In the beginning of 2017, there came a proposal by Cameron Winklevoss and Tyler, which was rejected later by the U.S. Securities and Exchange Commission. The infamous duo claimed that Mark Zuckerberg, the trail-blazer and founder of Facebook, had stolen their idea and built Facebook. They came to add more that this happened during their Harvard days and when they planned to launch a Bitcoin-based Exchange-trade Fund (ETF). The decision of SEC came after almost 4 years since the duo filed for regulatory approval.
As soon as the news broke, Bitcoin’s price rolled down to less than $1, 000, which was surprisingly tripled in 2016. Even though, there are several more bitcoin-based ETFs waiting to be approved, and their status seem to be unaffected by the news, the SEC verdict still did not trigger the Bitcoin-based exchanges. On a serious note, the SEC had mentioned that the proposed ETF was not processed, because of its poor regulatory standards and Cryptocurrency market is unregulated. It was quite astounding then, when SEC agreed to review its decision on the making of Bitcoin-based ETF just after a couple of months ever since, i.e. on 24th of April, 2017. Within a span of 4 months, since SEC’s decision to review its previous rejection on ETF, Bitcoin price chart saw a boost of 163%, which is not insignificant.
Know What Bitcoin Is
Bitcoin is digital currency that has created waves in the virtual world ever since. In 2009, the coin was designed (virtually), generated and circulated in the market for the very first time. There’s a Computer Math, named ‘Blockchain technology,’ solving which Bitcoin is generated, but the percentage is too little that you will feel like continuing with the game for as many times as you can.
With time, big businesses started accepting Bitcoins as a payment type, and as of today, best virtual currency Bitcoin accounts for $122 billion market share of the total $185 billion. There are certain factors behind Bitcoin’s hiked price, which include: 1) Supply Scarcity. Solving one Blockchain cannot generate sufficient Bitcoins to be available to someone and then to the market. The rarest group of people takes up the challenge and solves it. 2) Media’s collaboration with investors: Let’s suppose, an investor has invested quite a significant amount in Bitcoins, following this he will want to publish good things about it, resulting in price hike and more investors coming into the landscape.
Bitcoin Trading: Why Is It Always A Buzz?
Bitcoin market is run by individual investors mostly, and quite unlikely the fiat currency market. This makes the market free and open to all. The disadvantage of Cryptocurrency trading in a market controlled by influential investment banks is that an individual with nominal capital can’t trade. Reason: Over the years, large-scale institutions have invested enough to create computers, programmed with high-frequency algorithms. The trading is called high-frequency trading and its benefits are quite as follows:
- With such high-frequency algos, these institutions get direct access to the market they want to trade in. This is called direct access, meaning there is no need of going through brokers for them. For example, on placing an order, your order will be picked up immediately to decide which exchange it is going to and then be executed where it seems best. It will then be bought at best price and you get what you exchanged for.
- Secondly, in high-frequency trading, you enjoy an unbelievable speed over the investors. There are though many other ways to utilize the speed, like by placing their servers next to the servers of Exchange, by using expensive and advanced equipment, and also by simply programming the computer in a way that it acts on the commands.
- Thirdly, it has a comprehensive understanding of the micro-structure of the market: What is happening once you are done with order submission to your broker? Where is your order going, how is it being executed and which orders are prioritized? Using a high-frequency computer program, you can access all information and monitor it.
Hence, an individual with limited deposit amount cannot make the most of his trading as he trades against the bigger fish, who own a full-time team of expert crypto traders, who are best at manipulating results. Unlike this scenario, Bitcoin market is free and one can initiate trading with even $1.
Now, apart from these dazzling facts of Bitcoin trading, you should also know the potential risks, if you buy bitcoin online. Although, the concerns are few. These include: Cryptocurrency market is not regulated or even backed by the good will of the government and any other regulatory body. This is where, it comes to stand at a stark contrast to the Yen, Pound, Dollar and other fiat currencies that are accepted and used worldwide. Hence, many view crypto currencies as Monopoly money, for being neither a fiat currency nor based upon any tangible value such as gold. Simply speaking, the price of bitcoin is determined by how people perceive its worth. While, in one sense, it is true of any currency that the price should be based upon its demand in the market, but driving factors in Bitcoin’s case is a bit different and peculiar. It is believed that Bitcoin’s value is way volatile than all other currency forms and the reason is its unregulated mode.
The second thing is, Wall Street does not host Bitcoin trading. Bitcoins are not bought or sold through any broker; instead, the investors setup a bitcoin wallet on any Bitcoin Exchange, Bitcoin wallet is like a bank account which is exclusively used for Bitcoin trading. On successfully setting-up the bitcoin wallet, the holder links it to their traditional, primary bank account and utilizes the bitcoins collected by exchanging with the value of fiat currency.
This apart, Bitcoins are now accepted as payment type as well. You can make direct purchases with Bitcoin or save it for a smart investment when the price will shoot up.