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Your guide to trading Bitcoin (BTC)

Capital.com’s guide to trading Bitcoin (BTC): Everything you need to know on how to trade Bitcoin
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Why is Bitcoin important to traders?

Launched in 2009, Bitcoin was the first decentralised cryptocurrency. It is the leading cryptocurrency in terms of market capitalisation as well as the most expensive. Bitcoin comprises approximately half of the total cryptocurrency market cap.

Bitcoininfo

Bitcoin trading hours

You can trade Bitcoin CFDs on Capital.com 24/7.

How to start trading Bitcoin CFDs: Investing in Bitcoin CFDs and buying vs. trading Bitcoin CFDs

You have two options when trading in the cryptocurrency market. Firstly, you can buy actual cryptocurrency on exchanges, such as purchasing Bitcoin on an exchange like Bitstamp. This way, you own the Bitcoin yourself. This is considered a long-term investment, as you are waiting for the price to rise significantly so you can sell their crypto coins on an exchange.

Alternatively, you can trade a contract for difference (CFD) on a particular cryptocurrency, and speculate on the price difference. A CFD is a financial instrument or a contract, typically between a broker and an investor, where one party agrees to pay the other the difference in the value of a security – often known as the Buy/Sell spread. You can either hold a long position (speculating that the price will rise) or a short position (speculating that the price will fall). This is considered a short-term investment, as CFDs are usually used within shorter timeframes. For instance, when trading Bitcoin CFDs, you are also speculating on the rise and falls of the BTC/USD pairing.

There are pivotal differences between buying a cryptocurrency and trading a CFD in a crypto market. When buying cryptocurrency, it is stored in a wallet, but when trading CFDs the position is held in your trading account, which is regulated by a financial authority. You have more flexibility when you trade using CFDs because you are not tied to the asset; you have merely bought or sold the underlying contract. Additionally, CFDs are a more established and regulated financial product.

What is Bitcoin? What is cryptocurrency?

Bitcoin was the first decentralised cryptocurrency, which was launched in 2009 by an individual or group using the pseudonym Satoshi Nakamoto, and it has since paved the way for many other cryptocurrencies. Indeed, it was Bitcoin that shaped the cryptocurrency market as we know it today.

Cryptocurrency is stored in a ‘wallet’, which can take various forms. For instance, Bitcoin can be stored in an online or offline electronic wallet.

A cryptocurrency is a digital asset conceived for use as a medium of exchange, which uses cryptography to secure transactions, control the supply of additional units and corroborate transfers. In short, cryptocurrency is a decentralised electronic currency.

Why trade Bitcoin CFDs with Capital.com

Advanced AI technology at its core: a Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative SmartFeed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos, articles, news to polish your investment strategy.

Trading on margin: providing trading on margin (up to 1:2 for cryptocurrencies), Capital.com gives you access to the cryptocurrency market with the help of CFDs.

Trading the difference: when trading a Bitcoin CFD, you don’t buy the underlying asset itself, meaning you are not tied to it. You only speculate on the rise or fall of its price. CFD trading is nothing different from traditional trading in terms of strategies. A CFD investor can go short or long, set stop and limit losses and apply trading scenarios that align with his or her objectives.

All-round trading analysis: the browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. Capital.com provides live market updates and various chart formats, available on desktop, iOS, and Android.

Focus on safety: Captal.com puts a special emphasis on safety. Licensed by CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

History of Bitcoin

Although Bitcoin was first launched in 2009, it wasn’t until 17 March 2010 that the first Bitcoin exchange started operating on the now-defunct BitcoinMarket.com. Later that year, in May, Laszlo Hanyecz made the first real-world transaction by buying two pizzas in Jacksonville, Florida for 10,000 BTC.

Bitcoin price history

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Bitcoin hit the $1,000 mark in 2017, 7 years after it was first exchanged. But by May that year, Bitcoin surpassed the $2,000 mark. By September 2017, the Financial Conduct Authority (FCA), the UK financial regulatory body, had issued a warning to consumers, and JP Morgan CEO Jamie Dimon claimed that Bitcoin is a “fraud”. In December 2017 Bitcoin passed the $20,000 mark, before falling back around 17-18%. After the unprecedented boom in 2017, Bitcoin suffered a crash between January and February 2018, where the price fell as low as $6,510. It has been relatively stable since the crash.

Common FAQ

A ‘bubble’, in market terminology, is where the price of an asset far exceeds its intrinsic value. For instance, the dot-com bubble that occurred between 1995 and 2001 is a prime example, where firms in the information technology industry saw their stocks rise — merely because of the market sentiment around that particular industry, irrespective of their profits or chances of succeeding. This market then crashed in March 2000.

The problem here is that it is hard to determine the value of cryptocurrency to begin with. Although a lot of investors are holding cryptocurrencies as if they were equities, they are not. Yet they do not particularly act like currencies either, which makes comparisons to currency valuations difficult. However, as with any new technology, caution is advised. It could well be the case that the valuations of Bitcoin or Ripple are not overvalued, and that the bubble, if there is one, is represented by the various new cryptocurrencies that are being driven by market sentiment. Arguably, this is comparable to the dot-com instance – where stocks like Amazon were not overvalued, but others like Pets.com, which went from IPO to liquidation in 268 days – clearly were. So, it seems that only time will tell whether the market is overheating, but in either case, there are options to trade using CFDs to take both long and short positions.

From late 2017 to early 2018, there was a surge in the price of Bitcoin (reaching $20,000 per Bitcoin), followed shortly behind by other cryptocurrencies. The market then crashed between January and February 2018, and Bitcoin free fell, dropping 65% in value. Consequently, most other cryptocurrencies crashed as well. So there clearly was a bubble in the crypto market. The question that this begs is whether there still is one. The value in most cryptocurrencies is derived from their potential; how they could be used to advance society in the future. Without institutional acceptance however, the potential value, will remain merely potential, but whether this implies that cryptocurrencies are overvalued is another question.

Before buying Bitcoin, you will need a place to store it. This is what a wallet is for, and it consists of two elements: a private key and a public address. A wallet requires a private key, specific to the individual, that enables access to the Bitcoin address stored in the wallet, which is also the public key. The wallet is what enables Bitcoin, or any cryptocurrency, to be a secure medium of exchange. Essentially, people can send Bitcoins to certain wallets using the public key, which only the individual can access with their private key. Some individuals choose to keep their coins in their wallet provided by their cryptocurrency exchange, due to the fact that a lot of exchanges have mobile apps that allow people to easily buy, sell and spend cryptocurrencies.

Cryptocurrency exchanges or online wallets are far from immune to the dangers of cybertheft. The infamous case of the Mt Gox Bitcoin exchange highlights this. Historically, Mt Gox was the largest global exchange for Bitcoin, until it declared bankruptcy in 2014 after its security had been compromised. Mt Gox had 850,000 Bitcoins, valued at $450 million in February 2014, before their exchange was emptied by hackers. It is believed that the private keys of Mt Gox’s digital wallet were stolen from as early as 2011. These risks are avoided when trading bitcoin CFDs because you do not need a wallet.

The 2018 crypto crash was the biggest sell-off of most cryptocurrencies in the history of the market. From 6 January to 6 February, Bitcoin fell about 65%. Consequently, nearly all other cryptocurrencies crashed. The cryptocurrency market capitalisation lost at least $342 billion in the first quarter of 2018. Bitcoin peaked at the $20,000 mark in December 2017, with most other cryptocurrencies peaking shortly after. There were several shocks that ultimately contributed to the cryptocrash: the Bitcoin price depreciated by about 12% after the Attorney General for the South Korea announced a move to ban crypto exchanges from issuing new trading accounts. Later that month, Coincheck, a Japanese Bitcoin wallet and exchange service, was hacked and approximately 500 million NEM tokens (worth $530 million) were stolen, making this the largest crypto hack to have occurred.

Bitcoin Cash is a cryptocurrency that is a hard fork of Bitcoin. A hard fork is a radical change to the technology underlying Bitcoin: blockchain. In the case of Bitcoin Cash, the blocks in the blockchain were doubled in size to allow Bitcoin Cash to process transactions quicker and cheaper. It was created by a group within the Bitcoin community in order to re-establish Bitcoin’s promise of peer-to-peer electronic cash. Bitcoin Cash is the fourth biggest cryptocurrency in terms of market capitalisation.