Bitcoin is a cryptographically-secured digital currency that operates outside of the mandate of a central authority. It was created in 2009 by the pseudonymous Satoshi Nakamoto, and originally conceived as a method of payment that wouldn’t be subject to government oversight, transaction fees or transfer delay – unlike traditional ‘fiat’ currency.
Back in 2010, Bitcoins were worth around 0.003 cents each. As of December 2017, that figure is upwards of US$14,000 though this value has proved volatile, with frequent intraday swings. In that time, hundreds more cryptocurrencies have emerged, all with unique features and applications. Few of these have any significant value, but Bitcoin does have its rivals in the form of Ether and Bitcoin Cash, and – to a lesser extent – Litecoin, Ripple and Dash.
Bitcoin was initially devised as a method of payment, and in certain cases functions as exactly same. But it both lacks widespread adoption and is currently far too volatile to provide a real alternative to fiat currency: vendors need to revise their prices constantly in response to its swings in value.
This means Bitcoin is used first and foremost as an investment, resembling gold and other precious metals more than it does traditional currencies. Like commodities, it is beyond the direct influence of a single economy and largely unaffected by changes in monetary policy.
Remember that while Bitcoin isn’t affected by many of the factors that affect traditional currencies, there are a number of unique influences it has to contend with.
Bitcoin contracts for difference (CFDs) give you exposure to the Bitcoin price without having to actually purchase the underlying asset. This gives you additional confidence because you don’t hold any actual Bitcoins, meaning you don’t need to use a wallet to store them.
Bitcoin is usually quoted against the US dollar — so when you buy Bitcoin on an exchange, you are selling USD and buying Bitcoin. If Bitcoin’s price rises, then you can sell it for a profit, because Bitcoin is worth more USD than when you bought it. If Bitcoin’s price falls, then you make a loss.
When you buy Bitcoin, you’re doing the same thing. But instead of taking ownership of Bitcoin, you’re opening a position that will increase in value as Bitcoin’s price increases against the dollar. If Bitcoin’s price falls, then your position will lose value. You can use CFDs to open short positions as well as long: so if Bitcoin's price drops, your position increases in value.
A number of businesses already accept Bitcoin as a form of payment, though they are still very much in the minority. They include:
Of course, these big names have the infrastructure to cater for the cryptocurrency. But given the regulatory question marks and the volatility of the market, it’s little surprise that Bitcoin integration hasn’t yet become more commonplace.As a foundation for technology
Many companies are looking past the currency itself and towards the decentralised ledger at the heart of Bitcoin.
Blockchain technology has already seen the rise of an array of new business models, including those surrounding global payment, web development and data security. Plus, there are a number of funds looking to invest in blockchain-based projects, bringing cryptocurrency firmly into the eye-line of financial hubs worldwide.