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What Every Binary Options Trader Should Know About Bitcoin

What Every Binary Options Trader Should Know About Bitcoin

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Estimated reading time: 2 minutes

Bitcoin, the world’s “first decentralized currency “, according to www.bitcoin.org was launched in 2009 and is filled with a number of features that make it distinctly innovative and different from other forms of payment:

  • Bitcoin is classified as a ‘crypto-currency’ because it uses a type of military-grade cryptography to secure all transactions
  • It has absolutely no government affiliation, central authority or banks. It is the first decentralized payment network, based strictly on peer-to-peer technology.
  • Bitcoin payment processing is conducted through a private network of computers, and every single transaction is recorded in a public record called the “blockchain”.

The digital currency has started to gain immense popularity, with many businesses such as Amazon, eBay and Dell already accepting it as a form of payment. Unsurprisingly, Bitcoin is now featured as a ‘hot asset’ on many online financial trading platforms. However, before you choose Bitcoin as a trading asset on an online platform, there is one important aspect you should certainly be aware of.

Volatility

With prices rising from $100 to $1,240 and then decreasing to around $375 in a relatively short span of time, Bitcoin quickly earned a reputation of being tremendously volatile. There are a number of different reasons for this phenomenon, but only a few will be focused upon.

Over the last year more and more governments stated that Bitcoin is likely to be regulated in the near future. Announcements made by the IRS stating that the currency should be considered an asset for tax purposes generated an increased amount of volatility.  This is due to a slew of negative incidents such as the infamous Silk Road that was a platform in which Bitcoin was used in conducting drug transactions. Another troubling event was the bankruptcy of Mt. Gox, one of the very first Bitcoin exchanges. Both of these incidents and public panic rapidly caused Bitcoin’s value to plummet. However, many pro-Bitcoin investors considered these events to be evidence that the market was maturing, which subsequently drove up the value once again.

Additionally Bitcoin’s volatility can be attributed to its security vulnerabilities. The Bitcoin community will sometimes expose these weaknesses in order to produce a massive open source response in the form of security fixes. In other words Bitcoin developers must reveal these security concerns to the general public in order to generate viable solutions. Although it has produced fantastic results, Bitcoin embarked on a roller coaster ride. In April 2014 alone, the digital currency plunged over 10% versus the USD.

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Conclusion

Bitcoin offers Binary Options traders another unique way to profit. However, you should be aware of the popular adage, “an educated consumer is the best consumer”. Therefore, before you start trading this asset you should fully understand its dynamics.

 

 

 

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