Types of charts

What is Cryptocurrency?

In layman term, cryptocurrencies or crypto are a decentralized digital form of currency. However, this definition does not even begin to describe what it really is and the technology behind it. To put in in a more technical way, cryptocurrencies are limited entries in a database that can only be changed when a set of rules are fulfilled. The technology behind this digital currency system is called blockchain, a term which is becoming exponentially widespread over the last few years.

It is basically a public ledger where all the transactions ever done within the network is available to everyone in that network. And whenever someone in the network buys or sells a unit of the cryptocurrency, an entry is made in that ledger that cannot be changed, making the transaction official.

The most common forms of cryptocurrency nowadays are bitcoin, litecoin, and ethereum. However, every month new ones are launched with even tech giants like Facebook planning to release its own cryptocurrency.

The Cryptocurrency Market

Cryptocurrency Market

As cryptocurrencies are a decentralised form of digital money, so is the market in which they are traded. This means that they are not issued or backed by a central authority like a government or bank, instead, they exist across a network of computers.

Cryptocurrencies can be bought and sold and shared in digital ‘wallets’. The most popular ones are Due, Adyen, Allied Wallet, Google Wallet and Mozido.

Among all the different financial markets, the cryptocurrency market is one of the most volatile. Different factors causing the fluctuation of the digital currency market are:

Supply

Total number of coins and the rate at which they are released


Press

The image of the cryptocurrency on the global media


Key events

Regulatory updates, security breaches and economic setbacks


Market capitalisation

Total value of all the units in existence and how it is perceived to evolve


Integration

How well the cryptocurrency can be integrated into existing infrastructures

CFD trading on Cryptocurrency

When trading with online brokers, cryptocurrencies are traded as CFD, meaning that traders speculate on the price movements of the cryptocurrency without taking ownership of it. Trading cryptocurrency online is similar to trading forex in that the value of the digital money is valued against other currencies; digital or traditional.

For example, traders can choose to buy or sell BTC/USD, LTC/USD, ETH/USD, which are the value of the different cryptocurrencies against the US dollar. They can also choose to trade LTC/BTC, DASH/BTC, ETH/BTC, etc, which are the value of the cryptocurrencies against each other.

Traders should be very careful while trading cryptocurrencies as their prices are very volatile and can change dramatically in a matter of minutes only. Nonetheless, it does give traders the opportunity to make huge amounts of profits, provided they know what they are doing.