Bitcoin is the most popular of what are known as virtual cryptocurrencies - internet-based money with lines of computer code that are supposed to make it more secure. Unlike traditional currencies which are managed (or manipulated) by a central bank, Bitcoin is not controlled by any one authority. Instead, the system is maintained by an online community. Bitcoin was founded in 2009 by a pseudonymous developer known as Satoshi Nakamoto, and was championed by an internet community before exploding into the mainstream last year.
Bitcoin balances are kept using public and private "keys," which are long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key (comparable to a bank account number) serves as the address which is published to the world and to which others may send Bitcoin. The private key (comparable to an ATM PIN) is meant to be a guarded secret, and only used to authorize Bitcoin transmissions.
Bitcoin has evolved in recent years into a speculative investment for individuals seeking alpha from alternative assets and a possible hedge against global uncertainties and weakness in fiat currencies. Bitcoin (BTC) is a digital floating exchange that is pegged to the U.S. dollar like in foreign exchange. However, unlike gold, there is no underlying physical asset on which one can base the price.
Forex has always been one of the most attractive investment options for less experienced traders. Now, bitcoin is bringing a new breed of investors to the forex trading space, and many brokers are opening its doors to the digital currency. In fact, this year all along, several forex brokers started to deal with bitcoin, and it seems the interest, both from traders and brokers, in this type of investment is growing exponentially.
The growing popularity of bitcoin as an alternative investment has drawn the attention of forex brokers who are looking to expand their offerings. Some define bitcoin as a traditional currency, especially since the trading of bitcoins is not based on macroeconomics of a nation, but instead the underlying platform and broader reaction to shifts in global economics. Investors should consider the risks associated with bitcoin and alternative currencies, and decide whether that form of speculation is right for their portfolios.