How does crypto impact trading?
Cryptocurrencies have seen a surge in popularity over recent years, with more and more people becoming interested and involved in the crypto market. As a result, popular cryptocurrencies such as Bitcoin and Ethereum have seen massive fluxes in their price, which has got people extremely excited for the future.
Much like trading cryptocurrencies, many people also choose to trade foreign exchange currencies. This is known as forex trading, where you can invest money into a particular currency and exchange it for another in the hope that the new currency will go up in value. This can be done on an FX trading platform.
What Is Cryptocurrency?
Cryptocurrency is an intangible asset which essentially means that it holds value but cannot be physically touched like an expensive watch. Instead, the asset is described as being digital, and the value can fluctuate depending on the demand for it. If the demand is higher than the supply, then the cryptocurrency will go up in value.
You might be wondering what makes trading cryptocurrencies safe and secure. The technology behind it is quite complicated but in simple terms. Every time a transaction or trade is made with cryptocurrency, it is recorded on something known as a blockchain. It gives each trade a specific transaction ID that is unique and not replicable. This means that it isn’t possible to create a fake cryptocurrency and sell it. It also means people are able to track all of the trades they have made and where their assets have gone.
The Appeal Of Cryptocurrency?
The main appeal of cryptocurrency is the fact that it functions without the need for a central bank. The value cannot be controlled by banks printing money causing the price to go down. Governments are not capable of effecting cryptocurrency, which is attractive to those that don’t fully trust political agencies.
Another reason that cryptocurrency has seen a huge growth in popularity is due to the fact that transactions can be down instantaneously. You can send cryptocurrency around the world with a click of a button in a way that is regarded as safe and secure. The role that cryptocurrency may potentially play in the future has got people extremely excited for things to come. As a result, popular cryptocurrencies such as Bitcoin have seen massive increases in value.
How The Government Has Responded
Although many people are excited about the future of cryptocurrency in our lives, there are government bodies and financial institutions that aren’t so enthusiastic. Central banks won’t be able to have the same control that they have over people’s finances. It is true that the state of the cryptocurrency market sees some instability which is undesirable for banks that want to be able to predict assets and finances.
The United States Federal Reserve has said that there are some issues with cryptocurrency that need to be addressed before it can be used more commonly in society. One of the potential problems that may delay the integration of cryptocurrency into everyday lives includes possible tax evasion, as it is difficult to track the value of digital assets.
The European Central Bank has also expressed caution with respect to the growth of cryptocurrency. Comparisons have been made to the Tulip bubble that occurred in the 17th century Netherlands. It suggests that cryptocurrency might not have such a promising future as many people think and that it will soon lose a lot of its value.
In China, the opinions on cryptocurrency by the governments and banks are slightly different. They are open to accepting the introduction of cryptocurrency into their society however they have made it very clear that the government needs to hold full control for it to be allowed to function. This somewhat takes away the point of cryptocurrency as an unregulated digital currency.
Over in Japan, however, the Banks do not see a future in which cryptocurrency can be used in their market. The Bank of England, on the other hand, has expressed optimism about the new currency, describing it as a “revolution” within the financial market.
Impacts Of Crypto On The Trading World
Cryptocurrencies are in many respects immune to inflation created by government bodies and financial institutions. Many people have seen cryptocurrency as a good way to diversify their portfolios. By placing some investments in cryptocurrency, if their other assets decrease in value, they can potentially make up for losses by holding onto the digital asset. This is similar to the reasons some people hold investments in things like gold, where value is more independent of the overall state of an economy. Nevertheless, there is a lot of buzz around cryptocurrency, and people are eager to see what the future might hold for this unique asset.