Cryptocurrency market
Traders who already have long experience in the financial markets, already familiar with the forex market, the stock market, and have begun to grow in recent years are the cryptocurrency market.
The forex market is a market in which there are transactions to buy and sell currency. Between one country’s currency using another country’s currency.
The stock market is a market where buyers and companies trade shares with dealers as intermediaries. There are tens of thousands of company shares listing on the stock exchange.
The cryptocurrency market is an exchange wherein this market there are buying and selling of digital currencies called cryptocurrency. There are thousands of cryptocurrency on the crypto market.
All three are financial market models with different assets to trade. In the stock market which is trading stock. The forex market is trading in foreign currency. While the crypto market that is trading is digital currency crypto.
This article will be devoted to further learning about the cryptocurrency market, which is a shadow financial market in the world of the international financial industry.
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Cryptocurrency market explained
We certainly understand the market, there is a meeting place between sellers and buyers. In traditional markets, buyers will come to a place where there are many sellers offering their merchandise.
Some offer clothes, shoes, food items, and so on, and buyers will look for items they need to buy. When there is an agreement between the seller and the buyer, a transaction occurs.
In the cryptocurrency market, there is no special place where sellers and buyers meet each other. The goods that traded also cannot be held with your hands.
Cryptocurrency is a digital asset that has value. Basically cryptocurrency is digital money that can be used to buy and sell goods at outlets that accept payments in that digital currency.
The popular cryptocurrency is Bitcoin, this is the first cryptocurrency that was present. Ethereum, Litecoin, XRP, etc.
Crypto assets traded on the cryptocurrency market
After the presence of Bitcoin, which gave new hope to the way of payment with low costs and transparency, offered advantages compared to fiat currencies. Because Bitcoin was designed in limited quantities, allowing the value of Bitcoin to be equivalent to the gold that is resistant to inflation.
Other cryptocurrencies then followed by offering payment methods on the same basis using blockchain technology, but each had an advantage in offering at the initial launch.
Until now there have been more than 1500 cryptos included in the list cryptocurrency exchange. If on the forex market the number of countries in the world can be calculated so that it is simpler in choosing a pair to be traded. Unlike the cryptocurrency market, because there are many cryptocurrencies that confuse which assets to choose.
But like Forex, cryptocurrency also has a major currency, which is traded the most. Major currencies in the cryptocurrency market are crypto assets that are in rank 1-10 which have a greater market capitalization compared to others as biggest cryptocurrency.
Bitcoin, Ethereum, Tether, XRP, Bitcoin Cash, Bitcoin SV, Litecoin, Binance coins, EOS, Tezos.
To check all crypto assets, you can check on coinmarketcap, or on the Tradingview platform.
Top cryptocurrency list
- Bitcoin (BTC) market cap $ 128billion.
- Ethereum (ETH) market cap $ 19.4 billion.
- Ripple (XRP) market cap $ 8.22 billion.
- Tether (USDT) market cap $ 6.4billionn.
- Bitcoin Cash (BCH) market cap $ 4.1 billion.
- Bitcoin SV (BSV) market cap $ 3.4billionn.
- Litecoin (LTC) market cap $ 2.6 billion.
- EOS (EOS) market cap $ 2.4billionn.
- Binance Coin (BNB) market cap $ 2.4billionn.
- Tezos (XTZ) market cap $ 1.5 billion.
How cryptocurrency market work
The workings of the cryptocurrency market are also the same as the forex market, the stock market, and other markets. Traders will look for assets and buy at low prices and then sell at high prices.
There are thousands of assets that can be traded on the crypto exchange, so this requires knowledge of the assets chosen by paying attention to the company’s white paper, and also the potential for future development.
Not all assets can potentially provide profits to traders, so intelligence in choosing crypto pairs, and analysis becomes the main thing for crypto traders. Most traders like Bitcoin trading because besides this digital asset is cryptocurrency in the first rank. This may also is a future asset in the hope that its value will higher.
Where can trade cryptocurrency?
The cryptocurrency market is different from traditional markets where buyers and sellers meet. The cryptocurrency market is a global market. Where buyers and sellers can be anywhere because all transactions use the internet as the medium.
Then where can traders make buying and selling cryptocurrency? The first through exchanges. There are many exchangers who provide services to crypto traders to enable the buying and selling of crypto assets using their platforms. Binance, Kraken, etc.
However, not all exchanges offer margin trading, which in forex uses leverage, so margin trading allows traders to make large transactions using lower capital requirements.
The second way to trade crypto is to use a forex brokerage service that offers crypto accounts, you can make a deposit using Bitcoin and start trading.
Trading on forex brokers offering crypto accounts has the advantage that it provides leverage, but is usually lower than leverage on forex which can reach 1: 1000. While the crypto leverage depends on broker policy, usually is 1: 3 like as in TenkoFX.
When does the crypto market open and close?
The cryptocurrency market never closes. This is one of its advantages compared to the stock market or the forex market. The cryptocurrency market never sleeps and is open 24 hours 7 days a week.
Compare with the stock market which is bound by working hours, while the forex market is only 24 hours 5 days a week. So anytime traders can make transactions on the cryptocurrency market even on Saturdays and Sundays.
The cryptocurrency market never closes, so there are no open and close prices that can be identified. But if you trade on a forex broker with the MT4 platform. You can adjust the opening hours of your broker.
How to analyze price behavior can be with calculate 24-hour price changes and compare current market prices with prices of the previous day at the exact same time.
If writing with the formula then.
(Current Price – price 24 Hour Ago ) / price 24 Hour Ago * 100
In the simplest terms, it means that if you only see percentage changes over the past 24 hours, You can’t know whether you are seeing real-time price movements in cryptocurrency or just the residual price volatility of the day.
Risk in the cryptocurrency market
The crypto market is a risky market, like forex, although in the bulls and bears market a trader has the opportunity to make a profit. But also the risk is proportional to the profit potential. Moreover, the cryptocurrency market operates 24/7 days a week, aka never closed.
The second risk is if you find that you are trading crypto by choosing fraudsters exchangers or broker, who irresponsibly leave clients for a variety of reasons.
Then you should really choose a trusted exchange and broker when you start crypto trading.
Another risk when you store cryptocurrency in a digital wallet, but you lose your private key so that you cannot access your account, store your private key safely.
Standard requirements in trading on the crypto exchange
With the increasingly widespread fraud by masking as a crypto exchange, it requires high standard rules that can reduce risk factors in the cryptocurrency market.
Some of the high standard requirements in the crypto exchange are as follows below.
- First, in terms of depositing or purchasing crypto assets, it should be as simple as possible. Simple is to be fast and easy. For example, using a credit card bearing the Visa or MasterCard to directly be able to buy Bitcoin. Like as shopping at the store using an ATM card
- Second, the speed of executing each order in large quantities per second is also very, very important. Do not cloud computers used by the crypto exchange are unable to accommodate a large number of orders.
- Third, the trade security system remains number one. This is a condition of the level of user confidence in the crypto-asset exchange. Because many crypto-asset exchanges have been hacked. Including even the largest exchanges.
- Fourth, user-friendly comfort and 24-hour service for 7 days, including good language features.
Crypto market volatility
The cryptocurrency market is a global phenomenon that no one government controls. There is no specific regulation from the government regarding the cryptocurrency market. So cryptocurrency market volatility still depends on the market mechanism itself.
Some of the reasons that make crypto market volatility are as follows.
Cryptocurrency has no intrinsic value
The company, cryptocurrency does not sell products or employ thousands of people. The crypto company does not pay dividends, and only a small amount of the total value of the currency develops. this becomes difficult to judge when overbought or oversold? When is the value good or too expensive? Traders can only rely on market sentiment.
Lack of regulatory oversight
Because there are no regulations governing cryptocurrency so big players make it possible to manipulate the market and can cause volatility.
Lack of institutional capital
There are indeed several venture capital companies, hedge funds, and high-value individuals who are fans and investors in crypto, but that is still outside the market. Some officials acknowledge there is some validity in the space. But have not yet made significant capital or public participation.
Thin order book
Most Crypto investors never save coins on the exchange, which can be hacked. As a result, tradable supplies are not on the exchange order book but outside the exchange. Large market orders can make the market go up or down, causing “slippage.”Because the capacity of large traders to move the market can drive market volatility.
Long term vs short term
In the cryptocurrency market too many short-term traders who with panic can buy and sell crypto assets, not for long-term investment. Such conditions can also cause volatility in the crypto market.
Herd mentality
Crypto investors are mostly millennials, who don’t trust the government and try to be early adopters in technology. Most millennials have no long-term investment experience. The encouraging thing is the desire to take risks in the hope of getting a windfall from cash. By using whatever capital is invested in risky instruments, this also causes volatility.
What drives the crypto market?
There is some factor as drives crypto market, it’s following below.
Node count
This is a measure of how many active wallets on an existing network can be searched on the internet. In this way, you can analyze whether a currency has a fair price or not. By searching for data on the number of nodes and total market capitalization then comparing the two indicators with another cryptocurrency.
This method can be used to find out if the coins are overbought. The more nodes, the stronger the community that allows crypto to have increased value.
Demand has increased
In general, prices can rise if there is an increase in demand. In all types of supply and demand markets are important indicators for being able to analyze rising or falling prices, this records the average demand curve.
Mass Adoption
Whatever the currency if it gets mass adoption, its value can rise very quickly. If the adoption of high numbers will cause an increase in demand leads to a direct increase in price. Mass adoption can occur if there is a request to use cryptocurrency in the real world for payment.
Fiat currency inflation
If the price of fiat currencies falls, then the price of Bitcoin will rise, the owner of bitcoin gets more from that currency. This can be analyzed since the FED, ECB and other central banks have printed more money and kept interest rates low.
Production cost
High production costs can drive cryptocurrency, Bitcoin is crypto with high production costs. The resources and energy that have been put into bitcoin mining are very high. Such as for special hardware such as CPU / GPU or server and cooling system for that hardware.
Regulation
Regulations by the government have a very high cryptocurrency impact. This regulation can make digital money more centralized and can have a major impact on the price of digital currencies.
Market maker and market taker in the cryptocurrency market
The term market maker and market taker become unique terms in the cryptocurrency market, this term is different from market makers in forex.
Market maker
Maker ’is a trader who sells or buys Bitcoin using a self-determined price, or in other words, using the ‘Limit’ order.
For example, the current price of Bitcoin is $ 9000, and a trader buys a Bitcoin order at $ 8000. After you submit an order, it will be delayed until the Bitcoin price drops to $ 8000. Pending orders are entered into the order book, so you become a market maker.
The advantage of being a market maker is that there are no transaction fees.
Market Takers
‘Taker’ is a trader who sells Bitcoin using the price stated in the Book Order. Market taker traders usually buy/sell Bitcoin using the ‘Market or instant order method.
The advantage of being a market taker is that you can sell/buy Bitcoin instantly. Without having to wait for your order to be executed because it already uses prices made by market makers right away.
Final thought
The cryptocurrency market is a shadow market because it does not yet have clear regulations. But this is a global phenomenon that is a type of market that arises because of public encouragement and not encouragement from any government.
The growth of technology sometimes buries other industries with the presence of new technology. Although cryptocurrency can still be said to be a wild market at this time. It may be that in the future it will replace a flat currency driven by inflation.
Bitcoin is one of the oldest cryptocurrencies, and there are still many fans who feel confident that the crypto of the future can shift some commercial banks.
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