The popularity of cryptocurrencies has recently increased. It is noticeable also on Olymp Trade. More and more people are interested in them, especially bitcoin. Many have succeeded in trading cryptocurrencies. Let’s take a closer look at bitcoin. You will learn what it is and how it all works.
Key Takeaways🔑
| →Bitcoin is a decentralized digital currency, that operates on a peer-to-peer network and doesn’t depend on central banks. |
| →Bitcoin’s high volatility allows traders to potentially benefit from significant price changes. |
| →Trading Bitcoin on Olymp Trade is facilitated via CFDs, allowing trading without owning the asset. |
Contents
Bitcoin – what is it?
The first thing you should know is that there is a slight difference between Bitcoin and bitcoin. Bitcoin with capital letter B corresponds to technology. Bitcoin with a small b refers to digital currency.
The easiest way to describe bitcoin is to say this is a digital currency that is absolutely paper-free. There is a dedicated encrypted peer-to-peer system that can secure bitcoin on a computer. And this is the only way.
Bitcoin is a new kind of asset. It can be characterized as unpredictable and volatile what means that its price changes considerably in a short timeframe.
Bitcoin – how does it work?
After you understand how bitcoin works, you will be also capable of trading other cryptocurrencies. The main thing is they are decentralized. Traditional currencies work with banks. Digital currencies do not.
Bitcoin is totally different. It is a decentralized digital currency. It is not printed by a central bank like fiat currencies. Bitcoins are generated as a reward in the process called mining. Transactions are decentralized, so money can be sent directly from person A to person B within a peer-to-peer bitcoin network. Every single operation is verified by this network of connected computers through advanced cryptography and then stored in a ledger called the blockchain.
Bitcoin – why should you trade it?
Obviously, any trader is particularly keen to invest money where he will see high chances for a big profit. Bitcoin is a quite new asset, still very promising. As mentioned earlier, it is unpredictable and volatile, but despite the risk, there is still much to do with it.
High volatility.
Basically, all the other assets and conventional currencies depend on the economy of the country. Bitcoin does not. It is independent of the government and unpredictable. But high volatility is only its feature and knowing it allows you to use it to your benefit. You can trade in a short time, yet make big profits.
Transaction currency.
Together with popularity bitcoin has become useful. Nowadays we can pay in bitcoins like it was any other currency. There are more and more places where you can use bitcoin as a payment method. You can transfer bitcoins to other individuals as well. Just be careful and check always, if the service charges any commissions or fees.
Bitcoin – what is the price?
There is no fixed price and, as said before, it doesn’t rely on the country’s economy. The supply of bitcoins is limited to 21,000,000. This simple fact puts bitcoin in the group of limited amount assets similar to precious metals or land, where everyone knows that those goods are limited. So what is it that influences bitcoin’s price? User’s demand. The more people buy it, the bigger demand and at the same time the price. Analogically, when fewer people buy it, the demand decreases and the price falls.
How to get bitcoins?
Buying bitcoins is not that complicated as you may think. With today’s technology is actually as simple as signing up for the e-wallet and cryptocurrency exchange platform. As soon as you are registered, you may deposit the money for investment. You simply use your credit or debit card for that. And then you buy bitcoins the same way you are buying conventional currencies.
After buying bitcoins, store them and wait until the price rises. You can easily keep your digital money with an e-wallet as it provides a secure store. When the price reaches a satisfactory level, you may resell bitcoins in exchange for any traditional currency you choose.
The contract for difference on bitcoin.
On the Olymp Trade platform, you can trade bitcoins through digital financial derivatives, or CFD. It means you can trade bitcoins without owning them. CFD stands for contract for difference. So instead of registering in a cryptocurrency exchange and signing up for an e-wallet, you can trade BTC with Olymp Trade. With CFD it is easy, you simply buy or sell depending on your prediction.
There is a leverage tool available on CFD called Multiplier. What it does is multiplying your money so you can invest more than you actually have. If you, for example, have $20 and decide on the leverage of times five, you are able to invest $100. Just be careful with this tool, because the same way it can bring you massive income, it can take you down.
👍Pros and Cons👎
Pros:
- Decentralization: Bitcoin operates on a peer-to-peer network and isn’t controlled by any government or central bank.
- Variety of Uses: Apart from trading, Bitcoin can be used as a method of payment in many places worldwide.
- High Volatility: Despite being a risk, high volatility can present significant trading opportunities.
Cons:
- Risk: The high volatility of Bitcoin means it’s possible to experience significant losses.
- Regulation: Bitcoin and other cryptocurrencies face potential future regulation that could impact value and usability.
- Understanding Complexity: Fully understanding Bitcoin and blockchain technology can be challenging for beginners.
| Bitcoin Trading Element | Description |
|---|---|
| Decentralization | Bitcoin operates on a peer-to-peer network, making it independent of governmental or banking influence. |
| Volatility | Bitcoin’s price can experience significant changes in a short timeframe, providing potential opportunities for traders. |
Why Olymp Trade is the best choice for trading bitcoin?
The best of tools.
You are now aware of the fact that bitcoin is highly volatile. You need to make it an advantage for you and at Olymp Trade you get the best tools for that. Chart layouts, available technical indicators, detailed history quotes, expert market analysis to name just a few. But you may be most interested in market updates, which Olymp Trade offers too.
Customer support available 24/7.
Other traders’ experiences are very valuable and Olymp Trade is making sure you join a community of them with a similar mindset. You will learn from each other, you will exchange opinions, you will share your doubts and successes in trading. And you can do it all without leaving the trading room.
Here is the basic knowledge about bitcoin itself and trading it at the Olymp Trade platform. For more about the digital currency, please check our guide to bitcoin trading. And be kind to leave your feedback in the comments section below.
Wish you a great experience!
FAQs
- What is Bitcoin?
Bitcoin is a decentralized digital currency that operates on a peer-to-peer network. - Why is Bitcoin volatile?
Bitcoin’s volatility is primarily due to its relatively small market size and the fact it’s still an emerging technology. - How can I trade Bitcoin on Olymp Trade?
You can trade Bitcoin on Olymp Trade using CFDs, which allow you to speculate on Bitcoin’s price movements without owning the asset. - What is a CFD?
A Contract For Difference (CFD) is a type of derivative that allows traders to speculate on the price movements of an asset, in this case, Bitcoin, without owning the asset itself. - What are the potential risks of trading Bitcoin?
While trading Bitcoin could offer significant potential gains due to its high volatility, it also carries considerable risk. Traders could face substantial losses, especially if they use leverage.