The cryptocurrency market has taken the whole world by storm. It is a new and exciting concept in electronic purchases and investments that a growing number of people have already joined the cryptocurrencies bandwagon. The concept may be a bit technical, though, which makes some people hesitant to venture in it. If you’re willing to take the digital plunge to cryptocurrencies, here are some basic details you need to know.
FAQs: Things To Know About The Cryptocurrency Market
In this guide:
- What is Cryptocurrency Market?
- How Does the Cryptocurrency Market Work?
- How To Invest in the Cryptocurrency Market?
- What Is A Cryptocurrency Market Cap?
- Is The Cryptocurrency Market Doing Well?
What is Cryptocurrency Market?
Basically, the cryptocurrency market is a type of trading/investment environment which uses the digital landscape — meaning, everything happens online. It is a peer-to-peer electronic decentralized cash system. In part, think of it as similar to an online payment system such as PayPal, wherein you purchase or exchange goods online using the money in your account. But instead of using dollars for any type of transaction, one uses “cryptocurrency” — hence the name cryptocurrency market. In fact, there are now several retail shops that accept cryptocurrencies as a form of online payment.
How Does the Cryptocurrency Market Work?
To engage in the cryptocurrency market, one has to create an account with a digital currency exchange platform such as Coinbase. This is where one can buy, sell, or manage their cryptocurrency. The most famous cryptocurrency right now is Bitcoin, but there are a thousand other types such as Litecoin — all of which can be managed via a cryptocurrency exchange.
The idea behind the cryptocurrency market is that it uses cryptography in every financial transaction. Each cryptocurrency holder uses a “cryptocurrency wallet” to transfer balances to another account. Since cryptocurrency is a virtual currency, there is a challenge in terms of authenticating and securing every transaction. For this, every cryptocurrency transaction is recorded in a digital ledger (called blockchain) which is publicly available to everyone in the cryptocurrency market. The blockchain is made public to allow everyone to validate transactions recorded in it.
This whole concept makes the cryptocurrency market decentralized, unlike our usual monetary system which is centralized to banking institutions.
How To Invest in the Cryptocurrency Market?
First, one has to obtain cryptocurrency in his cryptocurrency exchange account. One may use dollars to buy one, trade goods in exchange for cryptocurrencies, or exchange other forms of cryptocurrencies. One simply has to look at the price indicated at the cryptocurrency exchange account to determine if it’s the right time to buy or sell their cryptocurrency.
To gain more cryptocurrency, some try to do “cryptocurrency mining” — a process where one confirms transactions to the blockchain. Miners do the confirmation by using special types of software. In return, miners will earn coins as a reward for confirming transactions at the blockchain.
One may also check CoinMarketCap.com to see how a particular cryptocurrency fares in the digital market. This will determine how huge a certain cryptocurrency is in the digital market, and which is more likely to give you more earnings. However, digital asset investors must look at the market cap of each cryptocurrency instead of the price.
What Is A Cryptocurrency Market Cap?
Market cap refers to the amount of money (measured in fiat currency, like dollars) invested into a particular cryptocurrency. It is the true indicator of how valuable a cryptocurrency is. In CoinMarketCap.com, you would actually see that the cryptocurrencies are sorted according to their market cap (and not the price).
Market cap reflects the digital currency’s vulnerability. Various movements in the economy tend to affect cryptocurrencies with smaller market caps, while those with higher market cap remain stable.
Is The Cryptocurrency Market Doing Well?
Interest and actual use of cryptocurrency have grown exponentially since it becomes a global hit. In fact, there are now around a thousand cryptocurrencies available in the digital world. The most famous of which remains to be Bitcoin, as reflected in its high market cap and price.
There have been certain issues on security and fraudulent undertakings in the use of cryptocurrencies. Also, governments worry about losing control over supply and regulation of money once cryptocurrencies dominate the economy. Yet despite these sentiments, cryptocurrencies continue to grow and remain part of the economy in the 21st century.
Planning to invest in cryptocurrencies? This video by Ameer Rosic will show you how:
The cryptocurrency market may sound complex at first, but fully understanding it reveals it actually offers a lot of financial possibilities. Give the cryptocurrencies a try, and see the endless opportunities these digital assets offer you.
Do you know of other important information about the cryptocurrency market? Share with us your thoughts in the comments section below.
Up Next: Can Digital Currencies & Digital Assets Be Your Future? | Inside Your IRA
Let Us Know What You Think