Virtual millions today. Bitcoin - mining and trading
Many, so to speak, orthodox traders smile condescendingly when it comes to bitcoin trading. Indeed, technically, trading cryptocurrency is no different from trading conventional currencies or other assets. However, there is no central bank whose chairman can speak and clarify the situation and prospects in the bitcoin market, there is no key news... All in all, exotic.
The situation changed in 2017, when bitcoin to the dollar has shown a staggering rise, reaching the $3,000 per unit mark. Many beginners and experienced traders alike have decided to take a closer look at the digital currency. We will give you a brief cryptocurrency overview that will allow you to learn everything you need to know about bitcoin.
- Who invented bitcoin?
- Why has the bitcoin exchange rate gone up so much?
- How many bitcoins can be "printed"?
- When will bitcoin run out?
- Could bitcoins become a global currency, replacing traditional money?
- Is it profitable to mine bitcoins yourself?
- How do I get my bitcoin wallet?
- How to make money on bitcoin?
- How does the publication of news and macroeconomic indicators affect the Bitcoin exchange rate?
- Does technical analysis work when trading bitcoin/dollar?
- Scalping and bitcoin are not compatible
- Frequent gaps
- Which trading sessions are best for bitcoin trading?
- Are there trading strategies for bitcoins?
- Is it worth it to start trading Bitcoin?
Who invented bitcoin?
Bitcoin was first introduced to the public in 2009 by a man who called himself Satoshi Nakamoto. It is not known whether this was a real person or a group of people hiding behind a pseudonym. Satoshi Nakamoto communicated only through forums and emails.
There have been no statements on behalf of Satoshi Nakamoto for the last few years. Nevertheless, the original Bitcoin network rules and software he created are still working, and the network is designed in such a way that its creator has the same rights as other users.
Bitcoin - money for criminals and terrorists?
Bitcoin cryptocurrency has no material component, but, roughly speaking, is a digital code. Naturally, the first bitcoin users were people with high computer literacy, as well as people with legal problems.
The media has also done a lot of damage to bitcoin. A persistent association with an online drug store, similar to the anonymous Silk Road online marketplace, was created. In addition, bitcoin exchanges, particularly Mt.Gox, were repeatedly attacked by hackers, which hurt bitcoin's image.
Nevertheless, to say that bitcoins are used exclusively by criminal elements is a false statement. The uses of cryptocurrency are increasing. More and more organizations, marketplaces and services around the world are accepting bitcoins for payment.
Why has the bitcoin exchange rate gone up so much?
As you know, cryptocurrency is completely decentralized. It is not tied to any country, central bank, political and economic environment. The first impetus to the growth of bitcoin was speculation.
In March of this year, the media widely reported that the U.S. Securities and Exchange Commission would approve the first bitcoin-ETF. However, the SEC did not make such a decision, citing concerns about the lack of transparency and regulation in bitcoin exchanges and markets.
Despite this, the popularity of electronic currency in the speculators began to gain momentum, which allowed the bitcoin exchange rate against the dollar to update the historical high above $ 3000, though, then a little "declined" to 2500.
How many bitcoins can be "printed"?
Cryptocurrency is often referred to as "digital gold. A certain analogy is evident - the number of bitcoins, like gold reserves on the planet, is limited. The Bitcoin network, conceived by Satoshi Nakamoto, is designed to generate 21 million bitcoinsAfter that, its existence will be ensured by transactions and commissions.
It is important to understand that mining or mining bitcoins is a very complex process. In mathematical terms, bitcoin is a hash function with many possible answers, but the one it is looking for is the so-called "beautiful" hash, which is characterized by starting with 15 zeros. In other words, the network counts all possible hash variants, and as soon as it finds the "beautiful" hash, it announces that unit solved. At this point, coins are issued, which are credited to the miner who found the block. All transactions are written to the block and the network continues to count the hash, looking for the next value.
Naturally, this is a very, very simplified explanation "on the fingers. In fact, everything looks much more complicated. A short video on how a bitcoin farm works.
When will bitcoin run out?
At the moment, it takes about 10 minutes to search for one block on all available capacities, and its cost is 12.5 bitcoins. In addition, there is a dependence of the cost of blocks on their number - about every four years, which is about 200 thousand blocks, the payment for the block is halved. For example, until the summer of 2016, a block was worth 50 bitcoins, and in about 123 years its value will fall to zero when the last bitcoin is "mined.
In addition, the Bitcoin network is set up in such a way as to clearly preserve the timing and volume of new coin issuance. This is made possible by the introduction by Satoshi Nakamoto of a parameter called complexity. If the Bitcoin network starts to grow and it takes less than 10 minutes to find a block, then every 2016 blocks a checking mechanism is triggered that evaluates the block finding rate and the power of the network. If they deviate from the set value, the complexity of the calculations is increased so as to bring everything back to the desired values.
Thus, the Bitcoin network regulates itself, not allowing deviations from the specified emission schedule, as well as protects itself from the possible collapse of the cryptocurrency, in the case of collusion between miners.
Could bitcoins become a global currency, replacing traditional money?
As we said above, the number of bitcoins is limited to 21 million. Is this a lot or a little?
To the inexperienced trader it may seem that not enough. In fact, it is not.
Traditional currencies are divided into 100 parts. For example, 1 dollar = 100 cents. Bitcoin is divided not into 100, but into 10 million parts, which, after the name of the creator, are called satoshi. That is, 1 VTS = 10 million satoshi. You can meet the names 1 microbitcoin (100 satoshi or 0.000001 bitcoin) and 1 millibitcoin (100,000 satoshi or 0.001 bitcoin).
At the moment we have about 16 million bitcoins, which is 1.6 x 10 to the 14th degree, or 160 trillion units of currency. The total GDP of the Earth is about 70-80 trillion, which means that theoretically bitcoin can replace all the money on the Earth. One can only wonder at Satoshi Nakamoto's foresight.
Is it profitable to mine bitcoins yourself?
It would seem that here it is - the key to riches! Connect your computer to the Bitcoin network and start mining cryptocurrency. You'll get rich, or in our case, you'll get rich. But it's not that simple either.
The fact is that Bitcoin is a peer-to-peer network. That is, the more computing power involved, the more complicated the calculations are. At the beginning of the cryptocurrency era, it was possible to mine bitcoins almost on home computers, using the power of a processor and a video card. By the way, it turned out that graphics processors were better suited for mining. For some time this led to the fact that ATI Radeon video cards were completely swept off the shelves.
Processors and graphics cards have now been replaced by specialized ASIC chips, which are designed exclusively for mining. This has led to a jump in the power used and the complexity of calculations.
The chance of mining a block is proportional to the amount of processing power used, because fast computers figure it out faster. Also, it is related to the speed of the Internet connection, because once the miner has created a valid block, he needs to distribute it as quickly as possible on the network before someone with a faster Internet connection can do so more quickly.
In practice, successful miners are grouped together in groups, or pools, where their processing power is stacked. If they find a block, the reward is distributed among the participants. This is similar to the formation of a lottery fund, where the participant wins less, but more often, and the income becomes more evenly distributed over time.
Currently, the top 10 mining pools consistently create about 90% blocks, with mining pools in China creating more than 60% blocks.
How do I get my bitcoin wallet?
Creating your bitcoin wallet is much easier than it seems. You don't need a copy of your passport, or income certificate, or any information that personalizes the user.
It is very difficult for a beginner in the world of cryptocurrencies to choose a type of bitcoin wallet. This video will help you understand how bitcoin wallets work and make the best choice for you:
To create a wallet for bitcoin storage, you need to go to official website of the bitcoin network. The site supports the Russian language and has a very user-friendly interface for beginners.
On the main page of the site you need to click on the "Get Started with Bitcoin" button.
This will take you to the "Beginner's Guide to Bitcoin" section, where you can learn how to use and accept bitcoins as well as create your own bitcoin wallet.
Clicking the "Choose your wallet" button takes the user to the bitcoin wallet selection page.
As you can see, a wallet for storing bitcoins can be of several types:
- for a personal computer;
- for the device;
- mobile wallet;
- web wallet.
Learn more about how to create your own bitcoin wallet from the video tutorial:
How to make money on bitcoin?
There are several ways to make money from bitcoin. We will describe the most common of them, from the easiest to the most complicated.
Way #1: Entering captchas on websites. Participation in lotteries and games
This method does not require any special mental or physical expenses. The idea is simple - for some action on the site the user receives a reward in satoshi. The amounts of these rewards are insignificant. As one curious user calculated, it would take just over 200 years to earn 1 bitcoin this way.
Method #2: Direct bitcoin mining
This method is more complicated and we will conditionally divide it into two types.
1. Self-Mining
A detailed description of this method can easily be found on the Internet. You will need special freely available software, a powerful (or better, superpowerful) computer, and a lot of time.
2. cloud mining
The idea is the same, but here you buy processing power from a bitcoin farm and, depending on how much money you invest, you make a profit. It does not sound very complicated, but if you expect to invest $100 and become a millionaire in a year, your dream is unlikely to come true. You can find out about contract plans in cloud mining services on your own.
Beware of scammers
We consider it our duty to warn that the main danger of cloud mining is a large number of fraudulent companies. They, of course, do not engage in any mining, for a period of time the profit is paid from the cash receipts from customers, but at one point, once the necessary amount is accumulated, the support stops responding, and the owners of such "mining" rest on your money in the Bahamas.
So if you do decide to take part in cloud bitcoin mining - approach the matter with maximum responsibility.
Method #3. Bitcoin trading
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This way is clear and understandable for traders. A lot of brokers - provides an opportunity to trade BTC/USD pair in MetaTrader 4 terminal.
Strictly speaking, technically, there is no difference in trading bitcoins and classic currency pairs - the rules of technical analysis work, you can use all available indicators, trading strategies and robots.
The main difference is in the use, or rather absence, of fundamental analysis. This comes from the peculiarities of cryptocurrency - the lack of a single central bank, reaction to events in politics and the economy. The nuances of Bitcoin exchange trading will be discussed below.
How does the publication of news and macroeconomic indicators affect the Bitcoin exchange rate?
Bitcoin/dollar pair stands apart among currency pairs. The fact is that bitcoin practically does not show any reaction to the publication of U.S. economic indicators. This is natural, because bitcoin is not a currency of any state and does not play any role in the country's economy.
Another thing is news. That's where bitcoin reacts with gusto. It is very important to follow the news of the cryptocurrency world. If information appears about large investments in bitcoin from serious companies, you can be confident in the growth of the BTC/USD pair and open sell positions. If some hackers have once again robbed the exchange, it is safe to open a sell position.
There is another characteristic point - news has a rather "long-lasting" effect on bitcoin exchange rate. For example, if the publication of NonFarm Payrolls causes an immediate spike in the euro/dollar currency pair, the news for bitcoin has an impact over the next few days.
Does technical analysis work when trading bitcoin/dollar?
The good news is that the classic rules of tehanalysis work for bitcoin as well. As we mentioned above, the chart of the currency pair BTC/USD does not differ from other currency pairs charts. In the same way the pair forms trends, "draws" the figures of technical analysis, you can install on the chart any technical indicators, which will work, as well as on other pairs.
Scalping and bitcoin are not compatible
A necessary condition for scalping is a minimum spread, which bitcoin/dollar pair "boasts" can not - the spread is quite high and is more than 1BTC. It is recommended to trade bitcoin on timeframes from H1 and above.
Frequent gaps
As a rule, gaps in currency pairs occur after the weekend. Bitcoin trades without weekends, but on the chart of the currency pair BTC/USD price gaps often appear. The reason is simple - lack of liquidity during any unexpected news.
Which trading sessions are best for bitcoin trading?
Bitcoin is a cryptocurrency with no single issuing center. Roughly speaking, there is no central bank that prints the cryptocurrency in its basements and regulates its exchange rate. In addition, bitcoin is not tied to any country's economy. Therefore, the activity of traders does not depend on the trading session - sharp movements of the pair are possible at any time of the day.
Are there trading strategies for bitcoins?
Strange as it may sound, bitcoins are easier to trade than regular currencies. The fact is that the speculative factor in Bitcoin exchange rate is too insignificant, which rules out fraudulent movements, "stop hunting" and other tricks of speculators on .
That's why there are no special strategies for bitcoin - they are simply unnecessary. To trade the currency pair BTC/USD you can simple trending strategies. You can also successfully use channel and breakout strategies. Naturally, without neglecting the rules of money management, which also work for cryptocurrency.
Is it worth it to start trading Bitcoin?
As you can see, there is nothing too complicated about bitcoin trading. Even a novice trader can cope with the analysis of H1, H4 and higher charts, the rules of technical analysis work perfectly. The only thing left is to follow the news and, as usual, "not to be greedy" 🙂
In addition, Bitcoin exchange trading has another function. Bitcoin is virtually uncorrelated with other currencies and assets, which allows it to be used for diversification trading portfolio.
We hope that after reading this article, bitcoin cryptocurrency will no longer look so mysterious to you, and the satoshi in your wallet will only be arriving, becoming full-fledged bitcoins.