Cryptocurrency is a type of digital money. It has exploded in popularity and over the last year has moved into the mainstream. If you are a sensible investor, then you can make a fortune off of cryptocurrency. This article will tell you how cryptocurrency took the market by storm, and all that there is to know about it:

What Is Cryptocurrency?

Cryptocurrency is virtual money. It is an internet-based medium of exchange, and while it is legal, it is not legal tender and does not exist as a physical asset, like coins or notes. Cryptocurrency is held on databases, secured by cryptography, which means that it is protected by complex codes and passwords. These databases are called crypto wallets and are very secure.

If that didn’t make any sense, then let’s simplify it even more: Cryptocurrency is a digital asset that can be held, traded, and used to pay for things. Because there is no real underlying asset, there is no intrinsic value. The value of cryptocurrencies is determined by supply and demand. Because of this, they are prone to change, hard to value, and very unpredictable. Rather than being held in a traditional bank account, they are held in digital wallets that only you have access to.

How Does Cryptocurrency Work?

Cryptocurrency is decentralized, which means that its transactions are recorded in a distributed ledger, called a blockchain. These ledgers are protected against fraud through a trustless system. Decentralized finance has no financial intermediaries, like brokers or banks. It relies on smart contracts which run on blockchains.

Cryptocurrency is used much in the same way that any currency is, to buy, trade, and hold. It is seen as an investment by many because of its fluctuations. You can open limit and stop orders, just like if you were trading on the stock market. It has the potential to make you an absolute fortune in a matter of hours, but conversely, can bankrupt you in a matter of minutes. Cryptocurrency became most popular among young people in the early 2010s who were using illegal, online black markets. These markets, like the Silk Road, were untraceable, and so an untraceable currency was needed to sustain them.

What Are Altcoins?

Anybody can make their own cryptocurrency, as in their simplest form, they are just software. There is no governing body or organization that decides what a cryptocurrency is or isn’t. Because of this, there is a huge number of ‘altcoins’ (alternative coins). Due to the unpredictable nature of cryptocurrency, many of these altcoins have become major players in the crypto industry themselves, like DOGE for example.

Altcoins rarely make names for themselves though, and instead, are used as ‘pump ‘n’ dumps.’ A pump ‘n’ dump occurs when organized groups of the crypto-traders band together and advertise a single altcoin, claiming that its price is about to rise significantly. Before doing this, they will buy large amounts of the coin for its original price. After they have advertised it, thousands of people will buy it, and the price will artificially rise. When the price has risen, the group will quickly sell and pull out, causing the altcoin’s value to crash.

How Do You Buy Cryptocurrencies?

Cryptocurrency, like any asset, can be bought with cash. Exchanges exist online that allow you to convert any currency (GBP, USD, etc) to the crypto of your choice. You can then transfer these cryptocurrencies to your wallet, or alternatively, you can hold them in the exchange and trade them. If you hold a specific cryptocurrency and its price rises, then you can sell it on the same exchange that you bought it from.

The Appeal of Cryptocurrencies

Cryptocurrency is not valued in terms of its use; it is valued on how interested people are in it. Unlike traditional financial assets or fiat currencies, there is no central bank supervising cryptocurrencies and making sure that they do not fluctuate wildly. Because of this, a cryptocurrency that is worth $50,000 today can be worth $100.00 tomorrow. This is what makes cryptocurrency so exciting, and so appealing. Cryptocurrencies can fluctuate significantly without warning, and fluctuations are generally not connected to any obvious world events.

The reason cryptocurrencies have entered the mainstream over the last year is that these fluctuations have mostly been upwards. This isn’t to say that it will continue like this; it rarely does. If you are a sensible investor, then you can make a lot of money trading cryptocurrencies. Some people have made millions of dollars overnight. Cryptocurrencies can be a great investment if you use your head, and you use stop-loss orders to counter against downswings. You should always research a coin before you invest in it so that you do not get suckered into a pump ‘n’ dump.