If you have read about trading, then, you must have come across the term cryptocurrency. Although it has only started gaining a lot of fame in recent years, the truth is that it has been around for over a decade. Virtual currency, as it is also known, is considered today as an alternative channel for financial exchange.
Of course, it is not bounded by traditional monetary policy. Since it is widely known, one may think buying bitcoin is the only form of trade in this sector. But, there are actually hundreds of virtual currencies out there; it just so happens that bitcoin is the most famous right now. So, without any further ado, let this article shed some light on this topic.
What Does Cryptocurrency Mean?
It has already been stated that cryptocurrency does not fall within the bounds of monetary policy. Then, how is its value determined? One thing to note is that these currencies are created with very complex encryption codes to ensure that the units of exchange are secure.
They are practically impossible to break, given the amount of mathematics and engineering protocols used in their development. Having said that, like physical currencies, they cannot be duplicated or counterfeited. Another advantage is that the user details are kept a secret to ensure that the transactions are not attributed to any group of people.
What was described above is what is known as cryptography. It is nothing new in the world of finance. In fact, your bank is using it to secure your electronic transactions, as well as to keep your private information safe from prying eyes. Blockchain technology has, however, used the idea to introduce another page in the already long history of money.
Cryptocurrency exchange, or forex, is a business that allows one to trade their virtual currency for other digital currencies or assets. In other words, you’ll either be buying or selling your bitcoins, altcoins, or other virtual currencies.
For most users, such a platform makes the buying and selling process quite straightforward. All you need is your investment, and you are good to go. You can find the full list here if you are looking for the best crypto exchange platform. As you will realize from the said list, some of them allow you to trade options and futures.
Types Of Crypto Exchange
Once you get into the market, you’ll notice that there is more than one way of exchanging your virtual currency. Below, have a look at the two main exchange types.
#1 Centralized Cryptocurrency Exchanges (CEX)
Perhaps, CEX platforms are the most common in the trading arena today. These exchanges act as the middlemen during transactions. So, what happens is that the institution will hold your cryptocurrency in a wallet.
When you want to buy or sell, you can trust the exchange to complete your transactions successfully. If you are planning to trade altcoins, for instance, you will have to find the highest liquidity altcoin exchange.
#2 Decentralized Cryptocurrency Exchanges (DEX)
If you don’t like the idea of storing your funds at an exchange, then there is another option. It is more like a distribution network where traders are matched, and the transaction is done directly. As such, the whole process is not run by a company, which makes them free from government policies.
They can, however, be complex to understand for newbies. Couple that with a lack of customer care support, and you have a massive problem in your hands. What most people like about peer-to-peer exchange is the high level of security.
Why do You Need to Know About Crypto Exchange?
You may be wondering why all this information is essential. Well, the world of finance has evolved, and it is best to keep up. Apart from being on the front pages of famous publications, governments around the globe are finding ways to create legislation regulating this sector. First, online retailers are beginning to accept bitcoins as one of their modes of payment. Yes, soon you might be using virtual currency to buy a flight ticket.
Given the value of bitcoin today, you would have been rich if you invested $100 ten years ago. And, by the way, that’s not an exaggeration. This market is very volatile, so you need to be careful. You can amass a lot of profits or lose most of your investment. Nonetheless, it is still one of the most lucrative businesses today.
Crypto has been around for just over ten years, but it has already shown that it can have an impact on the world’s financial system. But, being a new technology, you don’t really expect it to be perfect by any stretch. Since its introduction, however, a lot of people have started looking at money differently. Crypto exchange is gaining momentum, and it might be the right time for you to get on board.