As economic growth in various areas around the world remain anemic and investments continue to be sluggish, the littlest bit of financial news that offers the potential for major payback is always guaranteed to attract the attention of many.

It is in that context that bitcoin, arguably the “digital currency of the future”, has stepped into the limelight and has been gaining the attention of many around the world. The rise of bitcoin is by no means meteoric but recent trends have given this currency some level of legitimate boost and lasting power.

In this article, we’ll examine the basics of the bitcoin as the next currency to watch out in global finance. We’ll also look at how you can get hold of some bitcoins. Lastly, some introduction into bitcoin trading as a potential lucrative business is in order. If you want the fast facts on the bitcoin and some basic understanding as to how it can help you and your financial bottom line, this article is written with you as the target reader in mind.

What is Bitcoin?

Bitcoin, right now, is a virtual or digital currency. Specifically, it is a peer-to-peer payment system first invented in 2009. As such, there are no valuable physical versions of the bitcoin. Some “physical coins” and “hard paper currency” have been printed or minted but these are mere representations of the actual currency. The real valuable bitcoin only resides in the web, controlled by a complex system of cryptographically protected programs designed to regulate all transactions that involve the bitcoin.

That last part is a bit complicated for some people so it requires a more detailed explanation. In the real-world, the institutions that regulate the use of currencies are the banks, specifically the Central Banks. In the US, the Federal Reserve performs this function. In Europe, it is the European Central Bank. Almost every country in the world that prints its own currency has its own central bank that guarantees the value of the currency.

In the case of the bitcoin, it’s all controlled by a public database that’s heavily protected with complex security programs. This public database known as the block chain keeps a thorough accounting of all transactions involving the bitcoin, past and present. This is done to ensure the integrity of each transaction as well as to guarantee that any specific bitcoin is not double-spent or owned by two or more people at any given time.
To own a bitcoin, users must first open a bitcoin wallet, which is basically your own account that tracks your bitcoin transactions. These wallets are used to make or receive payments and are closely monitored by the block chain via public and private keys. The logic is complex and designed to keep the system safe. As a user, all that you have to remember are two keys, the public and the private key in order to make bitcoin transactions.

What is the difference to fiat money?

Before we can seriously take the bitcoin as a potential investment, we need to be assured of two things: first that the system is secure, and second that the value and integrity of the currency is beyond doubt. This is where the question of fiat money comes into the fore.

Fiat money is essentially legal tender. It exists because there are institutions that guarantee its value. Going back to the example of the US dollar, it is valuable because the Federal Reserve guarantees its value. The same goes for every other legal currency in the world.

The bitcoin is not fiat money in that sense because there are no guaranteeing institutions for it. But… this can all be a matter of perspective. In 2013, the value of the bitcoin tracked against the US dollar appreciated considerably, up to $1,200 per 1 bitcoin, because of the increased confidence in the block chain as the “entity” that guarantees the integrity of the system.

In essence, bitcoin may not be fiat money in the traditional definition but it holds value because it’s existence, traceability, and tradability is guaranteed by a competent and capable system.

So, how does Bitcoin mining work?

There are many ways of obtaining bitcoins and mining is just one of them, although it is one of the more promising ventures lately. You can acquire bitcoin via exchanges where bitcoins are sold for cash, you can also sell products or services and get paid in bitcoins, or you can mine.

Mining is perhaps the most ingenious method that guarantees the integrity of the bitcoin. Mining refers to the allocation of computing power that is then dedicated to policing the bitcoin system, or specifically the block chain. Computers are employed to verify transactions, secure the network, and keep everyone’s bitcoins where they belong.

In exchange for this computing power, users get paid new bitcoins. It is also possible to earn bitcoins as transaction fees when users who are transacting want a faster transaction. The term mining is used because it is analogous to “doing work while results in the release of new bitcoins.”

Why can trading bitcoins be a lucrative business?

Certain individuals and more than a few companies are now investing thousands of dollars to create computers specifically designed for bitcoin mining. This investment is justified because of bitcoin trading.
Only 21 million bitcoins will be released and thus far, about 12 million have already been released making competition for the remaining 9 million a bit more escalated.

And so, like any finite asset available, bitcoin values fluctuate up and down. It works much like a stock where the perceived value is weighed versus the US dollar. We’ve already mentioned how the bitcoin value appreciated to more than $1,200 per bitcoin in November 2013. Even Google stock hasn’t reached that value yet. That fact is turning heads and causing investors to consider entering the bitcoin business.

As for those who don’t have hefty sums to invest in expensive bitcoin mining machines, bitcoin trading is perhaps the most promising options into the bitcoin market. Trading bitcoins means you purchase bitcoin units, keep them, and use them eventually as payment for a transaction or sell them when the price becomes favorable. Either way, you get to treat it like an actual currency or financial asset and allow it to work for you in order to benefit your bottom line.

Where to trade bitcoin CFDs?

There are plenty of online locations where you can trade bitcoin CFDs. Many of these exchanges function similar to commodity trading platforms that we see today. xCFD and EXANTE Bitcoin Fund are two of the more popular bitcoin trading destinations for real-time trading while BIPS is the prime destination for fixed rate trades. There are also websites that specialize in bulk transactions like Bitcoins Direct and bitXoin.

Conclusion

Bitcoin is still a young venture but the limited number of coins that will be released is making this digital currency a potential hotbed for a new form of financial investment. And based on expectations, the bitcoin may not have even peaked yet. As the number of unreleased bitcoins continues to dwindle, the competition for bitcoins will only continue to grow stronger fueling a surge that can drive the bitcoin price higher.
If you are looking for another form of investment to add to your portfolio, pay attention to the bitcoin. It might just be the ticket you need to strike big.

The initial public offering of Facebook on 5/18/2012 caused quite a stir. No wonder, it was one of the ten largest IPOs ever, and the third largest in the United States. The evaluation of the entire company on the day of the IPO was 104 billion dollars. A lot of money for a company that last year, in 2011, just made 3.7 billion in revenue and a profit of one billion. And a lot of money per member – a single Facebook account was valued at $ 115.

Now that the dust has been settled: is it worth buying Facebook shares? Or should you short sell them? In this article, we are going to discuss the long-term opportunities and risks associated with the largest social network of the world.

No matter how the stock will develop in the future you can trade with CFDs at Plus500, one of the very few brokers where you can buy and sell Facebook CFDs in a matter of seconds.

Opportunities – Potential for Facebook Stock

Basically, like every other company, Facebook can generate more revenue by

• adding more customers (more people joining Facebook)
• earning more per customer (eg with higher click-through rates on ads or the introduction of fees)

Let’s have a closer look at these two revenue drivers:

Increase Sales by Attracting More Members

Currently, Facebook counts around 900 million members. Looking at the growth in the past, the mark of one billion members should be reached soon. After that, growth will probably slow down. But 1.2 billion Facebook users by 2015 seems to be a realistic target. This would represent an increase of 33% compared to spring 2012. If everything else would remain the same, revenues would increase by a third and profits would increase even more (because not all costs are variable).

More revenue per user

This revenue driver has far more potential than the former. This is the main lever for Facebook to boost revenues and profits and its potential has probably not yet fully been recognized by stock market analysts.

Facebook currently earns money mainly through advertising. Depending on which model an advertiser chooses, he either pays money per impression or per click. Because ads with low click-through rates become more expensive as time goes by, the click rate is ultimately the decisive factor in both cases.

There is a huge potential with regards to the click rates on ads at Facebook. The current CTR values ​​on Facebook are still very low. Advertisements from the right column are clicked only in an estimated 0.25% to 0.5% of all impressions. So about every 200^th to 400^th viewer of a page clicks on one of the roughly five ads. By comparison, Google Adsense ads usually get CTR in the range of 1% to 5% and the ads shown on the search results pages may be clicked even more often. So there is a potential of increasing revenues by a factor of up to 20x or even more by just increasing CTR. And even small changes Facebook may make in the future will have a huge leverage. The exact value cannot be estimated, but it is not difficult to forecast that the social network will multiply its revenues in the next years by just improving click-through rates on its ads. This could be easily done with a more prominent placement of ads. For example, compare the following two screenshots

• Facebook, where just 14% of the area on a standard monitor is covered with advertising
• and Google, where about twice of the area above the fold (28%) is covered with advertising

At the same time, the advertising space on a website is limited. Because businesses move their marketing budgets more and more form the traditional channels like print and TV to the Internet, the prices per click will continuing to rise in the future. So even if Facebook leaves the whole website design unchanged, it will earn more.

The second lever to increase the earnings per user is to introduce a fee for certain services. Sure Mark Zuckerberg doesn’t want to scare away his standard users. But why shouldn’t Facebook charge a fee for certain services? Think of free mail services. These are also free, but when you want more disk space or better spam or antivirus protection, you will have to pay a fee. This may sound unthinkable, but in combination with the added value to the user a small fee for great value adding services can be justified. In addition it is not carved in stone that companies can use Facebook pages forever free of charge. Web hosting and advertising ultimately costs money and companies are used to pay money for it. A prominent example of a service that recently introduced a fee is Google Maps, where power users now have to pay for the access to the maps.

Risks – Potential Downsides

Long-term oriented investors should also worry about the risks the Facebook stock is facing.

Technology

The technology behind Facebook could be rebuilt with a tiny fraction of the current valuation of the company. There are even open source programs like Dolphin from Boonex which have a similar functionality and are available free of charge.

Rise and Fall are Close to Each Other

Even though Facebook is in a unique situation of being the largest social community in the world, this dominance must not last forever. It is probably fair to say that most users do not want to maintain profiles on various social media communities. So the barriers to enter this market (to replace Facebook) are very high, which is also shown by the currently short time spent on site on the competitor Google +.

But when we have a look back at the short history of high-tech and Internet stocks, we find plenty of fallen heroes. Here are two examples of companies that once dominated their market and now have become unimportant or have lost many of their clients.

Nokia: For more than a decade, Nokia was the largest mobile phone manufacturer in the world. In the first quarter of 2012, it was replaced by Samsung. Nokia has missed the leap from a simple cell phone to the smartphone and the outlook for this company is not good.

MySpace: The first large community of North America was rapidly surpassed by Facebook. In August 2006, MySpace cracked the 100 million users mark. Three years later, it had more than 250 million accounts. The purchase by Rupert Murdoch and his News Corp., however, didn’t help MySpace to stand a chance against the new star Facebook. Some experts estimate that the number of members at MySpace has shrunk to less than 50 million at the beginning of 2012.

Potential Trouble with Authorities / Regulatory bodies / Competitors

Part of the value of the Facebook stocks consists of what this social media company knows about its users. Even if all users agree in the “fine print” in the T&C to give access Facebook access to their personal data, this may not mean that this is in accordance with the law in every country. Protection of personal data will become more and more an important subject for politicians. This may mean that Facebook may lose ways to efficiently monetize its website.

The de facto monopoly in the social community space can also become a roadblock to Facebook. It might be possible that Facebook will have to open up (and share data) with competitors in the future

Overvalued Facebook Stock?

Looking at the multiples at the first trading day, such as P/E (104x) or comparing the market value (104 billion) to the number of members (900 million), which yields to a value of $ 115 per FB account, then Facebook seems to be valued astronomically high. Facebook needs to prove in the near future that it is able to earn significantly more per member than it had been the case in the past.

It is difficult to say whether the Facebook stock is a “buy” or a “sell”. Using traditional metrics to value a company, the stock is overprized. And also that a single user during his customer lifetime should be worth $ 115 seems to be high. On the other hand, the opportunities to increase revenues are great. There has never been a worldwide social network of such a size. Barriers to entry may be low on the technological side. But convincing a huge number of users to spend their time on a new social platform is a much more difficult task.

We would like not to make any buy or sell recommendation on Facebook. It is up to every investor to decide for themselves if the FB stock will increase in value in the future or not.

As we are a FX trading portal, we would like to point you to the possibility to daytrade the FB shares with Contracts for Difference. With a CFD, you can earn a lot of money in a very short time frame (of course with a corresponding high risk of losing most if not all of your investment). If you want to trade CFD on Facebook shares, you can do this with a CFD broker such as Plus500 or AvaTrade.

Gold is a precious metal that is recognized as an international currency. It is also used in different industries such as textile, jewelry, electronics, medical and optical industries. On the stock market Gold is identified as XAU. The X stands for an international entity with a value that is guaranteed either by a state or a central bank. And AU stands for the chemical symbol of gold, and stems from the Latin word Aurum.

Price of Gold

In order to become more familiar with investing in gold, a look at the historical development of the gold price is helpful. The metal is measured in ounces, representing approximately 31.10 grams. In the Forex market, the gold price is measured as the price per ounce in U.S. dollars.

Since the 17th Century the price of gold is determined on the free market. The price of gold is fixed daily at 15 o’clock in London / England, the time when the U.S. stock exchanges are opening. The price of gold is also affected by market participants, central banks and mining companies which hold large amounts of gold reserves. If banks start selling gold or if gold mining companies increase their production, the price of gold goes down. When central banks buy gold or when the production of gold is reduced, the price of gold goes up. However, banks have only limited opportunities to influence the price of gold, since they own only about 20 percent of the total global gold inventories.

The Gold Standard

Also in the 17th Century a gold depository standard was in place. Paper bills could then be exchanged for gold. For this system, the Bank of England had developed (due to its global dominance in trade and finance) the classical gold standard. One hundred percent coverage by gold in this new system was not provided. Therefore, banks were allowed to give out more money than they really had in stock in the form of gold. The gold standard was the British model to a global system. Each traded currency corresponded to a specific monetary amount of gold. Through this intervention policy the gold price was fixed at 3.17 British pounds for centuries and the exchange rates of currencies were firm and unchanged for a long time.
The classical gold standard resulted in international price stability long into the 19^th century. With World War I, the binding of gold to the currency was temporarily lifted. Reinforced by the global economic crisis in 1931, the full convertibility was paused. This allowed traders in the United States to exchange an ounce of gold for five dollars in 1933. Meanwhile, England had lost its preeminence in industry and commerce. With the Second World War, the English financial system broke down, making the United States Dollar the new reserve currency of the world.

Bretton Woods System

With the conference in Bretton Woods in 1944, the U.S. committed to pay for every ounce of gold thirty-five U.S. dollars. Thus the price of gold rose by a factor of seven within eleven years. After President Nixon in 1971 dissolved the agreement on the exchange of 35 dollars for an ounce of gold, the gold price rose to eight hundred fifty dollars in three years until 1980. Within nine years the gold price further evaluated around the 24-fold. This also means that compared to 1971, the gold coverage had fallen significantly to 1:2, and that only half of the outstanding U.S. dollar were covered by the U.S. gold reserves.

Rising Gold Price

By the year 2000, gold was a bull market. And up to 2005 the gold price further increased to the fourteen-fold value, namely $ 500 per ounce. One reason for this was the decline of the U.S. dollar. The other reason for the increase of the value of gold was the increased perceived value of gold due to an uncertain social, political and economic outlook.
Early 2012 the price of USD / XAU was about 1750.00 after the summer of 2011 bounced off at a price of 1921.15. During the year 2012, a further increase over the 2000 USD mark is expected, because in times of global economic crisis, especially emerging countries increase their positions in gold. Furthermore, gold has yet another price potential because it is a resource with limited supply and growing demand in the market.

Trading Gold with a Forex Broker

Meanwhile, many Forex brokers offer in addition to trading currencies also contracts for difference (CFD) and trading with precious metals like gold, silver or oil. With FX brokers, the precious metals are traded exclusively in U.S. dollars. Therefore, traders from outside the U.S. who want to invest in commodities such as gold have also to consider the price development of the U.S. dollar.

Forex traders who use a trading platform such as eToro can trade commodities with no additional software. And trading gold is very similar to trading foreign currencies.

If gold is traded at a Forex broker, the trader can invest into the gold market with a low capital investment (due to margin trading) and at comparably low costs (low spreads). For example, with a leverage of 1:25 traders can benefit from even small price changes. This makes trading gold at a FX broker an attractive opportunity for private investors.
In addition, investing in gold was often a safe and profitable investment in the past. Within the last seventy years the gold price rose steadily, and is therefore unlike paper currencies considered as stable in its value. Therefore, trading gold is especially promising for long-term traders. In the short term, the gold price is subject to strong fluctuations, which is why experienced traders can make big profits in the gold market.

What are the Advantages of Trading Gold with a Forex Broker?

In uncertain economic times, the purchase of precious metals such as gold provides hedging against risks, because gold is not directly affected by inflation. In inflationary times, investing in gold can be profitable.

In addition, traders are required to have only a low capital investment to purchase gold. The trading platforms of various FX brokers, such as eToro offer trading with low margin requirements.

Since gold in general is a safe and valuable asset, the trader strengthens his financial portfolio and the diversification of his investments with the inclusion of gold. And a diversified portfolio means reduced exposure to risks.

Open an account at eToro now in order to start trading gold online now

CFD stands for Contract For Difference.  CFD traders speculate on the difference between the buying and the selling price of an underlying asset. Although the underlying security must not be purchased by the trader, the value of the CFD is dependent from the gains or losses of the underlying asset.  CFDs are available in all relevant markets, ie stocks, commodities, bonds and currencies.

Originally, Contracts for Difference were developed in the 1990s in Great Britain to avoid the stamp duty on stocks. Meanwhile, CFDs are recognized as innovative financial instruments throughout Europe and around to world and are also available for individuals through CFD and Forex brokers. Furthermore, CFDs are not listed but are traded in the OTC (Over The Counter) market. For that reason, CFD traders do not have to pay fees.

The speculative business with CFDs is particularly interesting for active day traders and intraday traders. Due to the high leverage, high profit margins on the invested capital can be achieved. Nevertheless, the traders must be willing to take risks and must have enough funds available, because the leverage effect can also mean huge losses. Therefore, CFD traders must know the market dynamics. A well balanced risk management must be used, as well as the knowledge of how to limit losses.

How does CFD Trading work?

In order to trade Contracts for Difference, the trader uses a special software from his CFD broker.  This application handles all the relevant price information and calculates the leverage effect of the underlying product. All other necessary trading tools are available on the platform of the CFD broker. The software of the Forex and CFD Broker Plus500 for example includes functions to buy and sell, charting tools, access to real-time news and multiple analysis functions.

Click here to take a look at the Plus500 demo account!
CFD Service. Your capital is at risk.

In general, the trader can place orders for long or short positions. The main aim of CFD trading is to buy low and sell high. Above all, the right time of entry and exit is crucial. Therefore, a continuous supervising activity is essential during CFD trading.

With a Contract for Difference, the trader enters a deal with his broker that is not limited to a certain time frame. This means that no contract expiry date exists and that the maturity of the holding period of the positions is unlimited. The margin acts as a security for the broker. This may, depending on the CFD broker, be between one and twenty percent of the total value of the contract. Thus, the margin reflects only a small proportion of the actual value, resulting in the leverage. The CFD broker offer leverages between 5:1 and 100:1. With a leverage of 20:1, for example, the trader can speculate with an investment of $5000 with leveraged volume of $ 100,000. Hence, the higher the leverage, the greater are the chances to win, but the greater is the risk of a total loss.

Example of a CFD trade

A trader expects a rise in price of an underlying asset, and therefore opens a long position, ie he buys a position. The leverage is 10:1. So if he invests $1,000, he can trade a leveraged volume of $ 10,000 of the underlying asset. If the base value increases by five percent, this means an increase in value of the CFD position by $500. The trader closes the position in this moment, and he makes a gain of fifty percent of his invested capital, ie a $500 profit. If the price decreased on the other hand, the trader loses his money in the same way.

What are the advantages of trading CFDs?

Because of the leverage effect, a high volume can be traded with only a small investment. Even with a low capital investment, this effect causes a high earnings yield. Especially in volatile markets the prospects for high profits are good. Because the CFD traders can profit from both rising and falling prices, there is also the opportunity to earn money in falling markets. On the other hand, volatile underlyings can cause traders to quickly lose their invested money. That’s why we recommend to only trade with money that isn’t really needed and to first gain valuable experiences by trading with a practice account.

A great broker for CFD trading is Plus500 – click here to open a demo account!
CFD Service. Your capital is at risk.