Bitcoin vs US Dollar (BTC/USD CFD)

The BTC/USD pair indicates the number of US dollars required to purchase one bitcoin*.

* 'bitcoin' without capitalization refers to the unit of account BTC, whereas 'Bitcoin' with capitalization refers to the entire network and protocol.

Bitcoin emerged as a revolutionary force in the world of finance in 2009, symbolising decentralisation and financial independence. It was the first cryptocurrency and continues to be the most prevalent today.

Satoshi Nakamoto, a pseudonymous programmer or group, is credited with inventing bitcoin and the blockchain technology on which it is based.

Bitcoin operates as a form of digital currency that can be transferred via a peer-to-peer network. It does not rely on central servers or intermediaries, and so can function independently of the banking system. As transactions are conducted directly between users, it is resistant to censorship and central points of failure, and it is designed to promote financial freedom and resilience.

Every Bitcoin transaction is recorded on the blockchain, which is an immutable public ledger accessible to all, making it a transparent monetary system and promoting accountability.

Instead of being printed or minted by a central authority, new bitcoins are awarded to miners who validate and secure transactions by adding them to the blockchain. Bitcoins are issued on a diminishing scale, and their total supply is limited at 21 million, ensuring that the currency remains scarce and deflationary. Every 210,000 blocks (approximately every four years) the supply is halved, with 3.125 BTC issued every 10 minutes after March 2024.

Bitcoin's permissionless nature is a crucial characteristic. Anyone can generate a Bitcoin address and transmit or receive bitcoins without the approval of a centralised authority. This opens up financial opportunities for individuals around the world, especially those without access to conventional banking services.

The network's decentralised nature also allows everyone to participate. Whether you want to become a miner, operate a node to help validate transactions, or simply use Bitcoin for your financial transactions, there are few barriers to entry, democratising the financial landscape.

Despite higher costs and processing delays acting as impediments to Bitcoin's mass adoption, its use is on the rise, with over 32,000 merchants around the world accepting bitcoin as a form of payment. Faster, cheaper, and lower-value transactions can be achieved through the “layer 2” Lightning Network, which addresses bitcoin’s scalability issues. Bitcoin can also be spent through e-payment services such as PayPal and BitPay, as well as debit cards issued by cryptocurrency exchanges.

Progressive cities and municipalities (such as Lugano, Switzerland, and Rio de Janeiro, Brazil, respectively) allow citizens to pay taxes and invest in cryptocurrencies, while El Salvador and Central African Republic lawmakers have recognized it as legal tender.

Bitcoin's historically volatile performance has been characterised by market cycles in which the asset appreciated significantly prior to retracing up to 80% from its previous all-time high (ATH).

The first recorded exchange rate for the pair was $0.00099 in 2009, while two (now famous) pizzas were bought for 10,000 BTC in 2010. In 2011, bitcoin's adoption began to gain momentum, and its value reached $1.00.

Attaining close to $69,000 per BTC at the height of the 2021 bull run, the market capitalisation of the top crypto briefly surpassed USD1.25 trillion.

Bitcoin is a highly speculative asset that is subject to extreme volatility due to its fixed supply and slightly deflationary properties. It is frequently compared to digital gold. The BTC/USD exchange rate can be affected by a variety of factors and market psychology.

The limited supply of 21 million coins makes it susceptible to price dynamics influenced by scarcity. Positive news, endorsements from prominent figures, or regulatory changes can drive bullish sentiment and price increases, whereas negative news or crackdowns can lead to adverse sentiment and price declines.

The adoption and recognition of bitcoin as a store of value, digital gold, and payment method have a substantial impact on its price. Increased adoption by individuals, companies, and institutional investors can increase demand and prices. Institutional participation can result in enhanced liquidity and legitimacy, which frequently supports higher valuations.

Regulatory developments and legal frameworks pertaining to the use and trading of bitcoin can foster confidence and stability, whereas stringent regulations can cause uncertainty and price volatility.

Technological advancements can enhance security, scalability, or functionality, affecting the perception of bitcoin's value.

During times of economic uncertainty, macroeconomic factors such as inflation fears, currency devaluation, and geopolitical unrest can drive investors to bitcoin as a hedge or safe-haven asset, potentially increasing its price.

Historically, bitcoin has encountered extreme market cycles, which have typically been associated with the asset's halving cycle. This cycle is a significant factor in bitcoin's volatility, and traders should always be aware of where we are within it.

Traders must closely monitor data releases and statements from organisations that can influence regulatory policies, market sentiment, or the broader financial ecosystem when trading BTC/USD. These consist of:

• Statements and regulations from government agencies and financial regulators pertaining to legal status, taxation, anti-money laundering (AML) regulations, and know-your-customer (KYC) requirements. Most notably:
  • The Securities and Exchange Commission (SEC), which is moving towards regulating the crypto sector by filing lawsuits against companies and exchanges that offer crypto products.
  • The Commodity Futures Trading Commission (CFTC), whose mission is to safeguard merchants and investors against fraud and manipulation.
  • Updates to the European Commission's Markets in Crypto-Assets Regulation (MiCA) as part of its digital finance strategy.
• Central Bank decisions, such as those made by the US Federal Reserve regarding interest rates, quantitative easing (the "printing of money" through an asset-purchase programme), or currency devaluation, can increase demand for bitcoin as a hedge against inflation or economic volatility.
• Endorsements of bitcoin or blockchain technology by leading financial institutions (banks or investment firms) can increase investor confidence.
• Announcements from technology firms regarding their participation in digital payment systems, blockchain initiatives, and cryptocurrency acceptance.
• Economic data releases and events that raise concerns about traditional financial markets, such as Inflation Rates, Employment Data, and Gross Domestic Product (GDP) growth, could prompt investors to pursue alternative assets such as bitcoin.
• Geopolitical events, such as elections, trade tensions, or conflicts, can generate uncertainty in financial markets and increase demand for bitcoin, which is frequently regarded as a digital store of value and a hedge against economic instability.
• News related to cryptocurrency exchanges, such as hacks, security breaches, or regulatory actions.