What are cryptocurrencies?
Cryptos are digital currencies that are:
- Created (mined) by a distributed network
- Kept and traded electronically
- Backed by peer-to-peer technology
- Not controlled by any central authority, government or organisation
- Not available in print form
With crypto CFDs, you never own the physical crypto. Instead, you speculate on its price movements (i.e., whether its value goes up or down).
What’s more, you can also trade cryptos in trading pairs, either via crypto-crypto pairs (ETH/BTC) or in a fiat-based pair (the most popular is BTC/USD).
The main three
Launched in 2008, Bitcoin (BTC) is the world’s first digital currency and is credited for paving the way for the crypto revolution. Today, Bitcoin is the most popular cryptocurrency and is increasingly being used to buy products and services in the same way traditional currencies (fiats) are. By design, Bitcoin’s supply limit is 21 million, meaning the currency cannot be devalued in the same way that a conventional currency can. Bitcoin has asserted its dominance over other cryptocurrencies, which consequently are called altcoins (ie, bitcoin alternatives).
Ethereum is the platform that backs Ether (ETH), its cryptocurrency token. Ethereum is the second biggest cryptocurrency, but the first altcoin in terms of market capitalisation. What distinguishes Ethereum from Bitcoin is its purpose: BTC is money, while Ethereum’s target is to run apps through blockchain technology.
The Bitcoin fork
Launched in 2011, Litecoin (LTC) is one of the first Bitcoin ‘forks’ or altcoins. From a technical standpoint, Litecoin and Bitcoin are extremely similar, but LTC has been upgraded and is now much faster than BTC. In fact, Litecoin only requires a quarter of the time Bitcoin needs to process a block. The price of this peer-to-peer cryptocurrency tends to be highly correlated with Bitcoin’s price. Litecoin is among the top 10 cryptocurrencies by market capitalisation.
What moves the prices?
Almost everything! The crypto market is very volatile, as there are many factors that can affect the relative value of BTC, ETH, LTC and so on to USD (lots of acronyms, huh?!). Because of this, you should always be thinking about what the next ‘trigger’ could be!
Here are some factors to look out for:
Supply and demand
Cryptocurrencies are subject to cycles of high public interest, and when demand for a crypto is high, its price dramatically increases.
When conventional currencies face a crisis, cryptocurrencies come to the fore – especially Bitcoin.
Regulation or market manipulation
Government bans, and even regulation or conversations about cryptocurrency taxation, can decrease the value of a cryptocurrency.
Prices of other cryptos
The price of individual cryptocurrencies can impact the price of others, particularly if its value has significantly increased.
Cryptocurrency prices are sensitive to both good and bad news, which is largely due to the fact that they are not regulated.
Cryptos are digital and unregulated, making them more vulnerable to hackers.
Some crypto lingo
Before you crypto
Do your own
A popular acronym in crypto, DYOR is key to your trading strategy, so make sure you spend some time learning and keeping up to date with market events!
Make a plan that takes into account how much you’re willing to risk and invest, and keep with it. Don’t let emotions sway you!
experience and listen
Learn from each trade and understand what worked and what didn’t. Listen to the markets and your research – not your heart!