The cryptocurrency pairing of BTC/EOS is a trade on the relative value between Bitcoin, the original and still market share dominant cryptocurrency, and EOS, a more recent arrival that has quickly established itself as one of the top cryptocurrencies. The pairing can be considered a cryptocurrency equivalent to a pair of currencies in forex, made up of two of the fiat currency ‘majors’. BTC is Bitcoin’s symbol and EOS, is of course, that of EOS.
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This is not investment advice.
What is BTC?
Bitcoin (BTC) can be described as a ‘currency’ cryptocurrency. Its nature is as a long-term alternative to fiat currencies. Used as a medium of exchange in payment for some general goods and services, like the dollar, euro, pound or yen but a decentralised equivalent with capped supply. Bitcoin’s overall market capitalisation, while it fluctuates, generally accounts for a huge portion of the total cryptocurrency market and other cryptocurrencies show a significant correlation to its price movement relevant to the dollar. It is often considered the ‘bellwether’ for the broader cryptocurrency market.
Bitcoin was launched in 2009 by a creator who went by the pseudonym of Satoshi Nakamoto. As already mentioned, the new ‘cryptocurrency’ was put forward as an alternative to the incumbent fiat currency system. Bitcoin’s white paper argued that central bank money printing reduced the value of savings over time through inflation and is the major contributing factor to socio-economic and geo-economic financial inequality. This further reinforced by the concentration of economic and financial power in the hands of a relatively small number of the financial services institutions required to facilitate secure storage, credit and non-cash economic transactions.
What is EOS?
While EOS is a cryptocurrency, like Bitcoin, it is one of a very different character. It was not created with the idea that holders are able to exchange it for general goods and services. Rather EOS is considered to belong to a category of cryptocurrencies known as ‘utility’ coins. Utility coins can only be spent within a specific ‘native’ environment – the blockchain platform environment the cryptocurrency is part of.
A good analogy is the tokens used in an entertainment arcade or the chips played within a casino. Both have a relative fiat currency value that they can be acquired or exchanged back for. They are used in the place of cash in their native environment, but you can’t go into the shop next door and use them to buy a loaf of bread. The only practical difference is that cryptocurrency utility tokens are exchange-traded, so their relative value to other cryptocurrencies or fiat currencies fluctuates on market demand and supply as a financial instrument. They are not ‘pegged’ or ‘fixed’ to a medium of exchange currency.
The EOS platform can be compared to other blockchain platforms built for smart contracts and DAPPs, such as Ethereum. However, launched in 2018 after a year-long ICO, EOS claims that its blockchain represents more sophisticated ‘next generation’ characteristics which, among other things, offer superior scalability to the blockchain technology provided by older competitors. As such, EOS positions itself as an enterprise-scale smart contracts and DAPPs platform.
How to Trade BTC/EOS
As BTC is the pair’s ‘base’ currency, a standard ‘long’ trading position on the pair means the trader realises a profit if Bitcoin’s relative value strengthens in relation to that of EOS. Both could rise, but if BTC’s were relatively greater over the period between a trade being opened and closed, the trader would finish in the money. Inversely, a ‘short’ position on BTC/EOS would mean the relative strength of EOS would have to increase more or decrease by less than that of Bitcoin for the trade to be successful.
One complication for traders when forecasting the relative strength relationship between the two cryptocurrencies when trading the BTC/EOS pair is that EOS’s movement is also correlated to that of Bitcoin. As the dominant cryptocurrency, BTC’s relative strength against the dollar influences overall sentiment around the cryptocurrency market. As such, trading BTC/EOS involves carefully assessing the current weighting between the correlation of the two, as well as their independent relative strength catalysts.
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Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Cryptocurrencies can fluctuate widely in price and are, therefore, not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Past performance is not an indication of future results. This is not investment advice. Your capital is at risk