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crypto-basics

What is Bitcoin (BTC)?

Matthew Levy
Matthew Levy

Bitcoin is a decentralized digital cryptocurrency that isn’t controlled by a central bank or government. Transactions involving Bitcoin use peer-to-peer networks without involving banks or other financial institutions.¹

The Role of Bitcoin

Because Bitcoin is a decentralized currency, no single agency dictates its value. The number of bitcoins in circulation is limited to 21 million.² Bitcoin is a highly secure digital currency; while one can easily hack into a network and access online accounts, cracking a node in the blockchain world is extremely difficult. It requires the attacker to control multiple nodes simultaneously to pull off such a hack.³

The cost of international transfer of funds is expensive and can take a few days, especially over a weekend. Bitcoin has the ability to transfer funds within a few seconds, seven days a week. Bitcoin has also been adopted in several businesses due to its flexibility. However, the volatility in price is a significant deterrent for adoption.

Example

The popularity of Bitcoin can be witnessed in the futures contract launched by CME involving USD and Bitcoin. To allow smaller investors to participate, micro contracts have also been created wherein a fraction of a Bitcoin is the underlying asset in the futures contract.⁴

Sources

  1. What is Bitcoin and How Does it Work? Forbes.
  2. Bitcoin Definition. Investopedia.
  3. Can Bitcoin Be Hacked?
  4. Why Micro Bitcoin Futures are a Game Changer. Reuters.

Please note that this article is for educational and informational purposes only and is believed to be accurate and reliable as of posting date but may be subject to change. The example above is for illustrative purposes only. Alpaca does not recommend any specific cryptocurrencies.

Cryptocurrency is highly speculative in nature, involves a high degree of risks, such as volatile market price swings, market manipulation, flash crashes, and cybersecurity risks. Cryptocurrency is not regulated or is lightly regulated in most countries. Cryptocurrency trading can lead to large, immediate and permanent loss of financial value. You should have appropriate knowledge and experience before engaging in cryptocurrency trading. For additional information, please click here.

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Cryptocurrency services are made available by Alpaca Crypto LLC ("Alpaca Crypto"), a FinCEN registered money services business (NMLS # 2160858), and a wholly-owned subsidiary of AlpacaDB, Inc. Alpaca Crypto is not a member of SIPC or FINRA. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC. Depending on your location, cryptocurrency services may be provided by West Realm Shires Services, Inc., d/b/a FTX US (NMLS #1957771).

This is not an offer, solicitation of an offer, or advice to buy or sell cryptocurrencies, or open a cryptocurrency account in any jurisdiction where Alpaca Crypto, or FTX US respectively, are not registered or licensed, as applicable.

crypto-basics

Matthew Levy

Matthew Levy is a Chartered Financial Analyst (CFA) designation holder, a former portfolio manager for $600+ MM in assets, and started his own business writing financial analysis for clients worldwide