A market for cryptocurrencies like Bitcoin that use advanced coding to verify transactions and share data through public ledgers called blockchain. Cryptocurrencies are traded for profit by investors and speculators, whose activities can drive prices up or down. The market operates via peer-to-peer transactions that check transaction data, and record changes to the ledgers through a process known as mining.
The price of a cryptocurrency is determined at the point where buy and sell orders meet, and is displayed on exchanges and trading platforms. The price is also influenced by other factors, such as liquidity (i.e. the availability of sell/buy orders) and volatility.
Volatility can provide opportunities for profit, but it can also increase risk exposure – particularly when you trade leveraged derivatives that magnify your profits and losses. To minimize your risk, stay up to date on relevant news and events that could affect prices, including upcoming regulatory announcements. Favorable regulations can boost investor confidence and drive prices up, while unfavorable ones may cause significant declines.
The total value of a cryptocurrency in circulation is referred to as its market capitalization, and it’s typically displayed on comparison websites alongside the price. This figure can be misleading, however, as some cryptocurrencies are limited in their supply but have high demand, or vice versa. In addition, some cryptocurrencies have a fixed supply, while others, such as Bitcoin, allow new coins to be created indefinitely, which can impact their relative price.
About the Author
