved the way for the multi-trillion dollar cryptocurrency market that exists today.
Read on to understand everything a trader needs to understand to get started with Bitcoin, including how to use it to make payments and how to include it in an investment portfolio.
What is Bitcoin? How does this work?
Bitcoin is a digital currency system introduced in 2009 by the pseudonymous programmer Satoshi Nakamoto.
Bitcoin, in its most basic form, can be seen as money that only exists on the internet.
Setting up a cryptocurrency wallet and buying Bitcoin on a cryptocurrency exchange are the two steps required for anyone with internet access to participate in the Bitcoin network.
Henceforth, individuals will no longer need the services of a financial intermediary such as a bank or online payment provider to securely store, transfer and receive money over the internet.
Writing about Bitcoin in a white paper published in October 2008, Satoshi Nakamoto called it “an electronic payment system based on cryptographic proof instead of trust.”
For this reason, Bitcoin-related transactions do not require the involvement of a financial intermediary. Instead, Bitcoin transactions are recorded on a distributed public ledger known as the blockchain, which allows anyone to review and verify the legitimacy of each transaction.
The Bitcoin blockchain is decentralized, meaning it is not under the authority of a single organization or individual. Transactions must be confirmed by miners who are members of the Bitcoin network before being published on a public ledger known as the blockchain.
How to trade with Bitcoin?
Bitcoin trading allows traders to predict which direction the cryptocurrency’s price will move. Active traders can find their niche in swing trading and Bitcoin day trading.
Bitcoin traders have the option of buying and selling through cryptocurrency exchanges or online brokerages through cryptocurrency contracts for difference (CFDs). These CFDs allow traders to speculate on whether the price of Bitcoin will rise or fall.
Follow the steps below to start trading Bitcoin:
Do some research on Bitcoin price changes.
Develop your own trading strategy for Bitcoin.
Choose a cryptocurrency trading platform or exchange to trade Bitcoin.
You can fund the account with traditional currency or cryptocurrency.
Implement a trading strategy for Bitcoin.
Keep track of trades and focus on them to improve your trading approach.
Advantages of Bitcoin
Although Bitcoin was launched in 2009, it is still considered a relatively new type of currency. Along with this perception comes many misconceptions.
Discovering the advantages of Bitcoin can help you determine whether it is a good investment choice for you.
Transparency
Unlike conventional currencies, Bitcoin’s monetary policy, transaction processes, and underlying technology are open to public scrutiny. The legality of any transaction can be easily verified at any time.
Low cross-border fees
One of the most common applications for Bitcoin is international money transfers, as transaction fees are significantly lower than those associated with wire transfers and other forms of money transfer.
This development has the effect of making the world a borderless place, as merchants no longer need the services of an intermediary to conduct international financial transactions.
Safety
Because of the obvious economic benefits built into Bitcoin to encourage good behavior on the network, Bitcoin is nearly impossible to hack because it was designed with these incentives in mind.
Accessibility
Bitcoin is open to anyone and everyone who wants to use it. There is no limit. Bitcoin transactions can be sent and received at any time from anywhere in the world.
Potentially high returns
Bitcoin has had stronger returns than other assets over the past decade, and due to the limited supply of bitcoin and the growing demand for the cryptocurrency, its value has the potential to continue to rise.
Disadvantages of Bitcoin
If you are wondering whether it is worth investing in Bitcoin, you should know that despite the rapid growth of Bitcoin and the increasing number of people using it, this cryptocurrency has several disadvantages that should be considered.
When considering whether Bitcoin is a worthwhile investment, just like when you make any other financial decision, it’s important to have as much information as possible.
Variability
In a very short period of time, the price of Bitcoin is prone to a series of sharp increases and decreases in value. Paying using Bitcoin can be difficult because the person receiving the Bitcoin payment will not know how much value they will receive.
Additionally, during market corrections, Bitcoin investors can see a loss of 50% of their initial investment in the cryptocurrency.
Bitcoin is not widely accepted
Currently, there are only a limited number of retail establishments that accept Bitcoin as payment for general merchandise. El Salvador is currently the only country in the world that officially recognizes Bitcoin as a form of currency.
Hacking Risks
Bitcoins owned by traders are the responsibility of those traders. Traders run the risk of having their Bitcoins stolen by fraudulent brokers if they do not have a solid understanding of how to properly store Bitcoin.
The result
So, is investing in Bitcoin a good idea? Even though cryptocurrencies and Bitcoin in particular have many positive aspects, many people still see it as a risky venture. Investing in Bitcoin, like any other type of investment, requires extensive preparation and research beforehand.
Exploring the list of pros and cons of Bitcoin is just the beginning of the process. It is another good idea to study the workings of cryptocurrencies and crypto wallets, the degree of accessibility of the market, as well as the assumptions and risks associated with it.
If you decide to invest, remember that there are various tools at your disposal that can help you track your Bitcoin and other cryptocurrency holdings.
Disclaimer: the information contained herein is provided without regard to your personal circumstances and should therefore not be construed as financial advice, investment advice or an offer or solicitation of any transaction in cryptocurrencies.
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