Bitcoin analysis before trading with CFDs

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The bitcoin is a virtual currency that appeared some years ago, and which, like other real currencies, has its own online exchange rate. We therefore suggest that you discover here how this currency is listed and especially how to analyze the price of Bitcoin.  

Latest news

Bitcoin drops after CFTC announcement

02/10/2020 - 16h44

Find out what caused Bitcoin's fall in the market yesterday and what to watch closely in the US news to better understand how this crypto may evolve in the medium term.

Elements that can influence the price of this asset:

Analysis N°1

First of all, the Bitcoin price is primarily influenced by supply and demand. Thus, the bitcoins in circulation will be compared with the increase in needs and demand.

Analysis N°2

Another very influential factor in the evolution of Bitcoin concerns the regulations on transactions carried out in this cryptocurrency, which are imposed more or less strictly depending on the government.

Analysis N°3

The media and all publications about Bitcoin in the press can give good or bad publicity to this digital currency and therefore have a direct influence on the demand and stock price of this asset.

Analysis N°4

As you probably already know, the community of bitcoin users and developers also has an influence on whether the price of bitcoin goes up or down.

Analysis N°5

Finally, technology itself has an impact on the evolution of the bitcoin price on the stock market. The latest technological advances and innovations thus have the power to influence the price of this value.

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Reminder: What are Bitcoins?

Bitcoins are a sort of virtual currency that was launched in 2009. This digital currency is today the first decentralized peer to peer payment network with no central authority. It is not governed by any specific banking system. In some cases, Bitcoins could be compared to digital cash.

On internet, bitcoins are often called “BTC or “XBT”.

The number of bitcoins in circulation on the market is limited to 21 million units but one of its particularities is that it can be affected by certain events on the stock or commercial markets. It is therefore an extremely speculative asset.

People who want to use bitcoins must have a digital wallet or go through a share broker. Bitcoins are used to buy all sorts of things, products as well as services. Since Bitcoins are increasingly being used, their general trend remains bullish on the long term.

In Canada and the United States, there are hundreds of distribution points of Bitcoins. We have also seen that more and more commercial sites and e-commerce markets accept bitcoins as a way of payment on the internet or physically.

Bitcoins can be exchanged between individuals, among professional or among individuals, on the internet or exchanged against real currencies such as the Dollar or the Euro, taking into account the exchange rate. This is the reason why it is possible to trade bitcoins since they have become a complete asset with a price that is experiencing upward and downward trends, but above all, it has a very strong volatility.

Numerous investors have already made the choice to invest on bitcoins by speculating on the evolution of their price through CFDs or with other trading instruments or financial investment products.


Who can use Bitcoin for trading live?

Any private investor or professional can trade on the Bitcoin price live, but this speculation is very risky, so you need to be experienced and know the stock markets well. This price is in fact listed on the financial markets, just like the other stock markets values and it is therefore possible to use online trading by taking advantage of the very high volatility of this currency.


Historical Analysis of the price of the Bitcoin:

To help you understand better the value of the Bitcoin as an asset to trade, it is necessary to focus on the historical technical analysis of its price. The stock charts show several phases since the first time the Bitcoin was listed in 2010.

While it reached the price of $ 1 in 2011, the Bitcoin price began a long volatile uptrend from May 2011 to March 2013, this uptrend allowed it to reach the $30 mark before falling back below $10 because of the explosion of the bubble.


How are Bitcoins issued and ranked?

One might wonder how bitcoins are issued since they are not a physical currency and are not regulated by any banking authority such as a central bank. In reality, bitcoins are created by a computer software with an innovative algorithm that allows, among other things, to limit the quantity of its payment units on the market. When it was created, the bitcoin was defined based on a finite model of 21 million units in total.

But the software used to issue bitcoins is programmed to regularly undermine bitcoins, at a decreasing rate, while respecting a specific cycle. Thus, from 2009 to 2013, the software issued 50 additional bitcoins every 10 minutes. Subsequently and since January 2013, the software has been issuing 25 bitcoins every 10 minutes. The number of bitcoins issue over the same period will continue to decline over time. The Bitcoin is becoming increasingly popular around the world today.

But what about the listing of this digital currency? Bitcoins are listed continuously on the open market, which means 24 hours/24 and 5 days/7 (From Monday to Friday). This listing, just like that of any other asset in the market, is governed by the relationship between supply and demand and shows a very important volatility. This is the reason why we have seen a rise in the price of bitcoins several times such as in 2013 with a price above 1000 dollars more than an ounce of gold. It has of course, lost some point since then, and it came back to the 1000 dollars mark in 2017.


The historical evolution of the price of Bitcoins on the market:

Since its creation in 2009, the bitcoin has seen its price fluctuate in a very significant and volatile way. It is interesting to observe what has been the tendency of the bitcoin during the last ten years because the graphics show a real trend upwards.

This is the reason why bitcoins are considered today as a first-class investment by numerous investors. This asset can be traded on the short term because of its volatility and on the long term thanks to its propensity upwards which has been clearly shown throughout its history.

In order to invest on bitcoins, you just have to go on internet since there are numerous trading platforms that propose it as an asset. It is thus possible to take a position on its price through CFDs both upwards and downwards. Thanks to CFDs, you can benefit from leverage just like with any other currency.


What are the advantages of trading bitcoins online?

First, it is important to understand that the number of bitcoins is fixed and that it is therefore not possible to create a new quantity of bitcoins as can be done with traditional currencies. The maximum number of bitcoins in circulation on the market is in fact limited to 21 million units. The system plans to divide by two the number of bitcoins created every 4 years when the mark of 21 million Bitcoins is reach by the year 2140. The demand for crypto currencies and in particular for bitcoins is rising sharply and its production is very limited and controlled, which could lead to an upward trend.

We know that more and more internet users are using bitcoins as a currency of exchange to pay for what they buy online. The experts on this field predict a significant increase on the use of this dematerialized currency in the future which will allow a new increment on its price.

Bitcoins have another major advantage by beneficiating from its status as a precursor in the world of crypto currencies. Because of its age, it is the virtual currency for which we find the most applications, and which can be used on most sites around the world. To this day, bitcoin is the digital currently with the highest market capitalization. Despite some shortcomings when it was first introduced on the market, bitcoins remain to this day the leader in its sector of activity and has managed to retain its users massively.

The bitcoin also has a significant advantage for season investors who can use this asset to diversify their investment portfolio. This is the reason why many traders invest in bitcoin in parallel with their current investments. It is also increasingly seen as a reserve currency, as is the Yuan, which has had this status for some years now, even though this status has not been conferred to it yet. It should be noticed that the major central banks are also becoming increasingly interested in bitcoins as a portfolio diversification asset, such as the Central Bank of Barbados, which has suggested that it could incorporate the bitcoin into its reserve currency portfolio.


What are the disadvantages of trading with bitcoins online?

Of course, trading bitcoins online does not only have advantages and the advantages of this asset also faces some disadvantages which you should take into account when you start to speculate about it, here are some examples:

First, we told you earlier about limiting the creation of bitcoins to 21 million units. However, it seems that this cap is not necessarily foolproof. In fact, it remains possible that in the future, this cap could be questioned by the creators and administrators of the system, which could mean a probability to raise this cap. Experts in this field are considering the possibility that an inflation of 1 to 2% will be applied to the Bitcoin by central banks. However, such a change in the bitcoin cap in the long term could also increase the interest of investors in this virtual currency and thus turn into an advantage with a positive impact on its price.

The volatility of bitcoins on the financial markets was previously considered as an advantage for traders who invest in this asset. However, this advantage can also be considered a disadvantage if we take into account the risk that this represents. In fact, the evolution of the price of the bitcoin has mainly up and down movements which sometime have a substantial magnitude and large volumes, the risk of loss should be considered with careful attention. This is why trading bitcoins is mainly reserved for the most experienced traders who are able to react quickly to potential downturns. Bitcoin volatility in the markets is estimated to fluctuate between 2.5 and 4.5% depending on the month.

For the moment, the bitcoin is beyond the control of the authorities and the government and is therefore free to set its own rules. But this situation may well change in the long term and governments could set limits to the negotiation of this virtual currency as they do with traditional currencies. The possibility of such regulations is in fact a real obstacle for the development of FinTech and the bitcoin is an asset particularly sensitive to events affecting China since almost half of the minors come from this country. However, a regulation by the Chinese government is likely to have a significant impact on the future of the bitcoin.

 Another obstacle to the potential development of bitcoin also comes from the fight against terrorism. As surprising as it could seem, to link this virtual currency and terrorist organizations, governments are considering that this type of currency could finance these organizations anonymously. It is therefore possible that actions are put in place in order to slow down its use and this will obviously have an impact on the price of bitcoin.


In short, should we trade Bitcoins and how?

As we have just seen, online bitcoin trading has both a lot of advantages and a lot of disadvantages. One can therefore wonder if it is really interesting to trade on this asset.

Of course, investing in a booming market is always a good idea because it allows you to take advantage of the large transaction quantities and equally important volatility that offer very interesting price differentials in a short time. But this type of trading is reserved for the most experienced investors who have enough knowledge to interpret the charts and identify future trends.

We also do not recommend using a leverage effect that could significantly increase the risks of reversing the movement in the opposite direction of your positions. The use of stop and limit orders is also a plus but must also take into account the upward and downward evolution of this asset, which sometimes shows strong deviations in the context of a strong background trend.

Investors who have a lot of availability will be able to venture into Day Trading strategies that are very interesting on the bitcoin but require constant attention. The technical analysis should be used along with different indicators of choice. But the fundamental analysis must not be neglected since it allows to anticipate any acceleration or reversal in the movement.

The use of CFDs to invest in bitcoins is, as we mentioned above, an excellent idea for the freedom that this type of contract provides to the user. However, we recommend that you only use the bitcoin as a diversification asset and not as the only asset in your investment portfolio. Do not forget to follow the other crypto currencies such as Ethereum which has currently great prospects and is the official competence of the Bitcoin.

Thanks to all the tips that we have just given to you, you will now have every chance to set up effective and efficient strategies for trading bitcoins.

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Trade Bitcoins online!
76.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.