A Cryptocurrency, also called cryptokenetic currency, or cryptocoin, is a digital currency that is determined by its supply, rate of transfer, and nature of its issuance. The term Cryptocurrency was first introduced in 2021 by Sunny Leone Hutt, then a trader for the online financial firm MegaDroid. He had been watching the emerging role the Internet played in the trading of currencies. When he began to notice how quickly and easily one currency can be altered in terms of price from other, he theorized that it would be practical to trade in multiple currencies simultaneously through a Cryptocurrency System. In the process of doing so, it would be impossible for an insider trader to manipulate the price of any given coin.
One of the major purposes of a Cryptocurrency System is to serve as an off-block chain of custody for your private assets. Unlike conventional block-chain transaction systems, a Cryptocurrency does not require expensive Proof of Work (POW). A Cryptocurrency is not backed up by any physical assets such as gold or silver. Therefore, unlike gold or silver, the value of a Cryptocurrency is not tied to any precious metal. This makes the Asset to Asset security model very appealing to many traders who are looking to hedge their exposure to market fluctuations.
Because of the inherent similarities between Cryptocurrencies and traditional money such as the US dollar, it is often difficult for new investors in the industry to distinguish between the two. While the two share some inherent characteristics, there are key differences as well. A typical Cryptocurrency, such as Litecoin or Namecoin, works similarly to how you would exchange currencies in traditional exchanges. The main difference between the two is that a Cryptocurrency never experiences a hardening period, which occurs when a particular currency’s supply exceeds the number of individuals that desire that particular supply of the currency.
In contrast, most Cryptocurrencies experience a rapid rise and fall in value when news regarding their supply situation is made public. This is one of the main reasons that cryptos are not widely accepted as methods of payment in the United States, the UK and other major international economies. In addition, because of the volatility that occurs in the marketplace during certain times of the year, most Cryptocurrecties can experience a short comings of period. This short amount of time can result in drastic price changes, creating a large amount of selling pressure on existing assets. This is similar to the environment in which people enter into investments: when there is large volatility in the market, people generally want to hold onto their assets for a while before making a final decision.
The fundamental differences between Cryptocurrecties and traditional currencies are that they have no centralised bank that issuing them. This lack of a centralised body means that there is no guarantee that the value of the Cryptocurrency that an investor receives will increase in value over time. There is also a risk that the supply of a Cryptocurrency could be reduced resulting in the supply and demand driven by external factors. Despite these risks, more investors are choosing to purchase Cryptocurrecties because of their ability to track the value of a specific Cryptocurrency in real-time. A typical Cryptocurrency works exactly like a stock on a exchange such as the New York Stock Exchange or the London Stock Exchange; a Cryptocurrency’s supply is determined by an algorithm based on the supply and demand of the Cryptocurrecty during any given time frame. Investors who choose to buy Cryptocurrecties can receive full play of this algorithm in real-time from their broker, which allows them to make informed decisions regarding the trading of Cryptocurrecties.
Investors looking to purchase Cryptocurrencies can do so by buying in small amounts to use as diversification away from traditional investment vehicles. However, as with any investment decision, it is important to understand that Cryptocurrecties are not always equal. There are several distinct types of Cryptocurrecties including Gold, Silver, Platinum and Cash Investing. Investing in Cryptocurrecties is not suitable for all investors due to the different risk factors associated with each type of Cryptocurrency. An investor seeking Cryptocurrency exposure should research each type of Cryptocurrecty in order to determine if it is right for them.