Bitcoin (BTC) is the very beginning of a new generation of decentralized digital currency created and operating only on the Internet. More than 10 years have passed since the creation of the first BTC coins, and in 2021 Bitcoin will be the most expensive and popular cryptocurrency in the world.
What is Bitcoin?
The Bitcoin (BTC) cryptocurrency is digital money, a medium of exchange and a potential replacement for a fiat currency. As of June 28, 2021, BTC is the main cryptocurrency in the world with a market capitalization of $641,537,319,000, and the price of BTC is $34,171. The main features of Bitcoin:
- Decentralization.
This currency does not have a CEO. The Bitcoin network is decentralized, all owners have the same rights, so it is peer-to-peer. The network is managed and maintained through nodes that are distributed all over the world.
- Transparency.
The system stores information about all completed transactions that were performed in it. It is stored in the form of a chain of blocks, or blockchains, in which there is data since the establishment of Bitcoin.
- Anonymity.
This feature is combined with the transparency of the system and guarantees the safety of users. Each miner or participant has the opportunity to create an unlimited number of addresses. The system uses a personal hashed address, which includes a combination of characters.
- Peer-to-peer transactions.
In the Bitcoin network transactions occur directly between the sender and the recipient. There is no need for third parties to act as an intermediary.
- Irreversibility.
It is impossible to cancel or block the transaction, which reduces the risk of fraud.
- Safety.
Since the currency is not issued by banks, it cannot be forged. But still investing in Bitcoin is associated with certain risks. The main risk, of course, is the volatility inherent in cryptocurrencies. But also do not forget about the security of storing your assets. So, the greatest concern is caused by hackers who can get access to your private key and withdraw your BTC. In addition, you should not exclude the human factor, you can forget your private key yourself. The main task of a BTC wallet is to store a private key that is needed to access the BTC address and, accordingly, your funds. But still, the best way to ensure maximum protection of your investment is to store the private key on paper or on an offline device. This method of storage is called a cold wallet. In addition, in the case of a written private key, you can add an additional layer of protection by encrypting it.
- Limited emission.
In total, no more than 21 million BTC can be mined in the world. Every year the amount of coins will be less and less. Every year it becomes very difficult to mine BTC. The quantity is decreasing, the demand is growing, thus the exchange rate is increasing.
How does Bitcoin work?
Bitcoin is a network that runs on a protocol known as the blockchain. For sometime the terms Blockchain and Bitcoin were probably synonymical, but over time, while other blockchains emerged, the terms became separate in meanings.
The basics of blockchain technology are mercifully straightforward. Any given blockchain consists of a single chain of discrete blocks of information, arranged chronologically. In principle, this information can be any string of 1s and 0s, meaning it could include emails, contracts, land titles, marriage certificates, or bond trades. In theory, any type of contract between two parties can be established on a blockchain as long as both parties agree on the contract. This takes away any need for a third party to be involved in any contract. This opens up a world of possibilities including peer-to-peer financial products, such as loans or decentralized savings and checking accounts, wherein banks or any intermediary is irrelevant.
In Bitcoin’s case, though, the information on the blockchain is mostly transactions.
A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast to the network and usually begin to be confirmed within 10-20 minutes.
Bitcoin is really just a list. Person A sent X bitcoin to person B, who sent Y bitcoin to person C, etc. By tallying these transactions up, everyone knows where individual users stand. It’s important to note that these transactions do not necessarily need to take place between humans.
However, someone should provide those transaction, and here is the point where miners enter the game. Mining is a distributed consensus system that is used to confirm pending transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all the subsequent blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively to the block chain. In this way, no group or individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.
The journey of Bitcoin
Bitcoin (BTC) was first introduced in 2008, by a legendary Satoshi Nakamoto. Though Bitcoin itself appeared only in 2008, the technologies, on which it is based were tested already in late 90’s.
By 2010’s the technology was not considered useful or significant, however such people as Hal Finney, Wei Dai and NIck Szabo have already tested it and earned some Bitcoins for mining.
The famous story about the guy who bough 2 pizzas in Papa John’s occurred during that period of time.
In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes.
The process of mass-adoption of BTC started in 2013 and is still taking place – more and more business and even big corporations (like Tesla) start accepting Bitcoin as a real currency.
Who created Bitcoin?
The developer of Bitcoin is a person or a group of people who worked under the pseudonym Satoshi Nakamoto. So, in the fall of 2008, Satoshi Nakamoto presented the concept of new digital money to the world. The main purpose of which is the absence of intermediaries and regulators, in the form of banks and financial organizations. So, in the Bitcoin peer-to-peer network, people can exchange funds 24/7/365, and no one can prohibit the payment.
Before you trade Bitcoin
Cryptocurrency is the same trading instrument as any other, so it also obeys the same trading rules as the others.
- Set complex passwords.
Everyone knows that there are hackers in the world who break everything and steal everything. And everyone is sure that this will definitely not happen to them. Don’t be frivolous! Protect the entrance to the wallet with long, reliable passwords.
- Try to have your own opinion.
Currently, there are a lot of cryptocurrency “gurus” on the market who predict the future of Bitcoin. You should understand which resources to trust, and even better, conduct your own research. From which the next tip follows.
- Learn to read charts.
Yes, it is boring and difficult, but in this way you will be able to form your trading strategy as correctly as possible. Analyze charts and market trends to prevent possible losses.
- Trade a part of your funds.
Try to avoid a situation where you use more than 5-10% of the total cryptocurrency capital. This allows you to reduce the thrill of trading and save the funds in case of unforeseen losses. If you are going to borrow funds for investment, choose only reliable and trusted service providers.
- Follow your initial plan.
For short-term investments, it is good to plan in advance the point at which you want to enter this cryptocurrency, and determine the exit points at which you will be satisfied with your profit. Do not be greedy and change your plan during investment, driven by the desire to increase profits. Profit-taking is one of the main points that even experienced investors forget about, blinded by growing quotes.
What moves Bitcoin price
The Bitcoin exchange rate is constantly changing. For example, in early October 2020, it reached about $9,000. And in January 2021, the price per one BTC coin was about $40,000. At the end of January 2021, the exchange rate again rolled back to about $32,000. But in January 2019, BTC coin was worth less than $ 3000. The all time low was set on July 5, 2013 (8 years ago) and reached $65.53. While the all-time high reached a record $64,863 on April 14, 2021.
There are few key reasons for such changes worth understanding before you start trading:
- Limited issue
The issue of BTC is limited to 21 million, of which 18,744,025 have been mined at the moment. The fewer coins left, the greater the demand for them. And the demand generates an increase in the price.
- Economic news.
In moments of scandals, the BTC exchange rate went down sharply, because traders started selling cryptocurrency of freight. Then BTC is bought up by other traders, as a result of which it becomes more expensive.
- Competition from altcoins
Bitcoin is the most important and popular cryptocurrency in the world. However, every year there are more and more altcoins seeking to improve its technical characteristics and displace it.
- Production cost
BTC miners spend a lot of money on electricity, which affects the price of the asset. In the process of the calculations necessary for BTC mining, computers consume a huge amount of energy, which also has disastrous consequences for the ecology of the planet. Given such circumstances, BTC simply cannot be cheap.
Pick Bitcoin strategy
The main characteristics of a correctly chosen strategy are high profitability and minimal risk. It is impossible to trade cryptocurrency without risk at all, since there is always a possibility of a sudden collapse of the exchange rate. Below are one of the best Bitcoin strategies, after analyzing which you can choose the one that is suitable for you:
- Scalping
The strategy can be called a classic one. The essence of this strategy is as follows: a trader enters into a large number of transactions for a short period, and then closes them after a few minutes (in some cases seconds).
- Arbitration
Simple scheme of trading on cryptocurrency exchanges. You buy BTC on one exchange at a low price and sell it on another crypto exchange at a higher price.
- Trend trading
A strategy that is based on the current trends in the crypto market. It is necessary to carefully follow the latest news about the chosen cryptocurrency and the launch of important new improvements.
- The range trading strategy
It is a fairly profitable, but difficult strategy for traders. It is necessary to determine the strong support and resistance levels within which the exchange rate moves over a long time period. When the price reaches the support level, you buy an asset, then when the price falls (the lower, the greater the profit), you sell the asset. And vice versa, when the price reaches the resistance level, you sell the asset.
- Holding
The essence of this strategy is extremely simple. You just buy BTC, and keep it on your wallet until it rises in price.
Long or short?
Are you a novice trader and trying yourself in the field of investment? Then you just need to understand in more detail such concepts as Bitcoin’s longing and shorting. You will be surprised, but you can earn money from the price going down.
Bitcoin shorting occurs when you sell an asset that you do not have (by borrowing from an exchange or a broker). The cost of the sale is credited to your account, and the coins will be displayed with a minus sign.
When the price drops to the level you need, you buy the asset, thereby returning the debt, and the difference in the amount remains in your account.
Bitcoin longing is a classic type of investment when you buy an asset with the intention of making a profit when the exchange rate rises. When the exchange rate rises, you sell the asset at a more favorable price.
If everything is clear by longing, then shorting assumes that you know how to correctly analyze the market situation, and know the nuances of technical and fundamental analysis. In the case of Bitcoin’s longing, you are unlikely to incur losses. While shorting Bitcoin is a rather risky idea for beginners, the bet may not pay off, but you will have to pay the commission. However, by knowing how to short correctly, a trader reduces his risks and has the opportunity to earn even in the conditions of a bear market.
Why should I trade Bitcoin?
In 2021, BTC remains the dominant asset in the cryptocurrency market. For a number of reasons, BTC trading is a profitable tool:
- BTC remains the top and most liquid cryptocurrency, enjoying incredible popularity among investors and traders.
- According to Digitalcoin, the price of BTC will only grow over the years, this positive forecast is also supported by Longforecast, Prime XBT and many other investors and crypto enthusiasts.
- BTC is quite easy to exchange for fiat currency, and many retail outlets and services are already introducing BTC coins as an alternative means of payment.
- The issue of BTC is limited to 21 million, at the moment the circulating supply is 18,775,931. Each time it is more difficult to extract BTC, which has a positive effect on its value.
- Many trading strategies that we have considered in our review are applicable to BTC.
What are the risks of trading Bitcoin?
Trading and investing are both associated with risk, however in terms of cryptocurrency market and Bitcoin in particular risks are generally higher, while the potential profits are equally high. Most common risk on crypto market include:
- Volatility – the price of BTC can gain and lose 15%-20% a day which makes is especially unstable.
- Fraud – while BTC provides anonymous trading, it is a great opportunity for different types of frauds or scams. Millions of dollars are being stolen everyday and cannot be recovered due to the risk №3.
- Absence of regulation – though cryptocurrency market volumes has probably hit 2$ trillion, there is no special institution to regulate it. If your cryptocurrency is lost or stolen – nobody will be able to help.
Where to trade Bitcoin?
Bitcoin is the most liquid cryptocurrency in the world, so it is not difficult to trade BTC. Depending on your requirements and wishes, you can choose an exchange or a broker. According to CoinMarketCap, the top exchanges for buying or selling BTC are:
- Binance – the most liquid platform in the world, providing a security guarantee and low fees (0.1%).
- ZBG – one of the largest exchanges in the world. A pleasant trading interface along with low fees (0.1%) is what attracts many traders.
- OKEx – one of the most reliable exchanges in the world. It has a large selection of fiat payment methods.
You can also trade profitably via the 7b crypto broker – a reliable intermediary who performs complex work for you, at reasonable and transparent fees.
How to trade Bitcoin using the 7b crypto broker app?
Using the 7b crypto broker app is the best way to buy or sell BTC. To do this, you will not need much time and effort:
- Download 7b from Google Play.
- Log in to your account and top it up.
- Select a trading pair, for example, BTC/ETH.
- Place a market order.
- Receive your crypto.
Bitcoin Trading vs. Stock Trading
| Cryptocurrency | Stocks |
| Extreme volatility | Regular volatility |
| High risks | Medium risks |
| Suitable for short-term deals | Suitable for long-term investment |
| The market works 24/7 | Markets work 5/2 |
FAQ
Is Bitcoin a good investment?
Certainly! The price of BTC is growing every year and it is the undisputed leader among cryptocurrencies. According to trusted sources (Longforecast, Digitalcoin, Prime XBT and others), the price of BTC will only grow over the years.
How do I invest in BTC?
Investing in BTC, as in any crypto asset, entails the risk of financial losses. Therefore, it is recommended not to invest more than you can afford to lose. You can invest in Bitcoin using the services of crypto exchanges. To do this, log in to your account, select a trading pair, enter the amount, and confirm the transaction. Store your BTC on a secure wallet to sell it profitable in future.
How to trade Bitcoin for beginners?
Trading always involves some risks, so it is recommended to diversify your crypto portfolio to prevent losses. Be smart about choosing cryptocurrencies for investing, so there will be more chances that if the price of one asset falls and the other rises, you will not suffer losses. On 7b, you need to sign up for your account, select BTC, choose the cryptocurrency you want to buy it with, enter the desired amount, and confirm the transaction.
How to buy Bitcoin cryptocurrency?
Bitcoin is exactly the kind of cryptocurrency that should undoubtedly be in your investment portfolio. But still, you should be careful, since Bitcoin, like other crypto assets, is extremely volatile. On 7b, you can buy BTC in a few clicks: select the desired trading pair, i.e. BTC/ETH, enter the amount, confirm the transaction.
What is Bitcoin Blockchain?
Bitcoin is the first decentralized payment system. Transactions in the Bitcoin network occur on the P2P principle. It works on the basis of the Proof-of-Work consensus algorithm.
