Let’s first explain what cryptocurrencies are in general. Cryptocurrencies are decentralized digital currencies. They operate through a peer-to-peer (P2P) transaction verification system without a central server. All transactions are added to a common digital database called the blockchain through mining or staking. Cryptocurrencies allow you to use applications and services that run on the blockchain, pay for goods and services, and trade them.
Cryptocurrencies have attracted the attention of the media, retail investors, and institutional traders due to the high volatility of their prices.
Trading fiat currencies is different from trading cryptocurrencies. Cryptocurrencies are different from fiat currencies such as the British pound sterling (GBP) or the US dollar (USD). Fiat currencies are issued by governments and controlled by central banks.
This means that fiat currency can be more stable, but the government can also manipulate its value - for example, if it decides to print more money. The prices of fiat currencies and cryptocurrencies fluctuate depending on market conditions, but fiat currencies are also subject to fluctuations due to government actions.
Cryptocurrencies operate on a blockchain, which uses encryption to secure transactions, control the supply of additional blocks, and verify transfers.
A blockchain is a digital database where cryptocurrency transactions are stored in blocks that require complex mathematical calculations to record and verify.
Cryptocurrency holders can store their tokens in electronic wallets, which are quite secure because the owner must have two unique keys (public and private) consisting of a set of letters and numbers to access them.
Cryptocurrencies have become popular among traders and have become an asset class in their own right. The volatility of their prices can provide traders with ample trading opportunities, but at the same time, it makes investing in cryptocurrencies very risky. Remember that the price of a digital asset can change direction in a matter of seconds and cause losses.
Cryptocurrencies are divided into three main categories: Bitcoin, altcoins, and tokens.
The first cryptocurrency, Bitcoin, remains the world's leading cryptocurrency by market capitalization and value. It is a global peer-to-peer digital payment system that allows parties to transact directly with each other without the need for an intermediary such as a bank. Bitcoin is often called a digital alternative to fiat currencies and gold, but regulators argue that BTC is a much riskier asset and cannot be compared with one another.
Altcoins are defined as cryptocurrencies alternative to Bitcoin. Altcoins can differ from Bitcoin in varying degrees. They may have a different economic model, they may use different underlying algorithms, or they may have different block sizes.
Altcoins cover a wide range of uses. For example, the Ethereum blockchain allows developers to create decentralized applications (dApps) and smart contracts. And IOTA (MIOTA) was specifically designed as a new layer of data transfer and transactions for the “machine economy” and the Internet of Things (IoT).
Stablecoins are cryptocurrencies that are designed to provide a digital form for fiat currencies. Stablecoins are pegged to fiat currencies or other assets at a 1:1 ratio. The top three stablecoins are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD). Since they are pegged to the US dollar, each of the above stablecoins should always be worth $1. Stablecoins are used to provide digital payment and settlement services, as well as to develop DeFi.
How does the crypto market work?
Unlike traditional currencies, cryptocurrencies exist only as a shared digital record of ownership that is stored on the blockchain. When a user wants to send cryptocurrency to another user, they send it to their digital wallet.
Since cryptocurrencies operate on decentralized computer networks, they are not issued or controlled by regulatory bodies. There are also no regulations on how they are bought, sold, and marketed. At the same time, they can be traded through decentralized or centralized exchanges and transferred to crypto wallets for safekeeping.
You can fund your exchange account with fiat currency, which is usually converted into stablecoins. You can use them to buy cryptocurrency. You can then sell the cryptocurrency you bought and get the stablecoins back, or use them to buy another cryptocurrency. In Artcap, you can also fund your account with cryptocurrencies.
We wish you successful trading with ArtCap !
