Bitcoin operates as a decentralized digital currency, allowing users to perform peer-to-peer transactions without the need for a central authority. Here's a simplified explanation of how it works:
1. **Transactions**: When you send or receive bitcoins, the transaction is broadcast to the Bitcoin network.
2. **Blockchain**: These transactions are grouped into blocks and added to a public ledger called the blockchain.
3. **Mining**: Miners use powerful computers to solve complex mathematical problems that validate and secure transactions on the blockchain, earning bitcoins as a reward for their work⁵⁶⁷.
As for trading strategies, there are several approaches you can consider:
1. **Day Trading**: This involves buying and selling bitcoin on the same day to take advantage of short-term price movements.
2. **HODLing**: A long-term investment strategy where you buy bitcoin and hold onto it, regardless of market volatility.
3. **Swing Trading**: This strategy aims to profit from price 'swings' in the market over a period of days or weeks.
4. **Scalping**: A strategy that involves making dozens or hundreds of trades in a single day to "scalp" a small profit from each¹²³⁴.
Each strategy has its own level of risk and requires different skills, such as technical analysis for day trading or a strong understanding of market fundamentals for HODLing. It's important to do thorough research and consider your risk tolerance before starting to trade.
Source: Conversation with Bing, 25/03/2024
(1) How does Bitcoin work? - Bitcoin. https://bitcoin.org/en/how-it-works.
(2) What Is Bitcoin And How Does It Work? - Forbes. https://www.forbes.com/advisor/investing/cryptocurrency/what-is-bitcoin/.
(3) How Bitcoin Works - Investopedia. https://www.investopedia.com/news/how-bitcoin-works/.
(4) Bitcoin Strategy: Easy Crypto Strategy In 5 Steps — 2023. https://tradingstrategyguides.com/best-bitcoin-trading-strategy/.
(5) 20 Best Bitcoin Trading Strategies 2024 - Quantified Strategies. https://www.quantifiedstrategies.com/bitcoin-trading-strategies/.
(6) 7 Best Cryptocurrency Investing Strategies | Investing | U.S. News. https://money.usnews.com/investing/articles/best-cryptocurrency-investing-strategies.
(7) 5 Beginner Crypto Trading Strategies to Master | CoinMarketCap. https://coinmarketcap.com/alexandria/article/5-beginner-crypto-trading-strategies-to-master.
