Investing in Bitcoin, how to get started? Bitcoin is the first cryptography in the world, born in 2009, and it is also the one with the most market capitalization. In this section you will find all the information related to Bitcoin (BTC).
Bitcoin trading: what are Bitcoins and how do they work?
What are Bitcoins? What are they used for? An electronic currency (cryptocurrency) created in 2009 by Satoshi Nakamoto, an inventor whose identity has never been ascertained univocally, and who thought of replicating on the system a previous theory that the same author had the opportunity to present on the web a few years earlier.
How Bitcoin works: main features
This cryptocurrency has become famous in recent years. In essence it is more than a digital currency, it is precisely a system that doesn’t use central entities to carry out transactions, instead it uses a database that is located on the network, called blockchain.
Inside of it, the transactions made by the users are stored, and they are also protected by a cryptography which ensures the security and uniqueness of the operations.
At this points, all we need to do is to deepen this matter before investing in Bitcoin.
Bitcoin Quotation: real time Bitcoin value chart
Who is Satoshi Nakamoto?
The creator of the Bitcoin system is Satoshi Nakamoto, a computer scientist who was able to present his ideas on the crypto world towards the end of the last decade, between 2008 and 2009, and who was personally engaged in the early stages of project development.
The identity of Satoshi Nakamoto has never been unveiled: the founder, in fact, has decided to remain completely anonymous.
In 2010 he abandoned his project to other developers. It is precisely the anonymity of its founder that contributed to raising concerns which, however, are not reflected in the typical Bitcoin approach, considering that one of the characteristics of the system is, intuitively, linked to the fact that no authority can control it, but it’s managed by all users.
In other words, no one – not even Nakamoto – can or could own the Bitcoin network.
Being in some ways “revolutionary”, Bitcoin is actually controlled by all users, while the developers are asked to improve the software.
What are Bitcoin used for and how do the transactions work?
The first thing to understand is that, precisely because of its particular structure, Bitcoin is not a legal tender currency.
The reason for this specificity, as it is clear from what was stated at the beginning, has to be found in the decentralized nature of the method of creating the currency, the quantity of which has however been limited from the beginning.
Bitcoins are transferred without the supervision of an external entity, but through an exchange between the parties.
The Bitcoin client used by the user who is selling the coin, therefore, has the task of transmitting the transaction to the nearest nodes on the network, which in turn propagate the payment through the rest of the database.
Transactions are generally free, but a fee is expected to support management of the node mechanism.
How Bitcoin works: how many Bitcoin are there?
As we anticipated, the number of circulating bitcoins is predetermined, with plans to reach a threshold of 21 million units.
The availability of the new coins increases every 4 years, in 2019 there are about 17 million units.
Considering that the distribution of the new currencies takes place with a geometric progression (since it is believed that the interest in the system is increasing), it also results a clear risk of a deflation in the value, with an increase of real value, due to the scarcity of new currency.
Will Bitcoin fail?
One of the most recurring forecasts on the web is tied to the failure of Bitcoin.
This is a nefarious forecast, which periodically reappears on the network (mainly whenever the value of the currency undergoes a depreciation).
However, it is certainly not excluded a priori that the system may collapse.
But for what reasons? Let’s try to understand the main ones.
Will the cryptocurrency depreciate too much?
The risk of devaluation of the currency is far from irrelevant and will tend to increase as new currencies are put into circulation.
Of course, this does not mean that the failure of the system must necessarily coincide with the devaluation.
However, it is good to avoid a drastic collapse in its value, which would be difficult to restore.
Will the money no longer be used?
The risk is quite uncertain to be precisely calculated.
However, it is not excluded that for several reasons (security holes, excessive volatility, access difficulties, replacement of bitcoins with another cryptocurrency system, etc.), fewer and fewer users may be interested in Bitcoin, with what follows on sustainability of the whole apparatus.
Will the currency be opposed by governments?
This is one of the most frequent theories.
According to some analysts, Bitcoin would not be liked by governments and central banks because it is not a “controllable” currency. In fact, it is very difficult for governments to have the intention or the effective possibility of banning Bitcoin and other digital currencies.
In any case, we note that China and South Korea have banned ICOs, which are the first process of creating a new cryptocurrency.
How Bitcoin works: how the transfer of bitcoin takes place (technically)
Investing in Bitcoin
Even if this is not the most suitable venue to try to understand how, technically, the transfer of bitcoins is carried out, it can still be useful to try to deepen the theme by defining Bitcoin as a sort of “dedicated” evolution of peer-to- peer.
The client (i.e. the software through which the transfers of the coins take place) is free and derives from the code of its founder.
The software allows currency transfers between different accounts, using a public key cryptography system.
This assumes that all operations are public and stored in a database, used to confirm them and prevent the possibility of spending the same coin twice.
Basically, when a user wishes to transfer the coin to another user, the system does nothing but accept the declaration of “renunciation” of the ownership of the coin, adding the public key (i.e. the bitcoin address, a sort of sending point or receipt of all payments, which any user can request, even in a number greater than one) of the receiving user.
The message thus composed (with the signature of the user’s private key) is then forwarded through the peer-to-peer network, with the nodes that will validate the signatures and the amount of the figures, before accepting the transaction.
How Bitcoin work: is there any risk of “duplication” of the coins?
Knowing how bitcoins work leads us to answer that the risk of coins being duplicated is minimal.
The system is in fact based on a network that makes time stamps, assigning sequential identifiers to all transactions.
Without going into excessive detail, each time a transaction is made (for example, as in the previous paragraph, user A who transfers ownership of his currency to user B), the same will start on the network in the state of “not confirmed”.
The transition to the “confirmed” status will only take place when the system has verified the so-called “Blockchain”, the mechanism by which Bitcoin tries to protect itself (and protect users) against the risk of scams and malfunctions.
Keep in mind that, however, the open feature of the original protocol and software has encouraged the creation of new programs and libraries that manage to implement the Bitcoin protocol independently, often simplifying the use of the system (sometimes allowing the user to receive transactions without having to download the entire block chain, or a single reduced version, sometimes connecting to the original client to extend its functions, and so on).
What are Bitcoins used for? Is it possible to withdraw Bitcoins at an ATM?
It’s not possible to withdraw Bitcoins at an ATM, as it happens for other currencies.
However, there are particular exceptions where there are some attempts to introduce ATMs, totally separate from the most well-known payment circuits, where it is possible to withdraw or deposit bitcoins on your bank account.
What are bitcoins used for if they cannot be withdrawn from the ATM? Being a digital currency, it does not exist in metallic or paper form, but through the ATMs mentioned above it is possible to deposit or withdraw bitcoins from your e-wallet that you have on your mobile device. In any case, an ATM is not necessary, thanks to e-wallets and exchanges it is possible to exchange bitcoins with other cryptocurrencies, but also with euros and dollars.
eTorox is the cryptocurrency exchange from eToro. You can open a free account on eToro using the button below
How to use Bitcoins?
The long series of introductions mentioned above could discourage some of our readers from carrying out operations on a system that you cannot fully “understand”.
Actually, Bitcoin can be considered a mere application for mobile, tablet or computer, capable of providing a personal wallet in order to have access to bitcoins, and which allows a user to send and receive bitcoins.
How Bitcoins work: can you “win” them?
As we have mentioned, new Bitcoins are issued continuously, according to a predefined expansion plan.
Who will receive the new bitcoins?
It may be useful to remember that cryptocurrencies can be donated to all users of the system, through a mechanism that “rewards” users who will make the computational power of specialized hardware available to bitcoins. We are talking about mining.
In fact, we have already recalled that the authenticity of each transaction is protected by digital signatures that correspond to the sender’s address, thus allowing all users to have full control over the bitcoins sent from their addresses.
The active participation of the user’s computer in the system outlined above is therefore “remunerated” (the quotation mark is a must) in bitcoin.
How Bitcoins work – is it worth investing?
Bitcoin is the most important cryptocurrency on the international scene, as well as being the first (introduced way back in 2009). Over time, Bitcoin has come a long way, reaching the end of 2017 to touch $ 20,000 per bitcoin.
When asked if it is worth investing in bitcoin, we can’t give an answer, it depends on you. If you believe in the project you could evaluate the purchase, otherwise not. We do not provide investment advice, the choice will always be yours.
Let’s see now an important milestone of Bitcoin.
May 22, 2010:the date of the first transaction to purchase goods made with bitcoin. The reason for purchase? Buy two pizzas. Total spending: around 10,000 bitcoins, because only after 1 year from their creation, bitcoins were worth almost little or nothing.
Those two pizzas would only cost $ 25 of “real” money, yet they were paid in bitcoin – fortunately for the merchant who received them. At the time of writing the article (1 bitcoin = $ 10,000), those 10,000 bitcoins are worth something like over $ 100,000,000.
You got it right: those 2 pizzas, with today’s exchange rate, were purchased for one hundred million dollars!
Bitcoins, like all other cryptocurrencies, are characterized by strong volatility: their price often undergoes changes in a short time, even within the same day.
Bitcoins nowadays can also be used for normal transactions and purchases, although some investors decide to keep them to themselves, with the hope that the price will rise over time.
In the past, Bitcoins were still seen as a “currency for a few insiders“. By now Bitcoin has become a daily news item and is known all over the world.
Bitcoin has undergone three forks: the first led to the introduction of Bitcoin cash, the second to Bitcoin Gold and finally Bitcoin Private.
We want to specify that there is another system to invest in Bitcoins, which doesn’t require a direct purchase of the currency.
We are talking about CFD trading, which we will show you in the next paragraphs. A form of investment that allows you to start investing even with a few hundred euros, also using tools such as leverage, that allows you to multiply the capital invested. However, remember that according to ESMA regulations, retail traders can use a maximum leverage of 1:2 for trading on cryptocurrencies.
How to invest in Bitcoin
So let’s get to the more “operational” part: how to invest in Bitcoin?
The investment in Bitcoin has practically “unique” characteristics.
Consider, for example, the fact that – despite what happens with other currencies – Bitcoin is not influenced very much by the elements of fundamental analysis (such as economic, political or financial news) and that, therefore, those who focus on Bitcoin generally aims to predict the evolution of cryptocurrency prices based on technical analysis.
In advance, let’s see in detail what to do in order to invest in bitcoins.
The first thing, however intuitive, is to acquire Bitcoins through the possibilities offered from your broker. Nowadays, all the main intermediaries allow their users to be able to invest in Bitcoin at particularly convenient conditions.
The process is extremely simple and intuitive, and similar to what could happen if you intend to buy dollars or euros, or other financial assets: you will therefore have to open a trading account, make a payment with real money, download and / or access the trading platform, and carry out the purchase transaction.
Once purchased, bitcoins can be stored in several ways.
For example, you can move them to your own hard disk, possibly external and disconnected from the network (the so-called “cold storage”), or even use a paper wallet, a document that contains all the data necessary to be able to generate private keys through ownership of a physical certificate.
As it is easy to understand, brokers aim to allow you to store your bitcoins directly on an online wallet, safely storing the codes. An example above all is eToro.
Another way could be to invest in stocks of companies that invest in Bitcoin.
In this case, it will be a kind of “derived” investment, which will allow you to enter in the Bitcoin sector indirectly.
Be careful not to confuse the technical form of use: it is entirely an equity investment, while bitcoins will exclusively constitute the corporate object (through their management and sale) of the target company of your investment.
How to earn with bitcoins – bitcoin trading with the CFD
Now that we have summarized how bitcoins work and how to invest in this cryptocurrency, we need to face a more complex issue: how to make money with bitcoins?
Let’s start by stating that the easiest method to invest in Bitcoin and seek a substantial profit is represented by the possibility of being able to invest in cryptocurrency through CFDs, contracts for difference.
In other words, even if it is possible to invest in Bitcoins with a wider time horizon, there is no doubt that the main profit opportunities are achievable in the short term.
However, we specify that as it is possible to earn with bitcoins, it is also possible to lose! In fact, if the direction of the value of Bitcoin is not the one hoped for you, you will incur a loss, therefore you have to be very careful.
Try to identify a sufficient reference time frame for your investment, the amount to be allocated to the use and the expected outcome, in order to obtain useful profitability opportunities.
Nowadays, all the major brokers allow you to invest in Bitcoin CFDs.
As this is an investment that includes a high degree of risk, it is necessary to remember that, before investing in bitcoin, it would be advisable to plan a broader portfolio management strategy.
It could therefore be useful to reserve a few days to be able to draw up a plan (formal and written) for investing your savings, sanctioning what your actual financial knowledge is, what your experiences are, what your time horizon is and what is your propensity to risk.
Once this is done, also try to allocate a highly minority part of your portfolio to the investment in bitcoin, perhaps limiting yourself to 2-3% of the total assets. Also avoid being caught by an insane and hasty desire to earn: investing in Bitcoin is very difficult, and although it is true that the volatility that is implicit in this instrument will ensure large margins of return, it is equally true that you have at least the same chances to obtain a negative outcome.
In any case, don’t be discouraged.
As all the most experienced and appreciated traders will be able to highlight, the successful trader is certainly not the one who must have the utopian ambition to close all the positions in a positive way, but the one who is able to take – with a planned money management strategy – the appropriate decisions in case of loss.
The “secret”, also in this case, is to seek a better diversification of your portfolio, decreasing the correlation level of the assets that are included in your portfolio and, consequently, lowering the overall risk level.
Going back to the investment in bitcoin, knowing the price and the real-time chart is not difficult at all. First of all, a punctual and well integrated resource with the trading platforms will be offered by your broker. At the beginning of this text, in any case, you can see the real-time graph of the bitcoin in dollars.
Each broker enabled for trading in bitcoin will allow you to have similar graphic representations, generally in candlestick, more or less customizable and manoeuverable for your own technical analysis purposes.
How to invest in Bitcoin on eToro
The eToro broker is one of the best known CFD brokers, above all because it is the leading broker in the Social Trading sector.
Thanks to social trading, it is possible to follow other traders (even professionals) and copy all their trades automatically.
Not only that, the eToro broker has also recently introduced the eToro CopyPortfolios function, thanks to which it is now possible to follow and copy the operations of real investment portfolios.
The eToro trading platform is also designed for inexperienced traders, with the possibility of also having access to a free demo account with which to practice without risks
CFD trading on Bitcoin with Plus500
The Plus500 broker was one of the first brokers to open its doors online, and nowadays it is one of the most used brokers for CFD trading.
Among other things, Plus500 was also the first broker to introduce bitcoins as a selectable asset in its CFD transactions.
But innovation is an integral part of the Plus500 broker’s business model, which has continued to improve year after year, and now it offers thousands and thousands of different assets with which to trade CFDs and also the possibility of using a free demo account to practice safely.
Investing in Bitcoin with the CFD trading of IQ Option
If you choose to operate with the IQ Option platform, you can invest using 3 BTC / USD instruments.
All of them offer the maximum trading experience, but they must also be used differently based on the long / short term orientation and personal trading style.
It is clear that to invest with IQ Option, the first thing to do is to open an online or demo or real trading account.
Remember that with IQ Option you can operate on a free demo account with virtual € 10,000, as well as with a real account thanks to the minimum deposit of € 10 and minimum trades of $ 25.
From this point on, choose the asset to trade with, and then the Bitcoin cryptocurrency.
The strategy in this case is simple, all you have to do is to buy or sell Bitcoins and keep the position open for as long as necessary to cover the spread and make a reasonable profit.
So, trading with Bitcoins is very similar to Forex trading.
Characteristics of Bitcoin trading with IQ Option
You should buy the cryptocurrency if you believe that the BTC price is expected to increase over time, while you should sell in the event that the asset price drops.
Please note that, in order to get the most out of it, you need to consider long-term trends and technical analysis tools, which should be taken into consideration when buying and selling Bitcoin directly.
Also, pay attention to that fact that there are no multipliers available for the purchase of cryptocurrencies.
This makes it much easier to invest and keep your capital, considered that it is very difficult to lose your entire investment capital in one single deal if you use a good portfolio diversification strategy.
Earnings depend on the difference between the opening and closing prices.
The higher the price of Bitcoin away from its starting position, the higher your profit.
CFD trading on cryptocurrencies with IQ Option
CFDs, or contracts for difference, that have cryptocurrencies as their underlying are another viable option.
Instead of buying the cryptocurrency itself, you can choose to invest in the contract and then get a profit considering the difference between the current and future Bitcoin price.
As in the previous case, the greater the difference, the greater the profit margin.
In the case of short term trends, all technical analysis tools should be taken into consideration when trading CFDs.
Note that trading with CFDs also means trading in the short term thanks to the lower spread.
Contracts for difference are all those which do not require significant price fluctuations in order to remain positive.
In the case of CFDs, you can also have access to the multiplier or to the leverage, that you can use to control higher positions than you could afford.
You should remember that both profitability and potential risk are multiplied.
Trading on cryptocurrencies with IQ Option
IQ Option allows you to trade on cryptocurrencies and with a cryptographic system that makes the processes in managing transactions safe.
With IQ Option you can invest always and only in a professional way, as it is not only a regulated broker, but it is also a broker that offers minimum trades of € 1 and minimum deposit of € 10.
You can always choose to invest in a safe way with IQ Option and its online trading platform.
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IQ Option – cryptocurrencies: general information
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