The crypto market is the economic activity of buying and selling cryptocurrencies, with prices determined by supply and demand. Just like stock markets, commodities, and foreign exchange, the crypto market is a global network of buyers and sellers. This includes individual investors, financial institutions, hedge funds, currency traders, and national banks.
As a new and emerging asset, the crypto market is incredibly volatile. It can be hard for new investors to keep up with sudden price movements, and even experienced traders can struggle to understand why certain assets are rising or falling. This volatility can be profitable for high-powered Wall Street investors who know how to make quick trades and can predict where the market is headed, but it can be a minefield for novices.
One of the most important things to understand about the crypto market is that unlike traditional investments, cryptocurrencies are not backed by cash flows. They are instead a form of digital money that exists outside of the banking system and has the potential to disrupt the way we make payments. Because of this, the success of cryptocurrencies hasn’t yet been based on traditional investment analysis, and spectacular returns have created their own self-fulfilling prophecy: the higher they rise, the more interest and buying activity they attract, leading to even greater price increases.
Currently, the most popular cryptocurrencies are bitcoin and ether. Together, they account for about 73% of the total cryptocurrency market cap and more than half of trading volume. However, the crypto world is home to thousands of different currencies, and some are geared toward specific use cases. Investing in the right cryptos can help you diversify your portfolio and increase your chances of success.