What are Cryptocurrencies?

Bitcoin, Ripple and Ethereum are few of the well-known names of cryptocurrencies. Cryptocurrencies are digital assets, created for the purpose of an exchange through the secure process of cryptography. Unlike other currencies, cryptocurrencies are not centralised meaning that they are not controlled by a central entity like government or bank.

Since the inception of Bitcoin in 2009, thousands of crypto coins, digital tokens, have been created with the intention of harnessing this potentially disruptive technology.

Currently, there are more than 2000 cryptocurrencies in existence. While many were created by individual developers, now, due to their technological potential, huge corporations and big banks are entering the crypto scene intending to create cryptocurrencies of their own.

The most valuable cryptocurrencies by market cap and market adoption are:

Bitcoin (BTC). The leading cryptocurrency in both adoption and market cap. Bitcoin was the first decentralised digitally encrypted currency and was launched in 2009 as an open-source software. Its developer released it under the pseudonym “Satoshi Nakamoto”.
Bitcoins are created through a process called mining and are stored in a peer-to-peer networking system called “blockchain”. The blockchain digitally records, verifies, and tracks the data of each cryptocurrency transaction. Each transaction is stored like “a block” adding more and more “blocks” with each transaction, recording the change in ownership of the Bitcoin. Bitcoins have limited supply and their mining will end after the mining of 21 million Bitcoins.

Bitcoin is the oldest crypto coin while cryptocurrencies that followed are called “Altcoins”, short for “alternative coins”.

Ethereum (ETHEREUM) launched in 2015. It’s a Blockchain-based platform generating the crypto token Ether. Ethereum is a digital currency, and at the same time, it is a decentralised software platform that runs on the blockchain.

Ripple Labs (XRP) launched in 2012. The crypto-token itself is called “XRP”, while the company behind it is called “Ripple”. XRP is a cryptocurrency and at the same time, a payment exchange network used by banks. It’s decentralised through its transaction validation process.

Litecoin (LTC) launched in 2011. It is based on Blockchain technology, while Litecoin processing time is faster than Bitcoin, making its transactions much quicker.

The Cryptocurrency Market

The cryptocurrency market is volatile and rapidly changing. Like every market, it moves by supply and demand. Changing regulations worldwide can shape the market, and global events can drive demand for cryptocurrencies. For example, Bitcoin prices surged after the Cyprus banks’ crisis (2012-2013) when people started to question the global banking system.

As for trading cryptocurrency on CFDs, we must know that they are bought, sold, and exchanged similarly to other currencies. They are derivatives, enabling traders to speculate on the price movement of the cryptocurrency without taking ownership of the underlying coins. It is important to remember that such products are complex and of high risk (i.e. they are highly volatile), and as such they imply a high risk of losing all of your trading balance.

Check out the full list of cryptocurrencies CFDs to choose from on the Investous platform.

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Risk warning: Contracts for difference (‘CFDs’) is a complex financial product, with speculative character, the trading of which involves significant risks of loss of capital. Trading CFDs, which is a marginal product, may result in the loss of your entire balance. Remember that leverage in CFDs can work both to your advantage and disadvantage. CFDs traders do not own, or have any rights to, the underlying assets. Trading CFDs is not appropriate for all investors. Past performance does not constitute a reliable indicator of future results. Future forecasts do not constitute a reliable indicator of future performance. Before deciding to trade, you should carefully consider your investment objectives, level of experience and risk tolerance. You should not deposit more than you are prepared to lose. Please ensure you fully understand the risk associated with the product envisaged and seek independent advice, if necessary. Please read our Risk Disclosure document.

 

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