WHAT IS CRYPTOCURRENCY
Trading in Cryptocurrency CFDs is a way of speculating on the price movement without actually owning the underlying asset. The digital currency has become a popular financial instrument among traders because of its high volatility and high liquidity, which offers multiple opportunities to make a profit, and also because it is becoming mainstream and a better-regulated market.
What is Cryptocurrency?
A cryptocurrency is a form of digital currency or virtual currency. These currencies are created by a process called cryptography. Yes, these digital currencies also have monetary value but they are not the same as the fait currency. Let’s have a look at the difference between the fait and Cryptocurrency.
The first and the most important difference is that cryptocurrencies are decentralized currencies and are not regulated by central banks or governments like fait currency which are printed and circulated by either a central bank or government.
The fait currency has physical existence in form of a paper note or coins while digital currency is only virtual and have no physical existence.
Types of Cryptocurrencies
With the development in technology space, many new digital currencies have been discovered and it is quite difficult to tell the exact numbers of Cryptocurrencies but according to our current estimations, there are around thousand Cryptocurrencies. Don’t worry we will talk about only a few popular ones.
Bitcoin is a digital currency that was invented in 2008 by a group of unknown people using the name Satoshi Nakamoto. It is one of the most successful blockchain-based Cryptocurrencies in the world.
Bitcoin is the world’s largest cryptocurrency by market capitalization. It is prevalent among traders who like volatility. Bitcoin has seen significant rallies and crashes since it started trading.
It is an open-source, software platform based on decentralized blockchain technology that acts as a digital currency. It is one of the few platforms that can also be used to launch other virtual currencies. Ether is the second-largest virtual currency based on market capitalization.
It is a technology that can be used both as a digital payment network and as a cryptocurrency (XRP) which underpins that network. It was launched in 2012 and was co-founded by Jed McCaleb and Chris Larsen. The cryptocurrency uses principles of the blockchain to facilitate faster, cheaper global payments for banks and other major financial institutions.
Why do Traders like Crypto trading?
Now that we know about the most popular Cryptocurrencies, let us understand why traders like to trade cryptocurrency CFDs.
- Leverage – leverage is a tool trade uses while trading Cryptocurrencies. It helps them to open a larger position without paying the upfront cost of the trade. It boosts the profitability of traders.
- Volatility – Cryptocurrencies are very volatile instruments. Because of its volatile nature, it provides numerous opportunities to exploit. Considers these example to understand how volatile Cryptocurrencies Time frame January to august 2017
- § Bitcoin value increased by more than 340%
- Ripple’s value increased by more than 1,200%
- Ethereum’s value increased by 4,500%.
Remember increased volatility bring numerous opportunities for high returns but with higher returns comes higher risk. So use proper risk management strategies.
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