Bitcoin is a foreign currency

Bitcoin

What are Bitcoin?

Bitcoins is a digital currency, i.e. a currency that is produced online. Such currencies are also known as cryptocurrency. Cryptocurrencies do not consist of coins or bills, as we know them from the euro or the US dollar. They are produced and stored electronically all over the world. Conventional currencies, on the other hand, are issued by the central banks. The national central banks keep a close eye on the amount of coins and notes in circulation. It is different with a cryptocurrency. It is not subject to any control and is traded in a completely decentralized manner. The network of producers ultimately controls itself through supply and demand via the course. There is no government intervention to control the course.

In principle, Bitcoins can be used for payments in the normal economy and in commerce. They fulfill a payment function like any other classic currency. Even trading - professional trading in financial instruments such as foreign currencies or raw materials - is possible with the digital currency.

How did the Bitcoin currency come about?

There are many stories about the creation of the cryptocurrency to this day. It is considered likely that the inventor appeared under the pseudonym Satoshi Nakamoto. It is unclear whether there is a single person or a whole group of people behind this name. Due to the unclear identity, there is still a lot of room for guesswork and speculation. In 2015, media reports received a lot of attention that an Australian computer specialist was behind the pseudonym. The IT expert Craig Steven Wright is said to have played a key role in the creation of the digital currency with the participation of other IT experts.

The development of crypto currencies is usually based on the desire to become independent of the amount of money in circulation and the influence of the central banks. Since they can increase or decrease the money supply as they wish, they use it to control the national interest rate level, among other things. An increase in the amount of money leads to a decrease in interest rates; if money becomes scarcer, interest rates rise. According to tradition, one wanted to free oneself from this control mechanism of a functioning economy with the development of crypto currencies.

How do you get Bitcoins and where can I pay with them?

Trading in the digital currency is possible in the form of contracts for difference or as real currency. Contracts for differences - also known as Contract for Differences or CFDs for short - are a speculative financial instrument. Trading in such financial instruments is also known as trading. Because of the risk of loss, it is rarely an option for private investors. Anyone who buys or sells bitcoins in the form of CFDs is betting that the price of bitcoins will rise or fall compared to another currency such as the euro or the US dollar. If the trader has made the correct prediction, he will make a profit. If he has forecast incorrectly, he will suffer a loss. This means that trading in Bitcoins is just as possible as trading in foreign currencies with any other currency pair. Bitcoin CFDs are traded through an online broker.

Bitcoin exchanges are one way of trading real bitcoins. Buying and selling is carried out automatically via a Bitcoin exchange. This means that the buyer only specifies how many coins he wants to buy and at what rate. The purchase itself will be instructed electronically once this price is reached.

If you do not want to buy in an exchange or in a portal, the digital units can also be purchased on a Bitcoin marketplace. Here, as everywhere in trade and business, the price arises from supply and demand. The user makes his bitcoins available on a marketplace, the buyer takes them at the price offered. For the purchase, the equivalent value is paid in a conventional currency. Trading is not carried out automatically, it must be instructed manually.

If you want to buy real bitcoins, you should definitely create an electronic wallet. This "wallet" is used to make deposits and withdrawals from the Bitcoin account. Basically, the transfer of digital currency does not differ from a classic bank transfer. There are several providers of such wallets on the market. The purchases from several Bitcoin portals, exchanges or marketplaces can be combined well in an electronic wallet.

Why is Bitcoin rising so much?

In 2017, the rate for the digital currency rose enormously. Financial experts see different causes for this. On the one hand, Japan has recognized the cryptocurrency as a means of payment. On the other hand, there is always speculation about whether a Bitcoin fund will be set up. The international and national financial supervisory authorities have repeatedly spoken out against it, but the trend is clear. The demand for the digital currency is great. It looks like private consumers and businesses alike have a need for it. It also doesn't seem to matter whether you trade CFDs or whether you trade physical Bitcoins on the stock exchange, on a marketplace or via a portal. The keyword "Bitcoins" is apparently on everyone's lips right now.

Source: Blockchain.info, 2018


Another reason for the rapid rise in the share price is the current reporting. When a country like Japan makes digital currency the official payment method, it will fuel demand even further. In addition, the digital currency is managed independently of the central banks and should also be particularly secure. Ultimately, these arguments speak for the steadily increasing demand and thus for the price increase. It is viewed very critically by financial experts.

Is the Bitcoin currency suitable as an investment?

Finance professionals generally advise private investors against investing in the digital currency. Due to the high price increase, a price decline is possible soon. This means that there is a risk of losing a large part of the capital invested. Anyone who invests on a large scale could be facing ruin within a few minutes. That's because digital currencies are very volatile. This means that their prices fluctuate very strongly within a very short period of time. Against the background of this risk, a cryptocurrency is hardly an option for private investors. Only experienced traders should participate in trading, provided that they are able to reasonably assess the market and the development of prices and when they invest with a sense of proportion with small sums.


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