BTCUSD is the ticker symbol for Bitcoin and the United States dollar exchange rate. BTCUSD is a cryptocurrency CFD because of the presence of Bitcoin as the base currency.
Cryptocurrencies are known for their immense volatility, while the US dollar is by far the most traded fiat currency globally. As a result, BTCUSD is the most popular crypto-to-fiat pair, and it serves as the de facto gold standard for the cryptocurrency market; providing the price direction cue for virtually the entire crypto market.
In the BTCUSD pair, Bitcoin is the base currency, while the US dollar is the quote currency. When, for instance, the price of the BTCUSD pair is 3,100, it means that one would require 3,100 US dollars to acquire 1 Bitcoin.
Launched in 2008, Bitcoin was the first and remains the most popular cryptocurrency. Unlike traditional fiat currencies, which are backed by trusted third parties such as banks and governments, cryptocurrencies are decentralised and backed by peer-to-peer technology.
At the core of cryptocurrencies is the blockchain technology that serves a secure and accurate public ledger of all transactions. By design, there will only ever be 21 million bitcoins, and as of the beginning of 2019, more than 80% of this amount had already been mined.
This scarcity has always fuelled the demand for Bitcoin, and it is one of the key reasons why its value started at a measly $0.003 in its early days and peaked at almost the $20,000 mark in December 2017.
United States Dollar (USD)
Also known as the ‘greenback’, the US dollar is the most reserve held currency in the world. The USD is also the denominator for major commodities such as gold, silver and crude oil in the global markets. As the official currency of the United States, also the world’s biggest economy, the USD is the most stable and liquid currency in the world that has rightly earned the title ‘king of currencies’.
Major Bodies influencing the BTCUSD
The genesis of Bitcoin came during the 2008 global financial crisis, and initially, the crypto was touted as the future of money, essentially as an alternative to fiat.
Based on this, the major influential body that can impact the BTCUSD pair is the US Federal Reserve, which has the mandate over the most powerful fiat currency, the USD. The Fed releases rate decisions 8 times a year, and these are important events for the BTCUSD price.
A rate hike would pressure the BTCUSD price lower, while any rate cut would provide tailwinds for the crypto pair. To put this into perspective, in November 2018, the BTCUSD pair (Bitcoin Index) traded at $3,778.
Mainstream adoption of Bitcoin caused the December 2017 peak of just below $20,000. But as major regulatory bodies sought to impose strict rules governing the space, the crypto party has faced challenging times.
Regulation will continue to be a mixed pill for Bitcoin and other cryptocurrencies. Good headlines will push the BTCUSD price higher, while bad headlines will pressure it lower.
The major regulatory bodies for BTCUSD traders to watch out for are: US’s SEC (U.S. Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission); China’s CSRC (China Securities Regulatory Commission); EU’s ESMA (European Securities and Markets Authority); UK’s FCA (Financial Conduct Authority); and South Korea’s FSS (Financial Supervisory Service).
As stated, earlier Bitcoin provides the price direction cue for almost all cryptocurrencies. Therefore, the BTCUSD has a positive correlation with all the major crypto pairs, such as ETHUSD, BTGUSD, LTCUSD, ETCUSD and XRPUSD.
There is also an interesting correlation with gold. Gold has, for years, been considered a safe haven and a hedge against inflation and fiat- qualities that Bitcoin now portrays. Bitcoin is now effectively the digital gold.
Additionally, the price of gold is measured in USD, something shared by the BTCUSD pair. By sharing fundamental economic qualities, gold and Bitcoin have developed a positive correlation that traders should always consider.
Trading BTCUSD with AvaTrade
AvaTrade offers a wide variety of benefits when trading the BTCUSD pair:
- With AvaTrade, you do not need to create a wallet to trade cryptocurrency.
- With the BTCUSD pair, you can trade cryptos against fiat currencies. Unlike exchanges, where you are restricted to trade only crypto to crypto.
- Since you are trading crypto CFDs and not actually purchasing the digital currency, you can profit from increasing and falling markets.