What is Bitcoin?
Bitcoin (BTC) is a form of digital money that can be sent, received, and stored without a bank, government, or payment processor. Each Bitcoin exists as a digital token on a decentralised network, and ownership transfers electronically between users.
Bitcoin serves two primary functions: it works as a medium of exchange for goods and services, and it acts as a store of value, similar to how investors hold gold as a long-term asset. Unlike traditional currencies issued by central banks, Bitcoin has a fixed supply cap of 21 million coins, which means no authority can create additional units.
When was Bitcoin invented?
Bitcoin was invented in 2008 by a person or group using the pseudonym Satoshi Nakamoto. Nakamoto published the Bitcoin whitepaper on 31 October 2008, outlining a peer-to-peer electronic cash system designed to remove the need for financial intermediaries. The first Bitcoin software launched in January 2009, and Nakamoto mined the first block of the Bitcoin network, known as the genesis block, on 3 January 2009.
Are Bitcoin and crypto the same?
Bitcoin and crypto are not the same. Cryptocurrency is the general term for all digital currencies that use cryptographic technology to secure transactions. Bitcoin is one cryptocurrency, and the first to be created, but it is not the only one.
How does Bitcoin work?
Bitcoin works as an electronic payment system that allows people to send money directly over the internet without a bank or intermediary processing the transaction. Every Bitcoin transaction is verified by a global network of computers and recorded on a public digital ledger called a blockchain.
A Bitcoin transaction follows four steps:
The sender initiates a transfer, and the transaction is broadcast to the network.
Computers on the network, called nodes, confirm that the sender owns the Bitcoin and has not already spent it.
Miners compete to group verified transactions into a new block by solving a cryptographic puzzle, a process called proof of work.
The winning miner's block is added to the blockchain, and the transaction is final and cannot be reversed. The miner receives newly created Bitcoin as a reward.
No single company or server controls the Bitcoin network. The system runs on thousands of independent computers worldwide, which means no authority can freeze accounts, block payments, or alter transaction records.
What is blockchain?
A blockchain is a decentralised digital ledger that records transactions across a network of computers. Bitcoin was the first application of blockchain technology, and the Bitcoin blockchain remains the largest by network size. The ledger is not stored in a single location: every computer on the network holds a complete copy of the transaction history, and all copies update simultaneously when a new transaction is verified. Transactions are grouped into blocks, and each block is cryptographically linked to the one before it, forming a continuous chain that cannot be altered without breaking every block that follows it.
What moves the price of Bitcoin?
The price of Bitcoin is driven by supply and demand. The 6 factors that influence Bitcoin's supply and demand include:
Halving
Global money supply (M2)
Regulation and government policy
Market sentiment and media coverage
Leverage and derivatives
Competition from other cryptocurrencies
1. Halving
Every four years, the rate at which new Bitcoins are produced is cut in half, an event called the halving. Each past Bitcoin halving has preceded a significant price rally in the following months, though past performance does not guarantee future results. The next halving is expected in 2028.
2. Global money supply (M2)
Bitcoin tends to rise when global money supply expands and struggles when liquidity tightens. Governments with high sovereign debt levels are likely to continue expanding money supply, which has historically supported Bitcoin's price as investors seek assets with a fixed supply.
3. Regulation and government policy
Announcements by governments, investment firms, or corporations that they are buying Bitcoin to hold as reserves or accepting Bitcoin as payment can push the price higher. Decisions to sell Bitcoin holdings or restrict access can push it lower.
4. Market sentiment and media coverage
Negative press can trigger panic selling of Bitcoin, while positive news tends to push the price higher. Social media amplifies this effect, and Bitcoin's 24/7 news cycle creates rapid sentiment shifts that move the price within minutes.
5. Leverage and derivatives
Borrowing and derivatives magnify both rallies and corrections in Bitcoin's price. Heavy use of leveraged perpetual futures can precipitate sharp crashes when an initial price drop triggers forced liquidation of long positions, creating cascading sell pressure.
6. Competition from other cryptocurrencies
Alternative cryptocurrencies can divert capital and attention away from Bitcoin, reducing demand and putting downward pressure on Bitcoin's price.
Where does Bitcoin get its value?
Bitcoin gets its value from what people are willing to pay for it in the market. There is no central authority that sets a Bitcoin price, no underlying asset backing it, and no government guarantee. Its value is determined entirely by supply and demand across global exchanges.
Five properties support that market value:
Fixed supply
Halving
Network security
Decentralisation
Liquidity and convertibility
1. Fixed supply
Bitcoin has a hard cap of 21 million coins, and no authority can create additional units. This ceiling is enforced by the network's code, not by a policy decision that can be reversed.
2. Halving
The rate at which new Bitcoins enter circulation is cut in half every four years through a process called Bitcoin halving. Each halving reduces the incoming supply permanently, tightening the scarcity built into the network's design.
3. Network security
The Bitcoin blockchain has maintained its integrity since its earliest days. The protocol's only significant vulnerability, a 2010 overflow bug that briefly created over 184 billion Bitcoins, was resolved within hours through a community-coordinated soft fork. Thousands of independent computers validate every transaction, and the cost of attacking the network exceeds the potential reward. This track record gives holders confidence that their Bitcoin cannot be counterfeited, seized, or duplicated.
4. Decentralisation
No single entity controls Bitcoin. This independence from governments and financial institutions makes it attractive to investors seeking an asset outside the traditional banking system, particularly in economies experiencing currency devaluation or capital controls.
5. Liquidity and convertibility
Bitcoin is the most liquid cryptocurrency and trades on hundreds of exchanges worldwide. Holders can convert Bitcoin to fiat currency at any time, and this ease of exit reinforces its perceived value. An asset that cannot be easily sold is worth less than one that can.
Bitcoin has no intrinsic value in the way a commodity like oil has industrial utility. Its value rests on collective agreement among market participants that it is worth holding, spending, or trading, reinforced by the five properties above.
What is Bitcoin used for?
Bitcoin has 4 primary use cases:
1. Payments. Bitcoin functions as an alternative form of payment for goods and services. Transactions settle directly between sender and receiver without a bank or payment processor, and cryptographic verification secures each transfer. Merchants in industries including e-commerce, travel, and technology accept Bitcoin as payment.
2. Store of value. Investors hold Bitcoin as a long-term asset, similar to gold. Its fixed supply cap and independence from central bank monetary policy make it attractive to holders seeking protection against currency devaluation and inflation.
3. Transferring value across borders. Bitcoin enables international transfers without the fees, delays, or currency conversions associated with traditional wire transfers. The sender and receiver need only a Bitcoin wallet and an internet connection, regardless of their location.
4. Crypto trading. Bitcoin is the most actively traded cryptocurrency by volume. Traders speculate on Bitcoin's price movements across spot exchanges, futures markets, and CFD platforms. Bitcoin's volatility and 24/7 market availability make it a popular instrument for short-term trading strategies.
How can I start trading Bitcoin?
You can start trading Bitcoin by following these 3 steps:
Choose an instrument
Bitcoin is listed under the ticker symbol BTC on cryptocurrency exchanges and quoted as BTCUSD when priced against the US dollar. It can be traded through spot exchanges (buying and selling actual bitcoin), futures contracts, or CFDs. Spot trading requires ownership of the coin, while futures and CFDs allow traders to speculate on price movements without holding bitcoin directly.
Select a platform
The instrument determines the type of platform. Spot trading takes place on cryptocurrency exchanges, while futures and CFDs are offered by regulated brokers. Key selection criteria include regulatory status, available leverage, and fee structure.
Place and manage the trade
Open and fund an account, analyse the market, set a trading direction, and manage the position using stop-loss and take-profit orders.
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How do I get Bitcoin?
There are 3 ways to get Bitcoin:
1. Buy on a cryptocurrency exchange. Exchanges allow users to purchase Bitcoin using fiat currency (such as USD, EUR, or AUD) via bank transfer, credit card, or e-wallet. The Bitcoin is stored in a digital wallet on the exchange or transferred to a personal wallet.
2. Receive Bitcoin as payment. Individuals and businesses can accept Bitcoin as payment for goods or services. The sender transfers Bitcoin directly to the receiver's wallet address, and the transaction settles on the blockchain without an intermediary.
3. Mine Bitcoin. Mining involves using specialised computer hardware to validate transactions on the Bitcoin network. Miners who successfully verify a block of transactions receive newly created Bitcoin as a reward. Mining requires significant upfront investment in equipment and electricity, and the reward amount halves every four years.
