Explaining cryptocurrencies: What is Bitcoin?

Wednesday Nov 29 2023 07:56

Duration

3 min

  1. 1. What is driving Bitcoin valuations so high?

  2. 2. How is Bitcoin traded?

bitcoin trade.jpg

Bitcoin is the world’s most popular cryptocurrency.

Since its inception in 2009, it has taken huge strides in both popularity and price.

It is a digital currency, created, stored, and traded online using blockchain technology. It can be used as payment for online transactions, with many predicting Bitcoin could become the future of currency as the 21st century progresses.

There are no physical Bitcoins. Instead, supply has been limited to 21 million digital coins, available online via blockchains. They are sold via exchanges, similar to other commodities, but are also traded via derivative products like CFDs.

Its accessibility and divisibility mean Bitcoin is available to many investors, despite its supply. This can affect price movements, despite comparatively low overall supply. 

2020 was a very good year for Bitcoin. Its value skyrocketed, with valuations breaking over $36,000 in December. Its highs continued into 2021, when Bitcoin reached a new valuation of above $42,000 – an all-time high.

At the time of writing, Bitcoin was valued at $35,418 per coin, showing the volatility all cryptocurrencies are subject too.

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What is driving Bitcoin valuations so high?

It’s a classic case of supply vs. demand. Investors and traders see great potential in the crypto, thus prices are hitting new highs.

Bitcoin is becoming more popular with major investment firms and companies like PayPal have started to accept it has a legitimate payment option on their platforms. 

Elsewhere, major investors have thrown their lot in with Bitcoin.

40% of millennials also said they would consider investing in Bitcoin to guard against any future recession. 

Investors see it as a potential hedge against inflation that could come from Covid-19 stimulus packages. 

Others see Bitcoin as a safe haven play like gold.

How is Bitcoin traded?

Bitcoins are sold via exchanges for investors looking to purchase the coins. Bitfinex is the US’ largest Bitcoin exchange with Coinbase and Kraken other popular exchanges. 

It is very accessible and can also be divided up into smaller individual units. The smallest tradeable unit is 0.00000001 of a Bitcoin – called a “Satoshi” after the pseudonymous developer behind Crypto the crypto.

Traders are turning to derivatives to trade Bitcoin, using products like CFDs and futures. These are available to trade via markets.com – but please be aware trading any CFDs or assets contains risk of capital loss. Only trade if you can afford any potential losses.

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