What Is Bitcoin and How to Trade It

Bitcoin (BTC) is the first cryptocurrency in history, created in 2009 by an anonymous person or group known as Satoshi Nakamoto. BTC operates on a decentralized peer-to-peer network called Bitcoin, where users can send and receive digital currency without intermediaries like governments or banks.

As the pioneering cryptocurrency, Bitcoin introduced blockchain technology—a distributed ledger reinforced by a network of computers that ensures the security and integrity of transactions. The Bitcoin protocol limits its total supply to 21 million BTC, creating a sense of scarcity similar to precious metals like gold.

Bitcoin serves as both a medium of exchange and a store of value. Its decentralized nature and finite supply have led many to consider it "digital gold." Over the years, Bitcoin has paved the way for thousands of alternative cryptocurrencies, known as altcoins.

As of December 2024, Bitcoin is the largest cryptocurrency by market capitalization.

Bitcoin vs. Bitcoin Cash: Key Differences

Bitcoin Cash is a hard fork of Bitcoin created in 2017—a split in the blockchain due to incompatible rule changes, resulting from disagreements within the Bitcoin community regarding block size scalability.

Here’s a summary of the main similarities and differences between Bitcoin Cash (BCH) and BTC:

Besides Bitcoin Cash, other significant hard forks related to the original Bitcoin blockchain include Bitcoin SV, Bitcoin Classic, and Bitcoin Gold.

How Does Bitcoin Work?

Bitcoin is a blockchain—a publicly accessible digital ledger—and its native cryptocurrency is called BTC. A decentralized network of computers, called nodes, records and verifies all transactions in its distributed ledger to ensure transparency and immutability. This means that once a transaction is recorded, it cannot be altered or deleted.

Proof of Work (PoW) is Bitcoin's consensus mechanism. Consensus mechanisms are a set of rules that govern and maintain the integrity of a blockchain. Through PoW, users called "miners" validate transactions and secure the network on blockchains like Bitcoin. New BTC is generated whenever a miner creates a new block, for which they are rewarded as an incentive.

How Does the Bitcoin Mining Process Work?

• Transaction Initiation: A user initiates a transaction by sending Bitcoin from their wallet to another user's wallet. This transaction is broadcast to the Bitcoin network, where it joins a pool of unconfirmed transactions.
• Mining and Validation: Miners collect these unconfirmed transactions and group them into a block. Using specialized hardware, miners compete to solve a complex mathematical puzzle associated with the block. This involves finding a unique value that, when hashed with the block's data, produces a hash value meeting the difficulty criteria set by the network.
• Block Addition: The first miner to solve the puzzle broadcasts the newly mined block to the network. Other nodes verify the validity of the block and its transactions. If accepted, the block is added to the blockchain.
• Reward and Fees: The miner who solves the puzzle receives a reward in newly generated bitcoins, known as the block reward, plus the transaction fees included in the block. This provides an incentive for miners to continue validating transactions.
• Confirmation: The transaction receives confirmations as new blocks are added on top of the block containing it. The more confirmations it has, the greater the security and finality of the transaction.

Bitcoin has a fixed supply limit of 21 million BTC, established by its protocol to create scarcity and prevent inflation. The "Bitcoin halving" occurs approximately every four years, halving the block reward for miners. This could influence long-term price increases due to reduced mining supply, potentially leading to over-reliance on secondary markets.

No central authority controls the Bitcoin network. Instead, it is maintained by a global community of users, miners, and developers who adhere to the protocol's rules. Altering the blockchain would require overwhelming the majority of the network's computing power, making BTC more resistant to censorship and fraud compared to traditional financial systems.

History of the BTC Price: How Much Is One Bitcoin Worth?

The price of BTC tells a story of significant volatility, influenced by technological advancements, regulatory developments, and market sentiment since its launch in 2009.

In its early days, Bitcoin had relatively little value and was traded among enthusiasts for fractions of a cent. In 2010, the famous "Bitcoin Pizza Day" marked the first real-world transaction when 10,000 BTC were exchanged for two pizzas.

Mainstream attention grew when Bitcoin surpassed $1,000 for the first time in December 2013, influenced by media coverage and growing adoption. But this momentum was short-lived when a group of hackers stole 850,000 BTC from Mt. Gox—the largest Bitcoin exchange at the time—which caused a considerable price drop and a decline in market sentiment.

Past performance is not a reliable indicator of future results.

The price of Bitcoin accelerated in 2017 during the "cryptocurrency boom," reaching $20,000 in December as the crypto market experienced its first major bull run. Retail trader enthusiasm contributed to the boom, fueled by the rise of Initial Coin Offerings (ICOs) and extensive media coverage. The CME and CBOE also launched Bitcoin futures trading in December 2017, introducing legitimate crypto derivative products to the U.S. market. The bubble burst in early 2018, leading to a prolonged bear market known as the "crypto winter," during which Bitcoin's price fell below $4,000 by the end of the year.

The emergence of the COVID-19 pandemic in 2020 triggered great global economic uncertainty, causing many traders to seek alternatives to traditional financial markets. Institutional adoption increased, with companies like MicroStrategy, Square, and Tesla pouring billions into Bitcoin, which rose to an all-time high of around $64,000 in April 2021.

Bitcoin (BTC) faced significant headwinds in 2021, as certain macroeconomic factors—such as rising inflation, central bank interest rate hikes, and geopolitical tensions—caused a broad market decline. Some high-profile events, like the bankruptcy of the FTX cryptocurrency exchange, eroded trader confidence, causing Bitcoin's price to fall below $20,000 in June 2022.

By 2023, the market showed signs of stabilization. Institutional traders cautiously returned, and technological advancements like the Lightning Network improved transaction speed and efficiency. These events helped restore some confidence in the cryptocurrency market.

Now, let's take a closer look at 2024:

• January 2024: The U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs, marking a significant milestone for institutional adoption. This approval provided regulated avenues for traders to gain exposure to Bitcoin, boosting market confidence.
• April 2024: BTC underwent its latest halving event, reducing the mining reward from 6.25 BTC to 3.125 BTC. Historically, halving events have triggered price increases due to reduced supply. However, the 2024 halving did not immediately trigger a significant price rally, suggesting that market dynamics may be evolving.
• November 2024: BTC reached a new milestone by surpassing $90,000 for the first time on November 14. The momentum continued, reaching $94,800 on November 20 and climbing to nearly $99,655.50 on November 22. This rapid appreciation intensified speculation about when Bitcoin would reach the $100,000 mark, attracting media attention and trader interest.

What Factors Can Influence the Price of Bitcoin?

The live price of BTC is influenced by factors unique to the Bitcoin blockchain, the cryptocurrency market, and broader economic trends. Here are some key elements that could contribute to its price movements:

Halving Events and Supply Scarcity

Bitcoin has a fixed supply limit of 21 million coins. Approximately every four years, the reward for mining new blocks is halved in an event known as the Bitcoin halving, which reduces the rate at which new bitcoins are mined, thereby increasing scarcity.

Historically, halving events have often preceded significant price increases, as—if demand for BTC continues to grow while its supply decreases—it could push BTC higher*.

*Past performance is not indicative of future results.

Technological Advancements and Network Upgrades

Although Bitcoin's core protocol remains relatively stable, advancements aimed at improving transaction scalability and efficiency can affect its price.

Technologies like the Lightning Network accelerate transaction speed and minimize fees, increasing Bitcoin's appeal as a medium of exchange. Conversely, unsuccessful implementations or lack of adoption could decrease network usage and demand, influencing a decline in the price of BTC.

Macroeconomic Factors and Economic Uncertainty

Bitcoin is often considered a hedge against inflation and economic instability. During periods of economic uncertainty, currency devaluation, or geopolitical tensions, traders may turn to Bitcoin as a store of value, increasing demand.

Conversely, factors such as high interest rates, quantitative tightening policies, and increased market confidence in traditional financial systems—like the stock market—could draw some traders away from cryptocurrencies like Bitcoin.

Market Sentiment and Media Influence

Public perception and media coverage can cause fluctuations in the price of BTC. Positive news, such as support from influential figures or announcements that major companies accept BTC, can boost market sentiment and drive prices up.

Conversely, negative news, such as security breaches, fraud, or critical comments from regulators and public figures, can erode confidence and influence a decrease in Bitcoin's price.

Mining Dynamics and Energy Consumption

Bitcoin's Proof of Work (PoW) consensus mechanism requires significant computing power and energy. Changes in mining difficulty, hash rate, and energy costs can affect miner performance and network security.

Events like mining bans in some countries—such as China—and the transition to renewable energy sources can cause a decrease in hash power, which might affect trader confidence.

Environmental concerns about Bitcoin's energy consumption can also influence trader perception and could lead to regulations impacting the price of BTC.

What Is Bitcoin's Trading Schedule?

Bitcoin (BTC) operates on a decentralized blockchain network that is active 24 hours a day, seven days a week. This means you can trade BTC at any time, including weekends and holidays.

• Cryptocurrency Exchanges: Many exchanges facilitate 24/7 trading, allowing continuous market participation.
• Online Trading Platforms: Some reliable and trusted brokers offer the possibility to trade Bitcoin via CFDs.

If you choose to trade with CFDs, you can monitor the live performance of BTC in U.S. dollars with our comprehensive BTC/USD price chart.

As an alternative, you can check our ETH/BTC price charts, BTC/GBP, and BTC/EUR.

Monitoring this cryptocurrency's activity can help you stay alert to any key fundamental or technical events that may affect its value movements in the short term.

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How to Trade Bitcoin

Bitcoin (BTC) is a cryptocurrency, meaning it can be traded directly on a cryptocurrency exchange or via peer-to-peer transactions. Traders can also choose to trade BTC using a derivative—a financial product that derives its value from the price of the underlying asset.

You can use a Contract for Difference (CFD) to trade the price of BTC pairs. A CFD is a contract, typically between a broker and a trader, where one party agrees to pay the other the difference in the value of a security between the opening and closing of the trade.

You can use CFDs to trade on whether you believe a BTC pair will rise (called "going long") or fall ("going short"). CFDs give you access to leverage, allowing you to take larger positions with a relatively small outlay. This amplifies both your potential profits and potential losses, making CFD trading risky.

Besides CFDs, you can also trade BTC using certain financial instruments like futures, options, ETFs, and investment funds. Each offers an alternative to leveraged CFD trading that suits different risk profiles and strategies.

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Frequently Asked Questions

What is Bitcoin?

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network without a central authority. It uses blockchain technology to secure transactions and control the creation of new units.

How does Bitcoin mining work?

Bitcoin mining involves using computer hardware to solve complex mathematical problems. Miners validate transactions and add them to the blockchain, receiving new bitcoins as a reward for their efforts.

What is a Bitcoin halving?

A Bitcoin halving is an event that occurs approximately every four years, reducing the block reward given to miners by half. This mechanism controls the supply of new bitcoins and introduces scarcity.

Can Bitcoin be used for everyday purchases?

While Bitcoin can be used for transactions, its primary role is often as a store of value. Some merchants accept it, but transaction speeds and volatility can be limiting factors for everyday use.

What factors affect Bitcoin's price?

Bitcoin's price is influenced by supply and demand, market sentiment, regulatory news, technological advancements, macroeconomic trends, and media coverage.

Is Bitcoin trading available 24/7?

Yes, Bitcoin trading occurs 24 hours a day, seven days a week on cryptocurrency exchanges due to the decentralized nature of its blockchain network.