Cryptocurrency markets are where users buy, sell, trade, or swap cryptocurrencies. Like any other market, they are highly volatile and not subject to the same regulatory oversight as registered securities. Investors should always only invest amounts they are willing to lose and understand the risks involved.
The most prominent use case of cryptocurrencies is decentralizing the legacy financial system by enabling peer-to-peer finance of varying complexity. Despite this potential, it is important to remember that this will inevitably run into resistance from those who derive power from the current system.
In general, a cryptocurrency’s value is based on supply and demand: The more people who are willing to buy it, the higher its price. However, there is also a significant amount of speculation and manipulation that can drive prices up or down.
Coins are traded at crypto exchanges, which can be centralized or decentralized. Centralized exchanges offer fiat gateways for exchanging cryptocurrency for currencies like EUR or USD, while decentralized exchanges enable direct trading between users. The latter often operate on a Proof-of-Work (PoW) mechanism, which rewards miners for verifying transactions on the blockchain. Mining requires specialized hardware and access to low-cost electricity, and can be very competitive.
The market capitalization of a cryptocurrency is a measure of its value, calculated by multiplying its price by the number of coins currently in circulation. Tracking this metric can help identify trends and recognise bull and bear markets, shaping investment strategies.