The big reason behind cryptocurrency’s popularity is its volatility index. The crypto assets allow traders to make money through extensive price movements. One of the most recognized cryptocurrencies, Bitcoin (launched in 2009), has proven its worth impeccably. The current Bitcoin price, which is worth more than 85 lakhs (PKR).
Undoubtedly, crypto assets are considered a renowned trading vehicle in India and worldwide. Being a trader, if you are looking to ride the waves to profit, it is also imperative to understand that risk involved by investing your money in cryptocurrency is also high.
There are plentiful ways to trade in the crypto market. Some investors opt to own the cryptocurrency directly, while others may turn to the futures market. Entering the futures market can magnify your gains (along with losses) as traders can leverage their money to 10 times. However, the futures option is only recommended for skilled investors having extensive experience in this market as it involves extraordinarily high risk in exchange for that potentially high reward.
Want to jump into the world of cryptocurrency? Wait! Before that, you need to know the best cryptocurrency brokers providing you with an option to invest in crypto assets. But, before informing you of the best crypto exchanges, it is vital to know the basic elements of cryptocurrencies
Things You have to Know Before Investing in Crypto Market
Listed below are some key terms used by cryptocurrency market operators just like other financial markets:
1) Decentralization- All the cryptocurrencies are decentralized, which means there is no centralized place to transact the crypto, and you can only eliminate the high transactional fees while transferring funds. No person or entity has control over any cryptocurrency; it is because the crypto tokens are maintained through a ledger technology called blockchain, which encourages transparency and enables your transaction/asset to be safe and secure.
2) Blockchain- It is a technology-based on which the entire crypto market functions. The technology helps to record the transactions of the growing list of crypto assets in a peer-to-peer network.
3) Block- All the financial transactions are recorded on a digital ledger occurring recurrently on a blockchain.
4) Cryptocurrency Wallet- It is a digital wallet solely responsible for holding crypto assets. The wallets are used to send, receive, and store digital currencies. The wallets comprise 2 types- the first one is a cold wallet, which is used for storing crypto coins in an offline environment. The other type of wallet is hosted wallet, hosted by 3rd parties to provide robust security for stored crypto assets.
5) Cryptocurrency Exchanges- The platforms where an investor is allowed to buy, sell, and hold crypto assets in exchange for their fiat currencies or other crypto assets are known as cryptocurrency exchanges. They are also called digital currency exchanges.
6) Distributed Ledger- The distributed ledger connects the decentralized nodes to the network where all the financial transactions and other data are recorded. The ledger can either be permissioned or private.
7) ICO- ICO (Initial Coin Offering) is a process in which the discount is offered to the first set of investors on the newly launched crypto coin. ICO is the first step a company takes to raise their funds to support their coin’s development and maintenance.
8) Fork- Also known as the Split Chain that builds an alternative version of a blockchain after leaving 2 blockchains running simultaneously.
9) Mining- A computationally-intensive process of adding new cryptocurrencies by solving cryptographic equations and verifying transactions on its distributed ledger. Every miner is rewarded with a certain set of crypto coins for their successful compensational efforts.
