Bitcoin vs. USD – CryptocurrenciesBTCUSD
The financial markets have grown over the years and driven mostly by technology. One such example is ‘Cryptocurrency,’ which is a digital form of currency and serves as an alternative to the paper currency. The basic purpose of cryptocurrencies is to provide an alternative digital method of payment for the common everyday transactions.
Cryptocurrency is said to be a decentralized currency, which means it cannot be governed according to specific government rules or policies; instead, it uses a blockchain technology, which uses a peer to peer internet protocol to authenticate the transactions. Cryptocurrency is traded like every other financial instrument, and traders can buy and sell popular cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and Ripple. But Cryptocurrencies are still not widely accepted by consumers and businesses as it is considered quite volatile and has an uncertain economic future due to no proper rules and regulations that every country can adopt and implement.
Traders among other options can use CFDs (Contract for differences) for buying and selling cryptocurrencies. Through CFDs, traders can speculate on the sudden price changes of a particular cryptocurrency without having to own the cryptocurrency. CFDs allow traders to use leverage and flexibility to open or close a trading position.
The traders have a chance to track the Bitcoin price in the market and have a chance to profit if the market goes in their favour, but there are also chances of considerable losses, so it is necessary to try to manage the risk. As a trader, you can use CFDs to either hold a long position (buy, speculating the price will rise) or go for a short position (sell, expecting the price to fall).
Bitcoin is the most dominant of all the cryptocurrencies and launched to allow two parties to complete a transaction without the need of any intermediary. The purpose of cryptocurrencies was to give an individual full control of his/her finances without the needs of banks or other financial institutions.
What is the BTC/USD currency pair?
The Bitcoin (BTC) pairing with US Dollars (USD) is denoted by BTC/USD and is regarded as one of the most prominent cryptocurrency crosses in the world. Bitcoin is the most popular digital currency, and USD is the most famous fiat currency.
As released in 2009, Bitcoin is still considered to be in its infancy, but it got the big surge in its price in 2017, where Bitcoin price went from $2000 to a staggering $20,000 in December 2017. The price boom in 2017 introduced the Bitcoin to a wider global market. Bitcoin is valued against the most traded currency, which is the US Dollar, and the cryptocurrency exchange ‘Coinbase’ is the place to exchange the BTC/USD pair.
The example of traditional currency exchange is GBP/USD, where GBP (Great Britain Pounds) represents the base currency, and USD (United States Dollar) represents the quote currency. Similarly, in the cryptocurrency pairing, BTC/USD shows Bitcoin as the base currency, and USD is the quote or counter currency. The BTC/USD pair shows the number of US Dollars needed to buy one Bitcoin. The current exchange rate is 1 BTC = $10,215
Bitcoin is the most widely used and accepted digital or virtual currency for online transactions. The BTC market remains volatile and potential for traders to speculate and earn a profit. The USD, on the contrary, is known as the world’s major reserve currency and benchmark for all the global Forex trading and makes up 90% of the overall Forex exchanges around the world. The USD is also used as a common denominator for all the essential commodities such as Crude oil, Gold, and Silver.
The BTC/USD is known to one of the most typical crypto to fiat currency exchange in the world. The volatile behavior of the market makes it a lucrative investment alternative as compared to conventional Forex currency pairs. With the CFD account, traders can try to take advantage of leverage and tight spread to have the possibility to potentially profit. However due to leverage, risk of loss increases.
History of BTC/USD Pair
Bitcoin is known as the first digital currency and sets a benchmark for other digital currencies. Bitcoin was presented in 2009 by a programmer under the name of ‘Satoshi Nakamoto’ who many presume is an alias. Bitcoin is arguably the most favored cryptocurrency used by traders and investors as it works on a peer to peer exchange mode and offers low fees and faster transactional speeds. The value of Bitcoin is determined in the open market as there is no central governing body to determine its price.
Bitcoins are stored and updated in a digital wallet that can be used for buying or selling over the internet. The transactions using Bitcoins are authorized using a digital signature and verified within minutes by a network of miners. All the transactions are calculated and kept in a public ledger, which is known as the ‘Blockchain.’
Bitcoin is said to have the highest market capitalization among all the cryptocurrencies, and it is calculated by multiplying the current price of currency with the supply of currency. A high market cap value means a significant number of users and less risk from an investment perspective. According to collected data, there are over 18 million Bitcoins in circulation, with an estimated total market value of $146 billion as of November 2019. The total Bitcoins are capped at 21 million.
The U.S Dollar (USD) is the world’s most popularly traded currency. USD is also recognized as the world’s most-used reserve currency. Many of the essential commodities such as oil, gold, silver, gas, coffee, sugar and wheat are all valued in US Dollars. In all the global currencies, USD is the most liquid and stable, although many macroeconomic factors slightly influence its value.
How to analyze the BTC/USD Price Chart
The crypto market takes in every detail into consideration, including the historical, existing, and upcoming trends in the price of the cryptocurrency. The past, current, and future demands are also considered in the crypto market. The price movements are not random and follow trends similar to the Stock and Forex markets. For example, the Bullish trend means an upward movement, and bulls or buyers take the market price of a cryptocurrency up by buying. Conversely, the Bearish trend suggests a downward movement, and bears or sellers take the market price down by selling cryptocurrency.
If we look at the price chart of the BTC/USD pair, we see that value remained with the range of $8000 to $10000 from the second week of January 2020 to the second week of March 2020. Then there was a rapid decline in the middle of the second week of March, and the BTC/USD pair fell to the lowest value of $4807.49 on March 12, 2020. The BTC/USD pair is seeing uptrend since May 2020 with a few dips, and the highest value of $12,301.89 was recorded on August 17, 2020.
Currently, BTC/USD pair trades on $10,215. The Bid price is 10215.0, while the Ask price is 10216.0.
If you speculate that the value of BTC will rise as compared to USD, then you open a long or Buy position, and likewise, when you predict the price of BTC will drop against USD, then you open a short or Sell position.
What causes price change in the BTC/USD pair?
Bitcoin is a different financial instrument as compared to Stocks or traditional Forex, which means you cannot purchase it from a corporation, and there are no balance sheets to review. Bitcoins are not sold through any central back or by government, which means that macroeconomic factors such as monetary policy, interest rates, inflation, unemployment, and economic growth do not influence the price of the Bitcoin.
The factors that determine the price movements in Bitcoin are
- The supply and demand of the Bitcoin
- The total cost required to produce the Bitcoin by using the mining process
- The rewards that the miners get by verifying the transactions made through Bitcoins
- The value of the existing rival cryptocurrencies
- The exchanges where the Bitcoin is traded
- The rules that govern the sale of Bitcoins
- The rules and regulations in the adoption of Bitcoins
The important regulatory bodies to look out for when trading with BTC/USD pair are US-SEC (US Securities and Exchange Commission), EU ESMA (European Union European Securities and Market Authority), CFTC (Commodity Future Trading Commission) and UK FCA (United Kingdom Financial Conduct Authority).
The growth of Bitcoin production has slowed down over the years, with 6.9% in 2016, to fairly low 4.4% in 2017, and a considerably low of 4% in 2018. The supply of Bitcoin is also limited as the system has only allowed the existence of 21 million Bitcoins; once that number is achieved, then the mining process will not be used to produce more Bitcoins. For instance, according to reports, the supply of Bitcoin recorded till December 2019 was 18.1 million, which shows a total of 86.2% availability of Bitcoins. After the 21 million Bitcoins are in practical circulation, then the price of one Bitcoin will depend on whether cryptocurrency is accepted as a worldwide mode of payment or not and also on the prices of other cryptocurrencies.
The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.
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