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What is Bitcoin? BTC Trading Strategies

Your capital may be at risk. This material is not investment advice.

What is a Bitcoin? Bitcoin is a digital currency or cryptocurrency that is exchanged over the internet using a cryptographic system and that secures transactions through blockchain technology, something like a shared ledger that is kept on several computers in different locations. In this way it is very difficult for the system to be hacked.

The abbreviation for Bitcoin is BTC. To operate with Bitcoin, the same principle applies as in the Forex market , that is, it can be paired with official currencies such as USD (US dollar) or EUR (Euro). In that case, the name of the CFD Bitcoin CFD contract could be, for example, Bitcoin vs USD CFD, or BTC / USD.

Let’s see in detail everything you need to know to operate with Bitcoin:

  • How does BTC work?
  • How do you create a Bitcoin?
  • How to trade Bitcoin?
  • Bitcoin CFD – Scalping
  • Bitcoin CFDs – Intraday Strategies

What is Bitcoin and how does it work

Bitcoin or BTC is a cryptocurrency that offers the opportunity to make fast, secure and low-cost peer-to-peer (P2P) payments without the need for a bank or a central processor.

System transactions take place directly between users’ digital folders and are verified on the blockchain. Transactions are digitally signed with unique private keys, proving that they came from the owner of the wallet.

Blockchain technology in Bitcoin
Blockchain is essentially a decentralized public record of all Bitcoins transactions that have been executed. A certain number of transactions form a database unit, called a “block,” and each block stores information about the previous block, just as each transaction stores information about its preceding transaction. In this way, the blockchain allows full transparency of payments.

The Bitcoins Block Infrastructure introduced a revolutionary method for storing financial data that is accessible to anyone, fully transparent, co-developed using open source and without belonging to any person or entity. Instead, the maintenance of the blockchain is done using the collective power of millions of computers that verify transactions and add them to the “blocks”.

Collectively verified transactions cannot be modified or deleted, so all Bitcoin payments are final and undisputed.

How to generate a Bitcoin

Every time a new block is created on the chain, it is rewarded with 12.5 Bitcoins, which occurs approximately every 10 minutes. It is a reward for the ‘miner’, who is wasting electrical energy and computer power in maintaining the Blockchain network.

Mining involves many specialized people and companies around the world and creates the basic value of Bitcoin.

Bitcoin – Supply vs Demand
The system generates new bitcoins automatically and is self-regulating so there is no way around global rules.

The total supply of Bitcoins is limited, only a total of 21 million Bitcoins can be generated. Every 4 years, the block reward to miners is cut in half, which is known as Bitcoin Halving. The last one was held in May 2020.

Bitcoin Trading 2020/2021 - Technical Analysis

As we can see in the graph above, during 2017 the cryptocurrency market increased by 2,000%. However, in 2018 this market turned around and crashed, causing a loss in terms of capitalization of some 700 billion dollars. A crash that could have been exploited by investing in Bitcoin through CFDs, instruments that allow you to trade short and take advantage of the downtrend.

  • The causes of the 2018 BTC price crash were:
  • Illegal Initial Coin Offerings (ICOs)
  • Money laundering
  • Tax evasion
  • Cyber ​​theft
  • Changes in the markets
  • Low or non-existent regulation in some cases
  • Excessive speculation

Bitcoin recovered little by little until the middle of the following year but fell again in 2019. In the first months of 2020, Bitcoin rebounded at its cross with the US dollar, driven by uncertainty in traditional markets, as many investors they see it as an active refuge.

However, as of February 26, both Bitcoin and the main cryptocurrencies in circulation registered notable falls due to the flight of investors to traditional refuge markets due to the fear of the coronavirus crisis. However, after the general collapse in financial markets due to the impact of the pandemic, Bitcoin starts a rally that still continues today.

Unlike the strong increases in the past, based on investor speculation, on this occasion, this rise has been supported by institutional investors since recently important banks, such as the Spanish BBVA, have announced that as of 2021, They will allow their clients the sale and custody of Bitcoins through their subsidiary in Switzerland, although later they will expand this possibility to other cryptocurrencies.

How to trade CFDs on Bitcoin

Trading CFDs on Bitcoin is probably not much different than trading any other currency pair, commodity or CFD that is trending strongly.

The interesting thing about operations lies in their diversity. Through price action studies, traders look for market entry opportunities, and it is advisable to focus on:

  • Follow the trend
  • Proper money management
  • Focus on the main sessions: London, New York
  • and Tokyo.

Buying at the price dips in BTC / USD is important because it gives traders the opportunity to join the majority of the market and follow the momentum.

Proper money management is the holy grail of trading, and if applied correctly in a strong trending environment there is a chance of achieving returns.

Traders should focus on the major trading sessions as they offer the most volatility in BTC / USD. It is also important to mention that you should only trade Bitcoin CFDs with a regulated CFD and Forex broker, such as IQ Option.

Trading with Bitcoin - How to start trading with Bitcoin

Yes, it is possible to trade cryptocurrencies through IQ Option, including BTC / USD. Traders can access BTC / USD and other cryptocurrency pairs using both MetaTrader 4 and MetaTrader 5 and the exclusive Supreme Edition plugin .

The process is as simple as following the steps below:

  • Download / open the platform
  • Open a new account or log in
  • Open a chart of bitcoin vs dollar (BTCUSD)
  • Start trading!

Scalping Bitcoin Trading Strategy
If you are an experienced trader you can use a scalping strategy to take advantage of the volatility in your favor. Scalping on the BTC / USD pair is done using an excellent double MACD strategy that we also covered in the Forex Begins course .

Due to volatility and trending, this strategy is suitable for trading BTC / USD CFDs on very short time frames such as M5.

The strategy for trading CFD BTC / USD uses:

  • 2 EMA (exponential moving averages), 34 and 55,
  • 2 superimposed stochastics (8,1,3 and 13,1,3),
  • The MACD2Line indicator (34,89,34) or the default MACD MT4 if you don’t have the MACD2Line,

Intraday Bitcoin trading strategies

To trade Bitcoin CFDs on the intraday timeframe, you may want to use our scalping strategy several times a day, or, if you have a daily job and don’t have enough time to scalp, you may want to use a day trading strategy. .

This strategy to trade CFDs on Bitcoin involves the MACD with the RSI and CCI indicators.

In order to apply this strategy you must download the MetaTrader 4 Supreme Edition, as it requires the Pivot indicator. The Pivot indicator offers unprecedented customization that suits both intraday and longer-term traders.

The indicators used for this strategy are:

  • RSI (10, close)
  • CCI (14, typical price HLC / 3)
  • MACD (12,26,9)

The strategy is carried out in the M30 time frame. Traders will buy the BTC / USD CFD when:

  • MACD> O
  • RSI> 50
  • ICC> 0

Price is slightly above Pivot Point support.

The stop loss is placed below the entry point, while the target is the Pivot resistance. In strong trends, this should be a successful CFD trading strategy for BTC / USD.

BTC - History of Bitcoin

Bitcoin is believed to have been created by Satoshi Nakamoto, who announced it on October 31, 2008 on a crypto mailing list in a research paper called Bitcoin: A Peer to Peer Electronic Cash System.

What’s more interesting is that his name is likely an alias used by the unknown person, or people, who originally designed Bitcoin.

In 2016, Australian businessman Craig Wright, Australian businessman, declared himself ‘Mr. Bitcoin ‘, a claim that has been widely accepted by prominent members of the Bitcoin community.

The financial history of Bitcoin originates from 2010, on May 22, when someone bought a pizza. If you haven’t heard of this revolutionary event, don’t worry, you’re not the only one…

Bitcoin Pizza Day

The pizza was not the most important part of the transaction but what was used to pay for it. The meal cost 10,000 Bitcoins, the first time this virtual currency was used to buy something in the real world.

That day is now known as the ‘Bitcoin Pizza Day’ and is celebrated annually by enthusiasts of this cryptocurrency.

Things have changed since then. The use and value of Bitcoin has skyrocketed. If that diner had gotten hold of those 10,000 Bitcoins, it might not have made history but it would have gotten a great return.

Is Bitcoin safe?

Bitcoin is totally transparent. All Bitcoin transactions are public, traceable, and permanently stored on the Bitcoin network.

Since users typically have to reveal their identity to receive services or goods, Bitcoin addresses cannot remain completely anonymous. The Bitcoin network is a peer-to-peer network, and it is possible to register the user’s IP addresses.

The legal situation varies from country to country, but the list of countries that accept BTC is constantly expanding.

Bitcoin’s fundamental value is generated through “mining” and is closely tied to electricity and hardware costs, while the rest of its value is driven by its limited quantity, slow generation process, and growing demand. .

Bitcoin is spreading around the world as a valid payment method for which you can buy various goods and services, which is further driving demand.

At the moment, only Japan officially recognizes Bitcoin as money, while in other countries there is still no specific legislation.

What are Bitcoins and how do they work

As we have already mentioned, the cryptocurrency market is very volatile, which requires having flexible products that allow you to adapt to this volatility as quickly as the market demands.

Here we will see some of the advantages of trading with Bitcoin through CFDs:

  • Leverage up to 1: 2 or 1: 5
  • Possibility of trading 24 hours a day, 7 days a week in pairs with crosses with the EUR
  • Possibility of opening both long and short positions

These flexible trading conditions are due to the fact that the trader is simply speculating on the price movement of the underlying asset (the Bitcoin or the cryptocurrency that he is trading), rather than owning the asset.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future. In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
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