Let's make sure we understand what Bitcoin actually is. In its simplest form, Bitcoin is a cryptocurrency created by an anonymous developer in 2008. The underlying technology is called the "blockchain" and allows the Bitcoin system to operate in a "decentralized" manner.

The Law Term

In layman's terms, this means that no single person or authority controls the Bitcoin network and the currency itself is not backed by any government or central bank. On the contrary, transactions are validated and confirmed by "miners." Anyone can become a Bitcoin miner as long as they have the necessary hardware device.

In return for contributing excess power, successful miners are rewarded with Bitcoin. Bitcoin as a currency is virtual, meaning that it does not exist in a physical form like the pound or the U.S. dollar. Instead, all transactions and account balances in exness mt4 download are stored in the blockchain. Not only is this immutable to the threat of misconduct, but it also allows for anonymous, fast, and inexpensive transfers.

That being said, the main use case for between up to this point has been speculative funds. Because of this, it is now a multi-billion pound asset class that can be traded by both retail and institutional clients.

What is bitcoin trading?

If an asset has value, it is likely that a tradable market exists. Whether it's oil, gold, wheat, sugar, or grain, most commodities that derive value can be bought and sold by investors - with the primary goal of making money. This concept is no different with Bitcoin and other cryptocurrencies.

Therefore, you can now trade BItcoin just like any other asset class. With this in mind, Bitcoin trading is also similar to Forex trading in that you trade Bitcoin against another currency. This can be a fiat currency like GBP, USD or EUR or an alternative digital currency like Ethereum and Ripple.

Note: Although Bitcoin has the currency code 'BTC', some platforms use 'XBT' instead.

However, the largest and most liquid Bitcoin pairing is that of the US dollar. At the time of writing this guide, the BTC / USD market has facilitated more than $24 billion worth of trades in just 23 hours. Whether you want to trade a few pounds or a six-figure amount, there is more than enough liquidity to go around.

Let's take a look at how a Bitcoin trade might work in practice.

•     You decide to trade Bitcoin against the US dollar, as this is the largest marketplace in this space.
•     The price of Bitcoin is currently at $10,000 - although you believe that the price will rise in the short term.
•     As such, you place a buy order for the BTC / USD pair at 500 USD
•     Over the course of the next 48 hours, Bitcoin rises to 12,000 USD - representing a 20% profit
•     If you invested 500 USD, your 20% gains will have earned you a profit of 100 USD

Note: Although the BTC / USD is denominated in the US dollar, your UK-based broker may still convert gains and losses into pounds sterling.