What is the Bitcoin and why trade it

What is the Bitcoin and why trade it

Trading is hard but one might think otherwise if one spends enough time online reading trading blogs. Trading cryptocurrencies is even harder, because they are complex instruments that nobody really knows how to price yet and nobody knows if they are here to stay or will be gone in the next few months. I’ve spent more than ten years trading various financial instruments, with my last trading in various cryptocurrencies across different exchanges. There is one thing I know for sure : you cannot control the outcome in trading, but you can control the process. The process starts with understanding the fundamentals. For crypto currencies it all started with the bitcoin.

So what is the bitcoin? Satoshi Nakamoto is the writer of the original paper on bitcoin. Everyone knows about him but nobody knows who he really is. In any case, his paper is titled Bitcoin : A Peer-to-Peer Electronic Cash System. So that’s what the bitcoin is. So bitcoin is for currency what BitTorrent is for files. Peer-to-peer means from one person to another, directly , without intermediaries. It’s pretty much like me giving you cash directly, but in bitcoin’s case , I don’t know you, you don’t know me, and the money is transferred over the internet. This transfer is logged into this ledger called the “Blockchain” and every transfer (transaction) is validated by the so called “miners”. The miners basically get paid in bitcoin to ensure that the transaction is legitimate, and all this happens anonymously. For the curious reader, I recommend reading the original paper at https://bitcoin.org/bitcoin.pdf

What can one do with the bitcoin ? One could buy merchandise anonymously over the web or buy a trip from Expedia or a grill from overstock.com . There are more serious use cases, like when a country is bombed , as Siria was, and one needs to move out of the country, on foot, one may want to safeguard his money in an online wallet until a safe place is reached. Some paranoid use cases could be the following

Donations to entities that the government does not like [Happened - WikiLeaks] Purchasing goods that the government does not like [Happened - Silk Road] Gambling in jurisdictions that the government does not like [Happened - Nitrogen Sports] Purchasing services that the government does not like [Starting to happen - Backpage/Adult Websites] Hiding assets from a spouse [Should start soon] Hiding assets from the government [Probably started, but for very few] Transferring assets across borders [Started to happen - Chinese buying mining equipment to convert fiat into Bitcoin]

In conclusion , the bitcoin is useful, even if it’s uses are controversial. Because of that, people will be interested in trading them, either for merchandise or for other crypto-coins that behave more or less like the bitcoin but may have specialized use cases. These trading needs will generate opportunities for those interested in trading. The following is a list of top 5 crypto currencies as of Dec 2018.

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The next article will go into details about how to open an account , transform regular currency (US dollars, or Euros) into crypto-currencies and give you some resources about trading them.

The thumbnail photo was created by Marta Branco from Pexels (https://www.pexels.com/@martabranco)