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Bitcoin is the most popular cryptocurrency in the world and has the largest market cap among cryptocurrencies. It is controlled by a decentralized authority unlike fiat currencies such as USD, Euro, or Yen, which are controlled by central banks and governments. There are no physical bitcoins, all transactions happen in a digital environment, and balances are kept on a ledger called Blockchain.
How are Bitcoins created?
Bitcoins are generated by powerful computers through a decentralized process known as mining. Miners are like auditors, checking the validity of bitcoin transactions. Every confirmed transaction is added to the ledger called Blockchain. This validation process takes so much time and computing power that bitcoin mining uses more electricity annually than some developing countries. That is why the miners are rewarded by receiving bitcoin in return. If no one mined for bitcoins, we could not prevent ‘double spending’ – using the same digital token several times.
As of February 2021, there are 18,62 million[1] bitcoins mined since the launch of the bitcoin network in 2009 and nearly 2,5 million bitcoins are yet to be extracted. But not all mined bitcoins are in circulation since there are bitcoin owners who forgot their credentials or lost the hard-drive they were using to store their mined Bitcoin. In 2013, an English man accidentally threw away his hard drive where he was storing 7500 bitcoins he mined back in the early years of the crypto. These bitcoins are removed from circulation forever.
Only 21 million[2] bitcoins will be available once all the supply is mined. However, bitcoins available for mining are ‘halved’ every four years. So, less and less coins become available no matter how many people are mining. This means the last bitcoin will not be mined in the next century!
Where is Bitcoin used?
Bitcoin was initially launched as an alternative currency that will minimize transaction costs. Later it became an attractive investment option and nowadays bitcoin is accepted as a means of payment in more and more places. Recently PayPal added bitcoin as a payment method option. Many major companies such as Microsoft, fast-food chains, various airways also accept payment in bitcoin for their services. Tesla has announced that they will accept bitcoin as payment upon purchasing $1,5 Billion worth of the cryptocurrency. [3]
Trading Bitcoin CFDs
Bitcoin prices are determined by supply and demand. Put simply, when people demand Bitcoin, its price will increase. Due to the limited supply and predictable mining rate of the crypto, the demand should follow this rate and keep the price stable. But the bitcoin market is still considered small and prices can change very fast when large amounts of money get in the market, which makes bitcoin highly volatile. Recently, Tesla’s $1,5 Billion purchase caused Bitcoin price to hit $48,600, an all-time high for the crypto at that time.
Trading CFDs on the other hand may turn this volatility into an advantage for traders because CFD trading does not require owning the underlying asset. This enables traders to go either long or short with their position. Meaning, even if the bitcoin price decreases, CFD traders can still profit with their short position!
Why Trade Bitcoin CFDs Instead of Buying Bitcoin?
Bitcoin’s increasing popularity is attracting more investors every day, but many people buy this cryptocurrency without knowing the possible disadvantages of purchasing bitcoin. There are cases of stolen coins as well as legality questions. Although the decentralized nature of the cryptocurrencies can be a good thing, regulation problems raise concerns.
By trading CFDs instead of purchasing the actual crypto, traders can benefit from many advantages regular bitcoin investment can’t offer. Since traders don’t need a Bitcoin wallet to trade CFDs, they can enjoy faster execution times. Due to high competition between CFD providers, spreads are usually very tight, which is another advantage for CFD traders; and the last but not least, reliable trading platforms such as MetaTrader 4 and MetaTrader 5 allows traders to manage their accounts easily and securely. Also, these platforms allow automated trading and come with helpful technical indicators. On top of all that, CFD trading relieves traders from the security concerns that are associated with regular bitcoin trading.
What is next for Bitcoin?
Bitcoin prices fluctuated quite a lot since the first-ever bitcoin was mined by Satoshi Nakamoto (The mysterious name used by the person or the group that created Bitcoin). In its early days, bitcoin was as cheap as $0,003! In 2011, 1 bitcoin was equal to 1 USD. In November 2020, 1 bitcoin was $16,800 and in February 2021, one bitcoin was $48,600. Although prices may seem to be on a constant rise, there were sharp falls too. In December 2017, Bitcoin price rose to $19,783.06 and fell to $13,800 in the next 24 hours![4]
Some experts predict that by 2025, bitcoin price would reach and even exceed $100,000[5] as demand and adoption points to an upward trajectory. But history is full of failed currencies and only time can tell what awaits bitcoin or any other cryptocurrency in the long run. CFD traders, no matter where bitcoin ends up, can benefit from both rising and falling prices by speculating on the prince changes instead of purchasing the asset.
[1] https://www.coindesk.com/price/bitcoin
[2] https://www.investopedia.com/tech/what-happens-bitcoin-after-21-million-mined
[3] https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html
[4] https://www.coindesk.com/price/bitcoin
[5] https://www.bloomberg.com/professional/blog/bitcoin-on-track-for-100000-in-2025-historical-growth-guides/
GKFX is the trade name of AKFX Financial Services Ltd (AKFX). CFDs are complex instruments and come with the risk of losing money quickly due to leverage. 82% of retail investor accounts lose money trading CFDs with AKFX. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
