This article written by David Pieper was originally published in the December 2013 issue of Traders' Magazine.
Some people compare the current hype with the historical tulip bubble, some people talk about a new currency age – the topic is the virtual currency called Bitcoin. This article shows the advantages of Bitcoins, how they work and what perspective Bitcoins have in the future.
One alternative might be Bitcoins. But what are Bitcoins? It is a virtual currency that consists of cryptographically coded data that is forgery-proof. Bitcoins enable the direct transfer from one user to the other and render intermediates like commercial banks and central banks redundant. Instead of a central third party – the central bank or commercial bank – you have a global P2P (Peer-to-Peer) network, where every user takes care of the control of the currency system. The decentralised structure avoids having single powerful players using the system in their favour or manipulating it. A major advantage of Bitcoins in contrast to the current monetary system is anonymity and cheap transaction costs.
- David Pieper has been busy studying the stock market since the late 90s. As early as during his business studies at university and later during a career as an investment analyst at a bank, he combined fundamental analysis with the benefits of technical analysis. Mr Pieper focuses on trading CFDs and works as a freelance writer in the field of technical analysis.
Some people compare the current hype with the historical tulip bubble, some people talk about a new currency age – the topic is the virtual currency called Bitcoin. This article shows the advantages of Bitcoins, how they work and what perspective Bitcoins have in the future.
Decentralised, Unregulated and Anonymous
The concept of Bitcoin was introduced publicly for the first time by Satoshi Nakamoto in 2008 – a time when the global financial world was on the edge. Since then our existing monetary system has been faced with a deepening crisis of confidence and therefore the call for an alternative has become louder.One alternative might be Bitcoins. But what are Bitcoins? It is a virtual currency that consists of cryptographically coded data that is forgery-proof. Bitcoins enable the direct transfer from one user to the other and render intermediates like commercial banks and central banks redundant. Instead of a central third party – the central bank or commercial bank – you have a global P2P (Peer-to-Peer) network, where every user takes care of the control of the currency system. The decentralised structure avoids having single powerful players using the system in their favour or manipulating it. A major advantage of Bitcoins in contrast to the current monetary system is anonymity and cheap transaction costs.
Money Creation in a Different Way
Bitcoins are not issued by a central institution but have to be created. All users within the network can take part. » Decentralised, Unregulated and Anonymous The concept of Bitcoin was introduced publicly for the first time by Satoshi Nakamoto in 2008 – a time when the global financial world was on the edge. Since then our existing monetary system has been faced with a deepening crisis of confidence and therefore the call for an alternative has become louder. insights 21 But it only makes sense if you have a high-performance computer because they earn Bitcoins for the resolution of a highly-complex arithmetic problem. The “Mining”, the money creation, is organised in a way that you need more performance power with time to create additional units of money – it is similar to the production of natural resources. The network creates about 25 new Bitcoins in ten minutes at the moment. In contrast to the current monetary system, where the big central banks try to out do each other by money printing, the Bitcoin money supply is limited from the beginning – to 21 million units which guarantees monetary stability Bitcoin supporters say.
Editors’ Picks
EUR/USD trims losses and returns to the 1.1750 area
The US Dollar resumed its decline in the American afternoon, helping EUR/USD trim early losses. The pair trades around 1.1750 as market participants gear up for the European Central Bank monetary policy decision and the United States Consumer Price Index.
GBP/USD flirts with 1.3400 after nearing 1.3300
The GBP/USD changed course after dipping with UK inflation data, and trades near the 1.3400 mark, as investors expect the Bank of England to deliver a 25 basis points interest rate cut after the two-day meeting on Thursday.
USD/JPY jumps higher to near 155.50 as US Dollar outperforms; BoJ decision eyed
The USD/JPY pair gains 0.55% and jumps higher to near 155.50 during the European trading session on Wednesday. The pair strengthens as the US Dollar outperforms its peers, following the release of the United States Nonfarm Payrolls report for October and November.
Editors’ Picks
EUR/USD trims losses and returns to the 1.1750 area
The US Dollar resumed its decline in the American afternoon, helping EUR/USD trim early losses. The pair trades around 1.1750 as market participants gear up for the European Central Bank monetary policy decision and the United States Consumer Price Index.
GBP/USD flirts with 1.3400 after nearing 1.3300
The GBP/USD changed course after dipping with UK inflation data, and trades near the 1.3400 mark, as investors expect the Bank of England to deliver a 25 basis points interest rate cut after the two-day meeting on Thursday.
Gold maintains its positive momentum, trades around $4,330
The XAU/USD pair gained on a deteriorated market mood, trading near its weekly highs near $4,340. The bright metal advances with caution as market players await first-tier events in Europe and hte United States.
Bitcoin risks deeper correction as ETF outflows mount, derivative traders stay on the sidelines
Bitcoin (BTC) remains under pressure, trading below $87,000 on Wednesday, nearing a key support level. A decisive daily close below this zone could open the door to a deeper correction.
Monetary policy: Three central banks, three decisions, the same caution
While the Fed eased its monetary policy on 10 December for the third consecutive FOMC meeting, without making any guarantees about future action, the BoE, the ECB and the BoJ are holding their respective meetings this week.
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