Bitcoin is the world’s most popular payment platform and cryptocurrency, which has been topping the CoinMarketCap rating since the very beginning. Currently, as of July 16, 2019, the currency’s market cap is $191,422,303,635 whereas its price is over $10,000 per coin. Even despite volatility in recent years, BTC still remains the most expensive cryptocurrency in the world.
What Is Bitcoin (BTC)?
It is the first decentralized digital currency. Decentralized means that the network is not regulated and not controlled by any authority. The network is supported by the so-called nodes, which check and confirm operations within the network. Decentralization is the main goal of BTC cryptocurrency.
Bitcoin was created in 2009 by an unknown programmer under the name Satoshi Nakamoto.
Three main ideas were put into the BTC code:
- Cryptocurrency should not be regulated by anyone.
- Its emissions should be limited.
- The cost of a coin directly depends on the demand for it.
To implement this model, developers had to use blockchain technology, which was invented back in 1970, but could not be implemented until 2009. Thanks to the blockchain technology, Satoshi Nakamoto transferred the network under the management of network members who support it through their computers. The BTC algorithm included the maximum number of bitcoins – 21 million, and the possibility of mining.
Since BTC is the world’s first digital currency, you can buy it on absolutely all cryptocurrency exchanges. Recently, Bitcoin futures have started trading on the Chicago commodity exchanges. All these factors contribute to the popularization of cryptocurrencies in the global community.
Trading Bitcoin: Benefits and Risks
Trading BTC has the following advantages:
- Long track record as compared with other crypto coins (altcoins). Being the world’s first and oldest cryptocurrency, the coin is still trusted by many investors and traders. It was a pioneer in the world of trading and was competing with such assets as fiat currencies, commodities, stocks, and bonds. Despite its volatility, the currency still tops the coin market cap chart with the highest price and market capitalization level.
- Portfolio diversification and hedging. Adding BTC to your trading portfolio is a perfect way to diversify it. Such diversification will help you to mitigate the risk of an economic downturn when other assets can become less valuable.
- Being a payment method. Bitcoin is becoming widely accepted as a payment method and as a storage of value. More and more e-commerce shops and other retail services accept BTC as a means of payment in addition to fiat currencies. For example, it is possible to use BTC to deposit funds into your Microsoft account. BTC is also accepted by brick-and-mortar retailers, especially in the food industry – at some locations, you can pay with Bitcoin in KFC, Subway, or Domino’s.
Meanwhile, the risks of trading BTC are:
- Price volatility. BTC had been quite stable until May 2017, when its price started growing, followed by a huge leap from $3,387 in November 2017 to $19,000 in December 2017. Now the coin is experiencing a bullish trend again. While medium volatility is beneficial for investments, high volatility can create high levels of uncertainty, giving the traders less time to react.
- Hard forks. Now Bitcoin has at least five hard forks, the most known of which is Bitcoin Cash. Such forks can also impact the confidence of traders and overall market sentiment, which can increase the price volatility.
- Conflicts with centralized financial institutions. The blockchain technology bypasses the traditional banking world and can threaten the existence of traditional financial institutions. Banks can try to advocate for more regulation on Bitcoin and altcoins.
- Risk of deflation. A limited supply of BTC can result in deflationary trends. Deflation is undesirable for governments with higher levels of debt because the debt will become more expensive in real terms. Moderate inflation helps indebted countries to decrease the nominal value of their debt but without impacting their economies. Deflation also means less income via sales tax and wage tax and also less consumption as companies and households save their money.
- Competitors. The growing number of altcoins can put Bitcoin at a threat. This is because many altcoins try to solve the problems of BTC, such as long processing time of transactions, high commissions, and lack of anonymity. Maybe one day some of these altcoins will move the Bitcoin down the coin market cap chart.
Investing in Bitcoin and Forecast for the Future
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