What is Cryptocurrency and How Does it Work?

The digital coin market is evolving faster than any other financial instrument in history. In just 13 years, the digital economy has gone from an unknown field to a multi-trillion-dollar industry. A few years ago, one of the most common questions people asked was what is cryptocurrency and how does it work.

As of the beginning of 2023, tens of millions of people are integrated into the digital economy. But even now, many novice investors have a superficial knowledge of cryptocurrencies.

In this article, we will talk in more detail and discuss the questions “What is cryptocurrency?”, whether it is worth studying this topic now or maybe it is too late.

What is the Point of Cryptocurrency?

The main feature of digital coins is decentralization. The idea of blockchain technology that underlies cryptocurrencies does not imply the existence of a central governing body.

With crypto assets in your wallet, you can send them anywhere in the world without the usual bank bureaucracy and high fees. There are no intermediaries and no human factor when you work with cryptocurrency. No one can delete your transaction or undo it.

With the lack of regulations and governmental control, cryptocurrency is too unstable and volatile. Indeed, banks do not affect crypto supply, and government cannot order to “print” more coins or cut their supply. 

The market volatility plays into hands of traders, for they catch the trends waves and make money by selling and buying digital coins. However, that is not a random action - successful trading requires consistent steps and order. For that purpose, traders use strategies:

• Buying coins and selling them in a couple of minutes, playing on tuny market fluctuations and taking profits many times a day;

• Buying assets and selling them at the end of the day;

• Opening positions and holding them for a couple of weeks or months;

• Long-term holding coins.

Additional trading tools allow making money even on the falling market - traders open “short” positions and generate income on the price drop. Another popular type of cryptocurrency trading is futures derivatives, implying the prediction of assets’ prices.

There are much more financial tools for cryptocurrency trading. Welcome to the WhiteBIT crypto platform and its educational blog to learn about cryptocurrency, blockchain, NFTs and trading more.