Cryptocurrencies
While money, in one form or another, has existed for millennia, it has always been in physical form until the 21st century. It can be coins, bars, or even paper money, but there has always been a physical representation of the currency that we use in our daily lives to purchase goods and services. That all changed in 2009, when bitcoin was released as open source software used to create digital currency. A digital currency, also known as cryptocurrency, is created using specialized software and is stored only in digital form on computers and servers around the world. Since then, many other digital currencies have emerged, with more appearing every month. Yet bitcoin remains the king of digital currencies, at least for now. Read on to learn more about the history of digital currencies and the details of some of the most popular digital currencies.
How it all began
The idea of digital currency actually appeared as early as 1982 in a research paper published by cryptographer David Chaum. He also created the first ever digital currency company, Digicash, in 1990, but this idea was ahead of its time and the company went bankrupt in 1998.
The modern era of digital currencies began with the launch of bitcoin, the first-ever decentralized digital currency. Until the release of Bitcoin, all digital currencies were centralized, but Bitcoin changed all that. Rather than being controlled by a single source or company, bitcoin is created and stored in a peer-to-peer network system and relies on what is intended to be secure cryptography for its creation through the use of digital signatures known as blockchains.
Although concerns have been raised about the creation and use of digital currencies by illegal and terrorist organizations, the movement has recently received additional support and several countries and global companies are currently exploring the use of the technology blockchain and cryptocurrencies in various applications.
- Bitcoin – As mentioned above, bitcoin is the first decentralized digital currency and the very first bitcoin was mined, or created, in 2009. The actual identity of the creator of Bitcoin is unknown, but it was released under the name by Satoshi Nakamoto, which is a pseudonym for the programmer or group of programmers who introduced Bitcoins. The Bitcoin system is a decentralized peer-to-peer system, with transactions taking place directly between individuals.
New bitcoins are created through the process of mining, in which computers distributed around the world solve each block in the blockchain system. When a block is solved, a new bitcoin is added. The system adjusts block solving difficulty every 2016 blocks, making each additional bitcoin more difficult to mine or create. In this way, bitcoin has an artificial scarcity which has helped increase the price of bitcoin dramatically since its inception. There will only ever be 21 million bitcoins created, which is expected to be accomplished in around 2140.
The price of bitcoin has increased dramatically since its inception, but it is also considered extremely volatile. In 2011, the value of a bitcoin fell as low as $0.30, but as of mid-2017, the value of a bitcoin is around $2,400. On August 13, 2017, bitcoin reached an all-time high of $4,200. It has been estimated that the price of bitcoin is 7 times more volatile than the price of gold, 8 times more volatile than the S&P 500 index, and 18 times more volatile than the US dollar.
- ethereum-ethereum is another decentralized digital currency, but also a computing platform developed for its scripting features. it is quite recent, having gone live on July 30, 2015 with a value of $1 per ether coin. Ethereum’s value recently skyrocketed, reaching almost $400 on June 14, 2017, but has since retreated and is trading around $240 per Ethereum coin as of mid-July 2017.
An interesting fact about ethereum is that many companies, financial institutions and even governments have started to develop their own systems and programs based on the ethereum protocol. This could be very positive for the currency, as wide adoption would be sure to increase the value of ethereum. Another factor to note is that ethereum currently sees double the number of transactions processed compared to Bitcoin.
Unlike bitcoin, there are no plans to cap the number of ethereum, but there are plans to reduce the growth (and therefore inflation) of ethereum to between 0.5% and 2.0% by changing the verifying new ethereum blocks into proof of stake rather than proof of work.
Anyone interested in digital currency trading should definitely keep an eye on ethereum, as it promises to be vital to the growth of the digital currency economy.
- Ripple – With a market capitalization of over $6.5 billion, Ripple is currently the third largest digital currency by market capitalization, eclipsed only by Bitcoin and Ethereum. In itself, this should be enough for traders to keep an eye on the price movements of the Ripple cryptocurrency. With over 38 billion coins, called Ripples, in existence, Ripple’s value is quite low compared to other major digital currencies, peaking at around $0.42 per Ripple in May 2017 and trading at just $0.238 per Ripple in mid-July 2017.
The original Ripple protocol was developed as early as 2004, and was released as Ripplepay.com in 2005 as a financial service to provide secure payment options to members of an online community via a global network. The current version of Ripple was developed in 2012 and was released in 2013.
Ripple stands out because it is a real-time settlement system, currency exchange, and funds transfer network. The Ripple network supports tokens that represent fiat currencies, other cryptocurrencies, commodities, and even frequent flyer miles or mobile plan minutes. It is increasingly being adopted by banks as they believe it has a number of advantages over cryptocurrencies like bitcoin, particularly in terms of price. Major banks using the Ripple protocol include UBS, Santander and, more recently, SCB in Thailand.
Due to its ability to conduct transaction-free cross-currency trading, Ripple is worth watching by traders and investors. It can be particularly useful as a bridge when there is no market for a specific currency, as it seamlessly converts any asset into the desired payment currency. This could make Ripple a very valuable digital currency in the near future.
- Dash-Dasha underwent several changes during its existence, and was formerly known as Darkcoin and also Xcoin. It should also not be confused with a similar digital currency known as Dashcoin. Dash is similar to Bitcoin in some ways, but it was designed to use a two-tier architecture in its network to provide additional functionality and increased security. Dash cryptocurrency users enjoy private and instant transactions. Dash is also the first decentralized autonomous organization, with the first Dash currency being created on January 18, 2014.
Dash has reached a market capitalization of around $1.5 billion and 7.42 million coins are currently in circulation. The value of one Dash coin is currently $193.46. it has not reached its recent high of $209.77, but appears to be trending upward over the long term. Dash’s daily turnover is over $100 million, making it a popular alternative to bitcoin and other digital currencies.
Traders interested in Dash should be aware that this digital currency has one of the most active communities of all altcoins (the term altcoin is used to refer to all digital currencies other than Bitcoin). Activity on the BitcoinTalk forum has reached over 6400 pages, 133k replies, 7.9M reads. This active community should certainly be a source of news and information constantly monitored by Dash traders.
- Litecoin – This digital currency was created from Bitcoin, and as such it is very close to the original digital currency. There are some differences, however, such as almost zero payment cost and payment transactions occurring around four times faster than Bitcoin. Litecoin was created in October 2011 by a former Google employee named Charlie Lee. Litecoin has been a success since its inception and currently has a market capitalization of $2.5 billion, with 51.9 million coins worth around $5 each in circulation. Litecoin reached a high of $55.46 per coin on July 5, 2017 before retreating, although the general trend is upward for the digital currency at the moment.
Litecoin processes blocks approximately four times faster than Bitcoin, and it is expected to release a total of 84 million Litecoins, four times the number expected for Bitcoin. This will give Litecoin an artificial scarcity which should keep the price of Litecoin rising as it becomes increasingly difficult to mine the remaining Litecoins.
As one of the top used digital currencies, Litecoin has a daily turnover of over $130 million, traders should definitely keep an eye on Litecoin to monitor price movements and changes in market sentiment that could provide trading opportunities.
The cryptocurrency market
Even though the cryptocurrency market is only 8 years old, it is already seeing trading volumes exceeding $100 billion as of June 2017. All of these transactions are coming from over 800 different digital currencies, with more coming in on the market every month. Needless to say, there are vast opportunities for those willing to accept the risk of entering new markets. Due to the volatility and rapid evolution of cryptocurrency markets, potential traders should conduct their own research regarding current trading volumes, active digital currencies and market opportunities.
Investors in digital currencies can benefit from the fact that these currencies are not tied to any central bank or country. This means they can be traded easily 24 hours a day, 7 days a week, 365 days a year. A warning for traders who are new to the cryptocurrency market is that these digital currencies move based on different factors than you are used to with traditional currencies. Rather than reacting to central bank policy and the economic strength of a given country, these currencies react to cyber events such as hacking or the launch of new technologies. and since the market capitalization of most digital currencies is quite low, they can also be influenced by individual investors.
Imagine you buy a US$100 million position. This is certainly a large position, but it is not large enough to be noticeable in the billions of dollars of daily USD transactions. This is not the case for any digital currencies. A $100 million position would be larger than the daily trading volume of all but the largest currency, and such a position would likely have a huge impact on the price and volatility of the digital currency underlying.
The cryptocurrency market is growing rapidly, but it is still small compared to the global currency market. This factor can be attractive to traders as they are at the forefront of trading these new markets. The only important factor to keep in mind is to remember the risks associated with trading in new and volatile markets, and to understand that losses can occur as quickly as profits, or even faster.
The figures above are not up to date. Please do your own research.
trade cryptocurrencies with InvestMarkets
As a leading online broker, InvestMarkets was one of the first to offer CFD trading on cryptocurrencies. With five of the most popular digital currencies currently available for trading as CFDs, we are always on the lookout for the latest popular currency so we can make a CFD of it available to our traders. Our education center will help you take the mystery out of cryptocurrencies so you can trade CFDs with more confidence. and with our easy-to-use trading platform, you will soon find that it is more accessible than ever to trade CFDs on your favorite underlying digital currency online.
The value of digital currencies tends to change very quickly. Therefore, there is no guarantee that the value of cryptocurrencies will remain stable. We highlight the growing popularity of digital currencies. Still, we caution our clients that there are a number of potential risks when dealing with CFDs on virtual currencies – the main one being their inherent volatility.
Risks associated with trading CFDs on cryptocurrencies (also called “virtual currencies”).
Before trading cryptocurrency CFDs, you should be aware of the following:
– These products are complex and present high risk, which can result in the loss of their entire stock balance.
– The values of virtual currencies can fluctuate widely (i.e. they have very high volatility), and can result in significant losses in a short time.
– These products are not suitable for all investors and, for this reason, you should not trade them unless you have appropriate knowledge and experience and fully understand the specific characteristics and risks associated with them.
– Cryptocurrency CFD trading on the InvestMarkets platform is available 24 hours a day, 5 days a week.
– The leverage of CFDs on cryptocurrencies can be up to 1:5. For up-to-date information, check the platform or contact our customer service.