Bitcoin is a relatively new digital currency that enables instant payments to anyone, in any location around the World. Bitcoins
use peer-to-peer technology to operate with no central authority; managing transactions and issuing money are carried out collectively by the network.
The computational process known as “mining” is how Bitcoins are generated. One thing that has to noted is that although it was created to be a digital currency, Bitcoin’s behaviour is identical to that of the traded commodities like gold or silver. Due to its finite nature, there can only ever be 21 million units, the currency is for all intents and purposes, inflation proof, the exact argument that is put forward by advocates of gold and silver bullion.
The initial pricing was US$ 1.00 = 1,309.03 BTC on 5 October 2009. In the space of just four short years Bitcoin’s value increased by a staggering 18400%.
The interesting thing is that BTC can be traded as a currency. USD/BTC can be traded like every other Forex trading pair, just like EUR/USD. However because of the limited amount of Bitcoin that can ever generated, the Market’s liquidity will be relatively low and therefore very very volatile. And as many a Trader knows there is large profits to be made, however, where there are large profits to be made, there may be very large losses to be suffered.
There are now a number of Bitcoin exchanges, the largest being Mt Gox. As awareness and popularity of trading Bitcoin has grown, so has the number of Forex trading platforms that now offer USD/BTC trading as well as options and binary options in the currency. The Forex market has now become aware of Bitcoins and there are some very big players trading in the Dollar/Bitcoin pair. One thing to keep in mind is that as yet there is no way to go short and there is certainly leverage when it comes to trading in the Bitcoin / Dollar market.
A number of Forex traders are trading the new pair but many have pointed out that there are very few alert programmes let alone credible charts, and up till now they have been trying to trade with “Heath Robinson” improvisations.