A Beginner’s Introduction To Bitcoin Trading

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2017 has been a good year for cryptocurrencies. Whereas there have been very many initial coin offerings and cryptocurrencies, the undisputed champion is the bitcoin. A lot of buzz and hype surrounds this currency. Potential investors are still confused on what actually bitcoins are and how useful they are. People are confused as they do not know whether this is a once-in-a-lifetime opportunity or whether the bitcoin bubble will ultimately burst. With this confusion in mind, this article tries to give people a glimpse into what bitcoin trading is all about.

What is a bitcoin ?

A beginner’s introduction to Bitcoin tradingA bitcoin refers to a certain type of cryptocurrency. A cryptocurrency is a digital currency where complex computer encryption techniques are used in the regulation of currency generation, transfer of funds and operates independently without the influence of a central bank. You might think of a bitcoin as a digital currency that two parties can use to complete a transaction, where the transaction does not involve any middleman. Simply put, digital currencies allow two parties to transact directly without any intermediary. Since digital currencies are powered by blockchain technologies, they usually don’t have any transaction costs.

Blockchain technology

A blockchain refers to a distributed ledger whose operations are decentralized. Several parties can simultaneously access the ledger. Once a transaction is successful, it gets recorded on a block. When the memory of a block becomes full, it is successfully added to the end of the ledger blockchain technology. This addition makes the transaction permanent in the database of blockchain transactions. Here, all the transaction details, such as the time and the amount, are recorded. However, the personal details of the transacting parties are not recoded.

This blockchain technology can be used in other different applications as well. It records all sorts of data and information. Block technology is being used to record huge amounts of information such as financial trade information, supply chain information and proxy voting information. Blockchains are monitored by computers that are connected to a network called nodes. Nodes receive downloaded copies of blockchains after joining the network. For every successful transaction, each node independently records and verifies it. This is information is then secured permanently and cannot be altered.

How to buy bitcoins

There are different ways of buying this digital currency. The most popular way, however, is through the use of a bitcoin wallet. One of the most popular bitcoin wallets is Coinbase. Coinbase allows users to link their existing bank accounts so that they are able to withdraw or deposit funds purposefully for the purchasing and selling of bitcoins. Wirex is the other popular bitcoin wallet. This consists of a card that automatically converts bitcoins into your local currency. Users could also use Bitcoin Depot. This allows users to deposit their cash in select ATMs across the country. A few minutes after depositing the cash, the bought bitcoin gets deposited in the user’s bitcoin wallet.

Is investing in cryptocurrencies a good idea?

Bitcoin prices have constantly been on the rise in 2017. However, the prices have experienced high volatility. In fact, between 2015 and 2016, bitcoin prices soared higher by more than 500%. Warren Buffet termed cryptocurrencies as a mirage back in an interview with CNBC in 2014. Jamie Dimon, the CEO of JP Morgan Chase, more recently stated that digital currencies would one day come down tumbling. He is vehemently against people investing in digital currencies. Some people, however, support investments in digital currency. The head of International Monetary Fund, Christine Lagarde, stated that digital currencies might end up replacing the existing currencies. The facts remain. Investors who bought bitcoins have been doing spectacularly well in 2017. Whereas bitcoin investing should not be treated as a retirement investment, it is worth the risk. The only risk with bitcoins is that gauging the intrinsic value of bitcoins and other cryptocurrencies is nearly impossible.

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