What Is Bitcoin? Plus, How to Trade Bitcoin CFDs

June 30, 2021 16:30 UTC
Reading time: 10 minutes

Bitcoin truly had its "heyday" back in 2017, when the price went from hovering around $900 in January 2017, to skyrocketing to an All Time High of US$19,650 on December 15th 2017. Now, years ahead to the year 2021, Bitcoin and other cryptocurrencies have established themselves as somewhat-mainstream financial instruments which all financial institutions are paying attention to. Let's not forget April 14, 2021, not so long ago, when Bitcoin reached US$64,805.00...

What does that mean for Bitcoin CFDs, Bitcoin and crypto in general? This article will not only explain to you, in detail, "what is Bitcoin?", but we will also explain to you how you can partake in Bitcoin CFD trading. We will address the basic questions, such as: What is Bitcoin?! How does Bitcoin work? What is Blockchain Technology, exactly? How about Bitcoin mining? How do I trade Bitcoin CFDs?¬†Along with more intertwining topics, ideally finding yourself more educated in the topic of Bitcoin and Bitcoin CFDs.¬†You will see how far Bitcoin has come from 2009 up to now,¬†in 2021,¬†along with¬†some very interesting facts you may not have known ‚Äď including the very first country to accept Bitcoin as legal¬†tender...!¬†

What is Bitcoin?

Bitcoin is a digital currency or 'cryptocurrency', due to the fact that it uses cryptography to secure transactions within its infrastructure, which represents a distributed online database, or 'blockchain'. Bitcoin is sent using a peer-to-peer network, which operates on the blockchain, also known as a public distributed ledger. 

It is notable to mention that you may trade CFDs on Bitcoin (BTC/USD, BTC/EUR, and BTC pairings with other digital currencies) in a risk-free demo trading account with Admirals (formerly Admiral Markets). This gives you the opportunity to get familiar with this financial instrument in a zero-risk environment, before you test your trading strategies with your live account. Once you learn in detail, what is Bitcoin, exactly, and how can you use it in your trading strategy, your best starting point is a demo account. 

What is the Abbreviation for Bitcoin?

The abbreviation for Bitcoin is simply BTC. The same principle as with USD (US Dollar) and EUR (Euro) applies. Bitcoin can also be paired with other currencies. In that case, the CFD contract name could be, for example, Bitcoin vs US Dollar CFD (or BTC/USD).  

As of 2021, we have also made available the CFD pairing of BTC/EUR, as well as the following digital currency pairings: BCH/BTC, DSH/BTC, EOS/ETC, ETC/BTC, ETH/BTC, LTC/BTC, XLM/BTC, XRP/BTC, XMR/BTC, and ZEC/BTC.  You can find more cryptocurrency contract specifications here.

How Does Bitcoin Work?

Bitcoin offers the opportunity to make fast low-cost peer-to-peer payments without the need of a bank or a central processor. The system transactions take place directly between users' digital wallets and are verified in the blockchain. The transactions are digitally signed with unique private keys, which proves that they've come from the owner of the wallet. Due to this form of modern technology (known as the blockchain), transactions have a modernized form of security. 

How can you Trade Bitcoin CFDs? 

As mentioned above, we offer various pairings for trading Bitcoin CFDs, including against the US Dollar, Euro and various digital pairings. Just as you would trade with any financial instrument at Admirals, you can do so via either MetaTrader 4 or MetaTrader 5 platform. Simply search 'BTC/USD' as your instrument (for example), choose whether to 'buy' or 'sell', and you're off to the races. Visit our 'How to Trade CFDs Guide' for more detailed steps on the process.  

What is Blockchain Technology?

To understand 'what is Bitcoin?', you first must understand the concept behind blockchain technology. A blockchain is essentially a decentralised public ledger of all Bitcoin transactions that have ever been executed. A certain number of transactions forms a database unit, known as a 'block', and each block stores information about the previous block. In addition, each transaction stores information about its preceding transaction. This way, the blockchain enables full transparency of payments. 

Bitcoin's blockchain infrastructure introduced a revolutionary method for financial data storage that is accessible to anyone, and is fully transparent, and co-developed using an open-source code, and does not belong to any person or entity. Instead, blockchain maintenance is performed using the collective power of millions of computers that verify transaction, and then add them to the 'blocks'. 

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Don't expose yourself to risk until you are truly ready. Download a FREE demo trading account by clicking the banner below!

What is Bitcoin Mining?

So, as you have now been given more insight into the popular query, 'what is Bitcoin?', let's dive a little deeper. Bitcoin and all cryptocurrencies are created on the blockchain by a process called 'mining'. 

You may have heard of many wild tales online where teenagers with laptops are becoming rich (and quick) by mining or buying Bitcoin or other cryptocurrencies. While the stories are certainly not all true, they are certainly not all false, either - take these five Bitcoin success stories, for instance. In 2021, the topic of whether mining Bitcoin is still profitable is debateable, but let us explain more about mining Bitcoin, so you get the full picture on 'what is Bitcoin?'. 

To break it down, Bitcoin mining is the process of creating new BTC by the use of heavy powered computers which solve mathematical equations automatically; like solving an incredibly complicated puzzle, if you will. There are two main and crucial results from Bitcoin mining: New Bitcoin is created, and the network is made more secure by further blocks created and further verification. 

Did you know there is a hard cap of only 21 million total Bitcoin? It has been said that the final coins will not be minted until the year 2140(!) The Bitcoin blockchain was designed to have a controlled supply, and only a fixed amount of Bitcoin may be created each year. 

From an overall, global standpoint, a Bitcoin miner solves a new mathematical puzzle and hence creates a new block every 10 minutes. This block contains transaction records which are drawn out of the awaiting Bitcoin memory bank. Each new block discovered, the miner receives a block reward for their efforts.  

Initially, upon the launch of Bitcoin, the block reward was 50 BTC (can you imagine be a miner back then?!). With every 210,000 blocks mined,¬†the reward is cut in half. The last halving occurred in May 2020, where the reward per block was 6.25 BTC ‚Äď the next halving is¬†expected in 2024.¬†It is notable to mention, at this point of writing (June 2021),¬†there are¬†18,738,900 Bitcoins in existence ‚Äď meaning¬†only 2,261,100 will be mined up until 2140.¬†

So, what does the mining reality mean for Bitcoin and its value?¬†Well, Bitcoin is¬†forecasted to reach $100,000 per BTC¬†in the year 2021 ‚Äď which we are now halfway through. But hey, stranger things have happened; considering how volatile Bitcoin and cryptocurrency have been in general, there is still plenty of action to be had in this space.¬†

Trade Bitcoin CFDs with Admirals 

While¬†learning more¬†about Bitcoin and the world of cryptocurrency, it is only natural to be curious on how you can cash in on the thriving opportunities surrounding it. But perhaps, don't move too fast ‚Äď Yes, you can trade Bitcoin CFDs with Admirals using a live account ‚Äď But why not try first using a¬†Risk-Free Demo Account?¬†¬†

Get comfortable with trading cryptocurrency CFDs with zero capital at risk in our demo account ‚Äď then move on to the big league register your live account!¬†Click the banner below and start now with a demo account ‚Äď the sooner you get comfortable, the closer you are to a live account!¬†

Who Invented Bitcoin?

When the topic of 'who invented Bitcoin' comes up, there has certainly been some controversy over the years! It is thought that Bitcoin was created by Satoshi Nakamoto, who announced the invention on 31 October 2008, in a cryptography mailing list within a research paper called Bitcoin: A Peer-to-Peer Electronic Cash System.  

What is more interesting is that his name is probably an alias used by the unknown person, or persons, who designed Bitcoin originally. In 2016, Australian entrepreneur, Craig Wright, declared himself as 'Mr. Bitcoin' -¬†this is where much controversy lies. Partial parts of the crypto community support his claim, while an equal part deny it, as it may be¬†tied to some manipulation¬†‚Äď or just a ridiculous PR stunt for Wright, especially considering¬†he refuses to prove it. At this point no one really knows the truth ‚Äď only 'Satoshi', himself, whoever¬†that¬†may be

When Was Bitcoin Created?

Here comes some interesting bits on the early days of Bitcoin!¬†The¬†domain Bitcoin.org was registered in¬†August¬†2008, where the official whitepaper by Satoshi, mentioned above, was sent out to a private mailing list in October 2008, just two months after the registration.¬†Technically, the open-source code of Bitcoin was then launched in January 2009 ‚Äď perhaps considered the 'official' time of creation.¬†

Fast forward just slightly, to May 2010, and the¬†very first¬†and¬†most¬†famous Bitcoin transaction took place, which even has an annual day¬†in memory of¬†it¬†‚Äď Bitcoin Pizza Day!¬†¬†

An early¬†Bitcoiner¬†by the name of Laszlo¬†Hanyecz¬†(residing in Jacksonville, Florida at the time)¬†wanted to experiment with some Bitcoin.¬†And he wanted pizza ‚Äď Papa John's pizza, to be exact. Quite¬†humorously¬†written, the open letter started¬†like this:¬†"I'll pay 10,000 bitcoins for a couple of¬†pizzas..¬†like maybe 2 large ones so I have some left over for the next day.¬† I like having left over pizza to nibble on later..."¬†

This unusual request was posted on the bitcointalk.org forum, where Laszlo received many replies ‚Äď but few could¬†fulfil¬†his offer. Until¬†four days later, May 22, 2010, he finally¬†received his pizza.¬†¬†

This event surely goes down in crypto history! Fast forward to 2021 and there are many more use cases for Bitcoin and cryptocurrency, as a whole... 

Where Can You Spend Bitcoin?

Now, in 2021, there are plenty of things you can buy using Bitcoin ‚Äď besides pizza!¬†Most notably, El Salvador has become the¬†first country to accept Bitcoin as legal¬†tender¬†as of June¬†9, 2021! That is by far the biggest global move which has occurred for Bitcoin and¬†cryptocurrency as a whole.¬†

In regards to companies accepting Bitcoin, see some of the major brands which now accept BTC as payment: 

  • Microsoft has been accepting BTC as payment since 2014 in its Xbox¬†Store¬†
  • Online retailer Overstock accepts payment in Bitcoin for all products¬†sold¬†
  • Home Depot, the largest US hardware retailer, accepts Bitcoin payments via¬†Flexa's¬†checkout system in their physical¬†stores¬†
  • Namecheap, one of the biggest domain registrars, gives credit for purchases when Bitcoin is sent for payments
  • Starbucks, a major US coffee brand, accepts BTC payments via the Bakkt app
  • Gift card services like CoinCards and Bitrefill accept BTC and other cryptocurrencies¬†
  • KFC Canada is rumoured to soon be accepting Bitcoin as payment
  • Popular food deliver app, Just Eat (France only), will take order payments in BTC
  • Travel websites like Expedia.com and CheapAir.com accept BTC for flight purchases¬†

(*Source)

… The list could certainly go on! 

Most Bitcoin payment processors will also provide a QR code at the checkout, which represents a Bitcoin address and a payment amount. QR codes are very convenient, making it easy to pay via the Bitcoin wallet application on your smartphone. Simply scan the QR code and it will pre-fill the recipient Bitcoin address, and the requested payment amount. Once you send the transaction, the payment is complete. 

Are Bitcoin Transactions Traceable?

All Bitcoin transactions are public, traceable, and permanently stored in the Bitcoin network. Bitcoin addresses are the only information used to define where Bitcoins are allocated, and where they are subsequently sent. These addresses are created privately by each user's wallets. Since users usually have to reveal their identity in order to receive services or goods, Bitcoin addresses cannot remain fully anonymous. Also, the Bitcoin network is a peer-to-peer network, and it is possible to log user's IP addresses. 

Which Countries Back Bitcoin as a Currency?

As mentioned above, the only country which accepts Bitcoin as legal tender in 2021 is El Salvador. However, that said, there are many other countries which are Bitcoin-friendly. 

The legal status varies from country to country, but the list of countries that accept Bitcoin is constantly expanding. Bitcoin operates independently of any central bank, contrary to other well-known currencies (e.g., the US Dollar and the Euro). The Bitcoin network does not have any other central point or single administrator either, which makes it a decentralised digital currency. 

The US, for example, has been quite positive towards Bitcoin, having its place in the US derivatives market. Bitcoin is also viable for taxation as a property under the IRS. Canada also maintains a positive status with Bitcoin, viewed as a commodity by the CRA. Australia maintains rules similar to Canada, ruling it an asset subject to capital gains tax. The European Union, as a whole, considers buying and selling Bitcoin exempt from VAT, as it is a supply of services. 

There are countries as well which are not on board with Bitcoin. China, Russia, Vietnam, Bolivia, Colombia, and Ecuador prohibit Bitcoin and consider it as 'illegal'. 

Is Bitcoin Safe to Trade? 

Bitcoin is a volatile asset, with daily price changes in excess of 10% being quite frequent, which makes it considerably risky for investing and trading. Of course, there is no high reward without high risk, and you don't have to invest or use any funds that you cannot afford to lose. The good news is that Admirals provides an advanced set of conditional orders - Volatility Protection - which have additional utility for highly volatile instruments.  

It is also notable to mention, when you trade Bitcoin CFDs, there is naturally no expiry date ‚Äď so if you are willing to play the long game in certain cases, it can be worthwhile. On the contrary, having such a volatile price can provide quick and fruitful returns when you have a strategy in¬†place and manage your Take Profit and Stop Loss.¬†

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What's Next For Bitcoin in 2021?

The year 2021, now halfway through, has proven to be yet another monumental year for Bitcoin, and a rollercoaster one at that. 

First off, let's not forget that BTC hit its ATH (All Time High) on April 14, 2021, where it reached a staggering US$64,805.00 per BTC. However, as history often repeats itself, and volatility is certainly still alive and well, it has experienced a series of upwards and downwards trends. For those who have followed Bitcoin over the years and traded on is volatility, this certainly comes to no surprise, and shouldn't.  

Source: Admirals MetaTrader 5, BTCUSD, Daily - Data range: from February 1, 2021, to June 25, 2021, accessed on June 29, 2019, at 6:00 pm CET. - Please note: Past performance is not a reliable indicator of future results.

While there is no end in sight in regards to Bitcoin's volatility, there is no doubt the cryptocurrency is becoming mainstream and taking headlines day in and day out. Elon Musk has certainly become a protagonist in Bitcoin's story this year, with his Tesla stunt of accepting (and then not accepting) Bitcoin as payment for the new Cyber Truck. An event in Miami coined the 'the biggest Bitcoin event in history', Bitcoin 2021, saw thousands of fans and well-known people gather to celebrate this 'new world'. 

And what about the 2021 Bitcoin price predictions? Despite its recent downturn, Nasdaq.com recently published BTC's price could hit US$100,000 by the end of 2021. Considering how the journey's gone over the years, you just never know! If one thing is safe to say, it seems Bitcoin and the cryptocurrency ndustry are here to stay. 

Trade Bitcoin CFDs with Admirals

Bitcoin has proven to be a very volatile asset which can be both risky and beneficial. 

You can trade Bitcoin CFDs with Admirals against USD, EUR as well as with 10 total digital currency cross pairs. Leverage ranges between 1:2 and 1:5, depending on the pairing, and the minimum contract fill starts at 0.1, meaning you can trade Bitcoin CFDs with very minimal capital (however, be aware of associated risks of using leverage). You have the innovative MetaTrader 4 and MetaTrader 5 platforms at your fingertips, to help you along your trading journey with us. 

Remember that you are encouraged to first open a Demo Account with us, where you can practice trading with no capital involved. When you feel comfortable to exercise your knowledge to trade with capital, you can then open a live account with us, where you will experience the very best in trading innovation and customer support.

 

Risk warning: 

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The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter ‚ÄúAnalysis‚ÄĚ) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter ‚ÄúAdmiral Markets‚ÄĚ). Before making any investment decisions please pay close attention to the following:¬†¬†

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Brandie E Blackler
Brandie E Blackler Trader and Financial Writer, Admirals, London

Brandie has worked professionally as a financial writer and digital marketing consultant for 12 years, while she also is an active retail swing trader and investor for the past 7 years. Brandie specializes in digital currencies and CFD trading at Admirals