What is Crypto?
Cryptocurrency is a type of ”digital asset” or ”digital currency”. It does not exist in the physical sense, as is the case with regular fiat currencies such as the Dollar and the Euro. Cryptocurrencies are not regulated or managed by any financial authorities, or bank, in the same way as traditional currencies are. It is mostly self-regulated, through the use of various encryption techniques and users within associated networks providing the verification that enables transactions to occur.
Overview of the market
Unlike other asset classes, the Cryptocurrency market is dominated by retail speculators. With Cryptocurrencies, you’ll trade in a market where there is no central bank intervention, interbank dealers controlling order flow or giant pension funds moving prices.
With IFX Brokers, traders can get exposure to the price of the Cryptocurrency without worrying about the security risks associated with storing it and the counterparty risk from the exchange. This is like trading Energy Futures such as oil rather than owning physical oil to speculate on its price.
Bitcoin against the Dollar
Bitcoin is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
Ether against the Dollar
Ethereum is the second largest cryptocurrency platform by market capitalization, behind Bitcoin. It is a decentralized open source blockchain featuring smart contract functionality. Ether is the cryptocurrency generated by Ethereum miners as a reward for computations performed to secure the blockchain. Ethereum serves as the platform for over 260,000 different cryptocurrencies, including 47 of the top 100 cryptocurrencies by market capitalization
Bitcoin cash against the Dollar
Bitcoin cash is a cryptocurrency created in August 2017, from a fork of Bitcoin. Bitcoin Cash increases the size of blocks, allowing more transactions to be processed. The cryptocurrency underwent another fork in November 2018 and split into Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision).
Litecoin against the Dollar
Litecoin is an alternative cryptocurrency based on the model of Bitcoin. Litecoin was created by an MIT graduate and former Google engineer named Charlie Lee. Litecoin
differs from Bitcoins in aspects like faster block generation rate and use of scrypt as a proof of work scheme. Litecoin is consistently among the largest cryptocurrencies in terms of market capitalization (though still remaining far below that of Bitcoin) and it currently has more than 50 million coins in circulation.
Ripple against the Dollar
Ripple is a technology that acts as both a cryptocurrency and a digital payment network for financial transactions. It was first released in 2012 and was co-founded by Chris Larsen and Jed McCaleb.
The coin for the cryptocurrency is premined and labeled XRP. Ripple is more known for its digital payment protocol than its cryptocurrency, XRP. Ripple operates on an open-source and peer-to-peer decentralized platform that allows for a seamless transfer of money in any form, whether USD, Yen, litecoin, or bitcoin.
In digital currency, an address is a destination where a user sends and receives digital currency. In a way, it is similar to a bank account. These addresses usually include a long series of letters and numbers.
An altcoin is a digital currency other than bitcoin. There were more than 1,000 altcoins listed on data source CoinMarketCap at the time of writing.
In crypto, arbitrage refers to taking advantage of the price difference between two different exchanges. If bitcoin is selling for £8,950 on one exchange and £9,000 on another, a trader can buy the digital currency on the first exchange and sell it on the second for a modest profit.
“ATH” is an abbreviation of “all-time high.” This term can be quite helpful to know for tracking the digital currency markets. These assets are so volatile, so keeping their ATH in mind can prove valuable. A digital currency could potentially hit several local highs before rising to a new all-time high.
“Bears” believe that an asset, for example a digital currency, will decline in value. Another way of putting this is that if a trader thinks a cryptocurrency will depreciate, their sentiment surrounding the digital asset is “bearish.” In many situations, traders will make use of this expectation by taking a short position on an asset, meaning that they will make a wager that will pay off should the asset in question fall in value.
Many digital currencies make use of blocks, which contain transactions that have been confirmed and then combined together.
The blockchain, which is a distributed ledger system, consists of a series of blocks. These blocks contain verified transactions. The blockchain was designed to be not only decentralised, but also immutable, meaning that entries could not be erased once placed on this distributed ledger
If a trader believes that an asset will rise in value, he or she is a “bull.”
The network for a digital currency reaches consensus when the network’s nodes agree that a transaction took place. This agreement is crucial if the varying network participants (nodes) are to have the same information. In other words, consensus is crucial to distributed ledger systems.
A cryptocurrency is merely a currency that relies on cryptography. Bitcoin, for example, leverages cryptography in order to verify transactions.
Cryptography is basically the process of encoding and decoding information so that would-be observers are unable to understand the information being sent.
Escrow refers to a third-party holding financial resources on the behalf of other parties. A third-party would hold funds in escrow when the other entities involved in a transaction may not trust each other.
Exchanges are basically just marketplaces where traders can make digital currency transactions. If a person wants to buy bitcoin, going to an exchange is the fastest way to accomplish this objective.
Fiat currencies are currencies that have value because they are minted by a central bank. Fiat means “by decree,” and these currencies have value because some central authority has decreed that they have monetary value. Examples of fiat currencies include the British pound, euro and Japanese yen.
The term “FOMO” stands for the phrase “fear of missing out.” This occurs when investors start buying up a particular asset based on their expectations that it will rise in value. Market participants can easily flock to an asset should that asset experience sharp gains.
Getting caught up in FOMO can be dangerous. More specifically, buying up an asset because it has recently enjoyed some notable upside can cause one to fall victim to market manipulation.
A fork is a change in a digital currency’s rules or protocol. Developers update a cryptocurrency’s protocol from time to time. A fork can be either a hard fork or a soft fork. A hard fork is a change to a digital currency’s protocol that makes blocks created using the old protocol incompatible with the new chain.
Fear, uncertainty and doubt can be summed up using the term “FUD.” The idea behind this is that market participants may spread misleading or inaccurate information in order to cause an asset’s price to decline. A trader may want an asset’s price to fall so they can either short it successfully or buy in at a lower price and increase their chance of generating a gain.
Cryptocurrency investors developed the term “HODL,” which stands for “hold on for dear life.” The acronym originally came from a misspelling of the world “hold.” Digital currencies can be highly volatile, so when they start experiencing significant price fluctuations, some market participants state that they should simply “HODL.”
An initial coin offering (ICO) represents the first time that an organisation offers digital tokens to the public in an effort to raise money. Companies frequently hold these offerings so they can finance projects.
Going long, also known as taking a long position, means making a wager that an asset will rise in value. If a trader purchases a digital currency like bitcoin, for example, they are making a bet that the cryptocurrency will appreciate.
Market cap is short for market capitalisation, which is a term for total market value. The market cap of bitcoin, for example, is the number of BTC outstanding multiplied by the digital currency’s price. The term can also be used to refer to a group of digital currencies.
Mining is the process for creating new units of a digital currency. For example, the bitcoin network releases new bitcoins every time a block is mined. In this instance, mining involves confirming transactions and combining them in to blocks.
This verification requires hardware and electricity, and miners are rewarded with digital tokens for contributing these needed resources.
The mining incentive is a reward that miners get for confirming transactions and mining them in to blocks. Verifying the transactions of the bitcoin network, for example, requires specialised hardware and substantial electricity, so miners are compensated with a mining incentive.
Initially, bitcoin’s mining incentive was 50 BTC, but at the time of report, the reward had dropped to 12.5 BTC.
POW is an acronym for “proof of work,” which is a system of proving that a digital currency’s transactions have been verified. Many digital currencies, including bitcoin, use POW. Under such a system, miners must do “work” that is difficult for them to contribute, but easy for the broader network to verify.
Miners are usually rewarded for verifying transactions by receiving units of a digital currency.
POS stands for “proof of stake,” which is another method of confirming transactions. The digital currencies that use this approach to verification frequently provide all their digital tokens up front, and miners are selected based on how many units they have (their stake). In these cases, users who confirm transactions, sometimes referred to as “forgers,” receive transaction fees for their contributions.
A private key is a piece of information—presented as a string of numbers and letters—that an investor can use to access their digital currency.
A “pump and dump” is a type of investment scheme where a market participant—or several—work together to inflate the price of an asset so they can sell it when its value is artificially high. This practice may be particularly pervasive when it comes to digital currencies, as traders can easily get together using Telegram groups with the goal of causing specific cryptocurrencies to rise sharply in value.
ROI is short for “return on investment.” Basically, if an investor puts their money in to a digital currency, they are doing so with the hope that they will receive a compelling return.
Shorting an asset, also known as taking a short position, means making a bet that the asset will fall in value. There are several methods that traders can use to short digital currencies, including futures, options and margin trading.
Investors considering this method should keep in mind it involves a lot of risk, especially with cryptocurrencies because of their volatile nature.
A digital token is a unit of a digital currency, such as a bitcoin. It is worth noting that some of these tokens are used for specific ecosystems, and those are frequently referred to as utility tokens. Other digital tokens are essentially securities.
The developers who create digital currencies usually provide white papers for these innovative assets. These documents generally offer comprehensive information on the digital token in question, as well as its underlying technology.