The History of Crypto Trading
Having recognised the issues with international transactions carried out using fiat currencies, developers set out to find an alternative, digital payment system which could not be controlled' by governments and institutions.
The result was cryptocurrency, a payment system secured using incredibly complex mathematical algorithms known as blockchains, which are unbreakable and anonymous.
In their very short history, cryptocurrencies have generated massive amounts of speculation, turmoil and publicity. Almost certainly, you will have witnessed the manifestation of this unique trading commodity which did not (and still does not) conform to any other.
In this guide, you will learn:
- Why was cryptocurrency developed
- How crypto replaces real currency
- The future of the cryptocurrency world
How Did Crypto Begin
Although cryptocurrency did not honestly come to public attention until the emergence of Bitcoin, several developers had already tried to create a decentralised digital currency system much earlier.
One of these was Nick Szabo who worked on a project he named "bit gold" from 1998 to 2005. His work failed to come to fruition but is still considered to have influenced cryptocurrency development. Other notable projects were "e-gold" and Wei Dai's "b money" system, which interestingly was cited in the original Bitcoin white paper.
You will no doubt be aware that the first cryptocurrency to appear was Bitcoin, which made its debut in 2008. Initially developed as a secure, open source "online payment" system, Bitcoin evoked a massive following with the mysterious mining possibilities and the fact that it was a limited edition resource.
Over the next few years, several other cryptocurrencies began to appear, some of which remain popular, but none has ever enjoyed the same levels of interest or epic rises (and falls) in value as Bitcoin.
Cryptocurrency is a much more valued commodity these days and is making its presence felt in both the binary options and CFD markets.
When Crypto Became Popular
CCryptocurrencies began to take off around 2013 when Bitcoin enjoyed a phenomenal increase in its value and came to the forefront of public awareness.
Even if you had not found yourself interested previously, perhaps you were one of the many traders who were suddenly intrigued by this whole air of mystique and naturally by the rapidly increasing value. The fact that crypto "coins" are a metaphor, rather than being a physical entity seemed to have a big part to play in that.
Not only that, cryptocurrency is a finite product. Using Bitcoin as an example, there were just 21 million coins released into the system, and once they are all unlocked, the supply ceases. At the end of 2018, all over the world Bitcoin "miners" were still busy trying to find the estimated 4 million which are still locked.
The Story Today With Crypto
Cryptocurrency is a much more valued commodity these days and is gradually making its presence felt in both the binary options and CFD markets.
Initially, most cryptocurrency traders were purchasing the currency itself via a broker. However, this required a fair bit of preparation in terms of acquiring digital wallets to hold and move the currency around and potential for losing the digital keys which are essential to access them.
Cryptos continue to expand in numbers, with an estimated 1000+ live currencies available. However, it is quite likely that you may only be able to name about five of the most popular candidates.
Current demographics still confirm that it is a "younger" trading market, with the average age of investors being 18-36 and interestingly, mostly male. Most are trading cryptos using CFDs rather than investing in the currency itself to simplify transactions.
Also making its mark is a relatively new version of cryptocurrency, the stablecoin. Stablecoin is something of a hybrid product or bridge between cryptocurrency and fiat currency and so-called because its value is linked or "tethered" to a stable commodity or currency such as the USD. Probably the best-known example is Tether itself, where one coin = $1.
By their nature, stablecoins are considered less volatile than normal cryptos, but if you analyse them, you will see that they are not infallible to outside influences. You may recall Tether being in situations where the value of the coin has dropped well below its $1 amount due to bad publicity.
Crypto Trading in The Future
Although still considered by some to be little more than a novelty, cryptocurrency trading has consistently increased over the last six years, growing to an estimated 30 million users and 1 million trades per day.
You will undoubtedly see experts predicting how it will progress in the future, but even their opinions vary enormously. Cryptocurrencies do not always seem to react by specific world economic events, making it very difficult to second-guess them.
Being developed all the time are new forms of cryptocurrency trading, e.g. Forex/Binary hybrid options are being offered by individual brokers. While this may appear to be a good thing, caution will be needed by you to guard against potential scams using loopholes in current or future financial regulations.
Interest in stablecoins is likely to increase. However, the tethering to either a commodity or currency is a concern for some. The fact they are takes away from the fundamental principle of an open, de-regulated currency option. These differences will undoubtedly be a fascinating time to watch this new era of cryptocurrency history unfolding.
Even if you do not intend on trading solely in this modern commodity, cryptocurrencies in general, stablecoins and their derivatives are definitely something interesting to keep in your sights and may well be a part of many more portfolios in the years ahead.
Jacob has been an author for us since our launch in 2012. He has over forty years’ experience in the financial sector and has held a variety of positions within financial services corporations and venture capitalist organisations. Learn more.