Bitcoin’s (BTC) first trade, took place in January 2009 and was in the amount of 10 Bitcoin. Things have grown exponentially since then, with Bitcoin gaining the highest market share among the newly formed cryptocurrencies.
Tracking the rise in Bitcoin value has become a full-time job, with websites specializing in historical price data, FAQ’s such as how investors should best convert BTC to USD on Crypto.com, conversion tables and Bitcoin news.
Sites offering these kinds of financial libraries are a great resource to help investors understand where Bitcoin values have been and, hopefully, where they might end up. They can also give you an easy-to-find resource on what your holdings in Bitcoin are currently worth, in a major currency of your choosing.
Read on to learn more about Bitcoin and its impact on the financial market.
Bitcoin’s Similarity To Regular Currency
Bitcoin is classed as a digital asset. This means that it must be exchanged for fiat currency before it can be withdrawn as real money. A fiat currency is a national currency, such as the euro, US dollar or British pound.
Surprisingly, these currencies are no longer tied to underlying commodities such as gold or silver, but maintain their value through a shared faith in value ascribed to them by their country’s citizens. The practice, known as the ”Gold Standard” ceased completely in 1971. A country’s government or central bank would normally be the issuer of fiat currency.
In the case of Bitcoin, citizen’s faith would be replaced by the belief of the cryptocurrency’s investors who hold and spend the currency. Movements amongst crypto lobbyists are aiming to sway public opinion, or citizen’s faith, on cryptocurrencies.
Bitcoin has even more in common with traditional currencies. Supply and demand have a large effect on the value of Bitcoin, as a set supply determines what is available and the market then begins to adjust accordingly. The total number of coins that will ever exist is 21 million, equal to a little over 1.2 trillion US Dollars, as of writing in July 2024. This set supply, linked with the normal movements and appetites of the cryptocurrency market as a whole, begin to form a perpetual system.
Trading between Bitcoin and fiat currency can be done on online exchanges, similar to foreign exchange services offered for regular currency transfers.
The cryptocurrency is subject to price volatility due to the above reasons, as well as those of public perception, consumer appetite and competition, just like a ‘real’ currency would be. For those wanting to stay in the cryptocurrency field, but wish to avoid its volatility, companies such as Stablecoin have begun to offer a solution. Stablecoins peg themselves on a fiat currency or a commodity such as gold.
Now that you’ve understood a bit more about Bitcoin and seen its similarities to the currency you already have and purchase with, its time to find out how to transact using it.
Ways To Buy And Sell
Creating an account on a cryptocurrency exchange as well as access to a digital wallet will allow you to buy and sell Bitcoin. This will require the same security documents, known as Know Your Customer (KYC) documentation, that your bank needs when opening a regular account with them.
Cryptocurrency exchanges can be centralized, which means they are operated by a single company or organization. Alternatively, they can also be de-centralized, removing a third-party overseer and allowing for trades between individuals known as Peer-to-Peer (P2) to take place.
Its best to choose an exchange that supports transfers to your local bank and offers transaction fees that make sense for the volume of Bitcoin you will be buying and selling. Ensure that the exchange you choose offers a secure platform to trade through. Competition amongst exchanges since Bitcoin’s start has seen fees drop from low single-figure percentages all the way down to tenths or even hundredths of a percent.
Once you have decided on a suitable exchange, understood their fees and chosen a digital wallet, the process of buying and selling your Bitcoin can begin. Please bear transaction times in mind when dealing with Bitcoin, they are sure to be reduced as time passes, but for now, averages of 10 minutes are the norm.
To summarize, a crypto exchange is a marketplace where Bitcoins can be bought, sold and traded. A digital wallet is required to send and receive these Bitcoins, the wallet acts the way your bank account number would by giving transfers an origin and destination. Each Wallet comes with a key, this key is similar to your bank account’s password and needs to be kept private.
Alternative ways to make use of your Bitcoin include:
- Buying products directly using your Bitcoin, such as clothing items, gift cards, hotel stays and airline tickets. Your Bitcoin can be linked to your fiat card, meaning you are essentially cashing out by making purchases of regular products.
- Drawing cash from a Bitcoin ATM, just bear processing times, admin fees and the availability of such ATM’s in your area in mind.
Food For Thought
As with most forms of investment, it’s important to complete your research. Read up further on the topic of Bitcoin, understand the pros and cons, research fees and then make an informed decision on how you’d like to proceed and whether you’d like to become involved in this new form of digital trade.
