The cryptocurrency market operates in a different way from other financial markets, which makes it vital to learn how it works, and understand the jargon used to describe it, before you start trading.
The cryptocurrency market is a decentralised digital currency network, which means that it operates through a system of peer-to-peer transaction checks, rather than a central server. When cryptocurrencies are bought and sold, the transactions are added to the blockchain – a shared digital ledger which records data – through a process called ‘mining’.
Cryptocurrencies are also famously volatile, which makes it important to know what is likely to move the market – this could be anything from ICOs and blockchain forks, to breaking news and government regulation.
When you trade on cryptocurrencies, instead of buying them, you can be ready to open a position much faster. You don’t need a digital wallet or an account with an exchange. In fact, all you need to trade via CFDs is an account with a leveraged trading provider.
The most popular cryptocurrencies, by market capitalization, are Bitcoin, Ethereum, Tether and Solana. Other well-known cryptocurrencies include Tezos, EOS, and ZCash. Some are similar to Bitcoin. Others are based on different technologies, or have new features that allow them to do more than transfer value.
Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor, allowing value to transfer globally, near-instantly, 24/7, for low fees.
Cryptocurrencies are usually not issued or controlled by any government or other central authority. They’re managed by peer-to-peer networks of computers running free, open-source software. Generally, anyone who wants to participate is able to.
At its core, cryptocurrency is typically decentralized digital money designed to be used over the internet. Bitcoin, which launched in 2008, was the first cryptocurrency, and it remains by far the biggest, most influential, and best-known. In the decade since, Bitcoin and other cryptocurrencies like Ethereum have grown as digital alternatives to money issued by governments.
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