Cryptocurrency Market

Earlier, we talked a bit about bitcoin. Given its popularity over the past 5 years, a huge number (over 1000) of various cryptocurrencies have formed in the world, which have taken the idea of ​​bitcoin (blockchain) as a basis and found a place in the sun.

Some of them are almost a complete copy of bitcoin (bitcoin cache, gold, dogecoin, etc.). Some took only part of the ideas (Light Coin, Namecoin, etc.). Some differ significantly say, they added anonymity or other properties (Monero, Dash, etc.).

There are currencies completely unlike Bitcoin such as Ripple (a protocol for transferring data between banks) or Iota a cryptocurrency for smart household appliances that cannot be mined, and some of which “burns out” during the transfer.

We should also talk about the Ethereum ecosystem. This is the currency that has changed Bitcoin a lot. It is rather not a currency, but a way of transferring value based on contracts that can be entered into the system in advance (smart contracts).

Ethereum has become Bitcoin 2.0 for many. Its value has grown thousands of times since its inception (IPO) and it has become the object of cloning. Now there are many systems that are similar to it NEM, NEO, LISK, etc. based on these systems, tokens are created individual cryptocurrencies that are created for a narrow set of purposes usually to create decentralized applications (a decentralized exchange or an advertising company, social networks, casinos, etc.)

As you know, the cryptocurrency market is quite heterogeneous and it offers completely different assets. Some assets are similar to currencies, some to metals and some to stocks of companies. Given that the market is still very young (it is not even 8 years old), it is extremely dynamic and unpredictable. The price of any currency can rise several times a day (or maybe fall).

The youthfulness and unpredictability of the market also leads to the fact that it can be earned in ways that no longer have an effect on traditional exchanges (and may even be banned there). Arbitration (buying in one place and selling in another when the market is skewed), Pump and Dump, when in various ways artificially created hype around certain products, the use of insider, etc.

This is a super profitable market and even a person far from the exchange can make money here but professionals who know a lot of tricks really earn a lot here.

Cryptocurrency Market Risks

Briefly consider the negative elements that make the cryptocurrency market especially risky.

Concentration of value in one hand. Many cryptocurrencies first of all, bitcoin are supposedly centralized in a small number of people in particular, the creator of bitcoin Satoshi Nakamoto has about a million bitcoins left on wallets (almost 10% of all). Various studies suggest that 30% of bitcoins are concentrated in less than 1000 individuals. The same applies to bitcoin hard forks.

Small market size. Yes, the market has grown by orders of magnitude in recent years however, the value of the entire market is still several hundred billion dollars which is quite a bit (the derivatives market is thousands of times larger). Therefore, the market can be manipulated with rather small volumes (sometimes an order of several million dollars can bring down a separate cryptocurrency by several percent).

The probability of a ban. Cryptocurrencies are constantly banned in various countries. China banned crypto exchanges at the end of 2017, America bans ICOs, etc.

Value quickly flows to more advanced coins. As soon as the cryptocurrency becomes more perfect it dramatically increases the cost while other currencies begin to become cheaper. For example, the transition of Litecoin to SegWit raised its price several times. It is necessary to monitor not only the movement of the currency but, more importantly, its development and improvement. If a currency has stopped in development, it can quickly fall to zero.