Like Bitcoin itself, the market for this cryptocurrency is decentralized. Bitcoin trading entails speculating on the price movement of this electronic currency. People can purchase and sell this digital currency via exchanges like bitcoin revolution. These platforms enable people to easily access, buy, or sell Bitcoin using fiat money.
Others use CFD trading or derivatives to speculate on the movements of this cryptocurrency's price. That means you don't own the underlying coins. Thus, a trader can go long, which is to buy Bitcoin, if they expect its value to rise, or go short, which is to sell if they think its price will fall.
Both options are leveraged products. That means you deposit a small amount, called the margin, to get total exposure to the crypto market. The market calculates losses and profits according to the full position size. Thus, the leverage of the trader magnifies both losses and gains.
Purchasing and Selling Bitcoin via a Crypto Exchange
When you buy Bitcoin through a crypto exchange, you buy the coins themselves. Before doing this, you have to open an account with the platform and put up the asset's total value to open your position. Then, you have to store Bitcoins in a digital wallet until when you decide to sell them.
Crypto exchanges have a steep learning curve because a trader must understand their technology. You must learn to analyze and use crypto exchange data to maximize your profits. Most crypto exchanges have limits on the amount a user can deposit. Maintaining some crypto exchange accounts can also be costly for some people.
How the Bitcoin Market Works
The Bitcoin market is decentralized. That means no central authority like a central bank or government backs or issues Bitcoin. Instead, Bitcoin runs across a computers' network. But people can purchase and sell Bitcoin through crypto exchanges. They can also store Bitcoin in digital wallets.
Unlike a conventional currency, Bitcoin exists as a shared digital asset ownership record in the blockchain. If somebody wants to send a Bitcoin unit to another person, they send it to the digital wallet of another user. Blockchain does not consider a transaction final until miners verify and add it to the network. Bitcoin mining is also the process via which miners add new Bitcoin tokens to the network.
Blockchain refers to a shared digital data record. For Bitcoin, blockchain is a transaction history of all cryptocurrency's units, showing the change in ownership over time. Blockchain records transactions in Bitcoin blocks as miners add new blocks into the chain. Blockchain technology presents security features that you can't get with a regular computer file.
This technology links blocks together using complex computer science and mathematics methods. If somebody tries to alter the data, they disrupt cryptographic links for the blocks, and computers in this network identify this as a fraudulent activity.
Multiple computers in the network store every blockchain file, meaning you won't find a file in a single location. What's more, everybody in the network can read the file. And this makes blockchain transparent and complex for anybody to alter. Essentially, this technology leaves no weak point for hacks, software, or human error.
What Moves Bitcoin Market?
Bitcoin market moves according to demand and supply. But because the electronic currency is decentralized, it's vulnerable to the following factors.
- Press: How the media portrays Bitcoin and coverage affects its price.
- Market capitalization: The value of the available coins and users' perception affects its value.
- Key events: Events like regulatory updates, economic setbacks, and security breaches will affect the price.
- Integration: How easily Bitcoin integrates into the current infrastructure like e-commerce payments affects its value.
- Supply: The number of Bitcoins available and their release rate affects the price.
If planning to start trading Bitcoin, understand how the crypto market works to get the most from your activity.