CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The vast majority of retail investor accounts lose money when trading CFDs.
77.78% of retail investor accounts lose money when trading CFDs with this provider.

Trading 101: How to Start Trading Bitcoin

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Author: Martin Penev

What is Bitcoin? 

Bitcoin is a virtual currency that was created in 2009. The virtual currency exists on a public transparent ledger that is accessible to everyone.

Bitcoin is not monitored or backed by governments, which has sparked criticism globally. Due to the success of this particular currency, other virtual currencies have emerged and now cryptocurrencies are widely traded on the financial markets. Find out how Bitcoin works and start trading Bitcoin without the need for a cryptocurrency wallet.

How does Bitcoin work? 

Bitcoin is based on an encrypted mathematical algorithm, containing strings of numbers and letters which then form what is known as ‘private’ and ‘public keys’.

Public keys essentially serve the same purpose as a bank account number, allowing people to send bitcoins. Private keys, on the other hand, are similar to your bank card pin number and are used to authorise transactions.

The different ways you can start trading Bitcoin 

Instead of owning a Bitcoin wallet or the cryptocurrency, traders are more interested in speculating on the price of Bitcoin on the financial markets, as it means that that they don’t have to own the underlying physical asset.

To start trading Bitcoin you will need to open a trading account which allows you to buy and sell Cryptocurrency CFDs. 

Trading CFDs involved placing a small initial deposit while still allowing you to gain exposure on much larger positions. Even though this can magnify any profit you make it can also magnify losses.

What affects the Price of Bitcoin? 

Just like any other financial asset, supply and demand play a factor in the price of Bitcoin moving. If traders are interested in Bitcoin it leads to an increase in demand levels and as a result this will drive the price of Bitcoin up. In recent years, Bitcoin has been circulating more widely due to international corporations adopting the cryptocurrency and this has subsequently had an effect on the market due to increased demand. Supply of the cryptocurrency will also have an impact on its price. We have also seen the price of Bitcoin take a dive making it affordable but at the same time the process of mining the cryptocurrency became increasingly difficult.

Another factor that influences the price of Bitcoin is the reward of Bitcoin halving. This particular currency has a limited amount of coins in circulation.

Bitcoin halving was introduced which means that meant that after the generation of blocks hit 210,000 then the reward for mining was also halved.

This then happens every four years with the recent one having just passed on the 12th of May 2020. This has had an impact on the mining of Bitcoin and can cause the price of Bitcoin to fluctuate on the market.

What is Bitcoin Mining? 

Bitcoin miners essentially approve transactions and are there to stop the problem of double-spending, which could lead to the user spending the same bitcoin twice. Bitcoin miners are rewarded with a certain amount of bitcoins for every 1MB of bitcoin transactions that they approve.

The strategies you can use to trade Bitcoin:

Day Trading –  This is perfect for when you want to take advantage of short term movements with Bitcoin. You can then close your position at the end of the trading day. This is a good strategy to have in place especially with breaking news and new market trends.

Swing Trading – This is for trading the trend. You open your position and maintain it until the trend stops or reverses. This is for when you want to make the most of market momentum on Bitcoin.

Scalping – Scalping is for when you want to try and profit from small price fluctuations and therefore you would place consistent intraday trades.

Here’s how you can start trading Bitcoin 

You can start trading Bitcoin today with an Eightcap Live trading account.

Choose from two account offerings which suit your trading needs. If you want to practise trading Bitcoin CFDs then try our free Demo Account which provides you with $100,000 virtual funds and access to real-time prices and charts.

You might be interested in:

What Drives Stock Market Indices? 

What Affects the Price of Oil?

How to Trade Brent and WTI Crude Oil

How to Download, Install, and log in to the MetaTrader 4 Platform on a Windows PC

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