When we start to consider the effects of cryptocurrency on dynamics, we need to consider a unique set of forces. Cryptocurrencies are passed from one party to another without intermediaries or central institutions. Inherently decentralized and anonymous, they offer unprecedented freedom and control. On the other hand, if you decide to go into bitcoin trading, then you use a reliable trading platform at this page.
The downside? It can be tough to feel confident in purchasing them. And yet the upside is often worth it — there’s an incredible potential for growth with limited chance for risk. For the uninitiated, understanding the cryptocurrency market structure requires a firm grasp of these two fundamentals: economics and emotions. Understanding the Market Structure for cryptocurrencies.
The cryptocurrency market structure has already proven itself a unique force to be reckoned with. At the beginning of 2017, many were skeptical that Bitcoin would be able to rally from its January price of USD 1000. As we look back now, that seems like a laughable underestimate. Here’s a quick chart of Bitcoin’s most recent movements: as of November 20121, it had reached an all-time high at USD 65000 per BTC (Bitcoin). And yet, despite this enormous growth, many are still left wondering whether or not they should invest in the market. The answer is yes — but understanding the market structure can help to make informed decisions.
Understanding the economics of cryptocurrency is complicated, primarily because there are no agreed-upon standards in the market. Many would argue that there’s no “market” in the traditional sense. Instead, there are thousands of different exchanges for hundreds of different coins and tokens. First, your investment confidence will rely upon your trust in a given coin or token. If you can trust that it will continue to grow, you are more likely to purchase it.
You are less likely to purchase it if you can’t trust it. Unfortunately, this causes a problem for experienced traders and investors, as there’s no way to know exactly where the price will be at any given time. As a result, many new investors shy away from investing in cryptocurrency until there’s some standard or universal understanding of the market structure behind them.
Emotions of Confidence, Uncertainty, and Doubt
If you were to survey the average investor looking at cryptocurrency investments at this point, they would overwhelmingly describe emotions like uncertainty or doubt. Of course, some would argue that this is intentional — cryptocurrencies were created so that they could be anonymous and decentralized by nature. As a result, it’s up to the individual to trust their judgment and determine whether or not they should invest.
For example, if you wanted to invest a large amount of money in Bitcoin right now, you would have to trust that no exchanges would be hacked or closed overnight. The price could have the potential to rise and fall overnight on these unknowns alone.
But there are also emotions of confidence — especially in the upward trend. With consistent upward movement and a nearly 5,000% return on investments in 2017 alone, people who invested at the beginning of the year are more confident in the market. It has created new demand for cryptocurrencies and a large amount of wealth for those who have been able to stay ahead of the curve and make intelligent investments.
Markets Structure Is Changing
With all this in mind, it’s essential to realize that the market structure is changing rapidly. As mentioned, there’s a great deal of skepticism in the market. Yet, as cryptocurrencies continue to gain exposure and acceptance, we’ll see more confidence in purchasing them. As a result, we will see new exchanges develop as well as new regulations adapted for the changing market structure.
If you don’t keep yourself updated on the latest news and trends from your trusted sources, it could mean that your investment won’t go according to plan — or worse, it could leave you feeling out of control.
Understanding and adapting to the market structure is a massive part of what makes cryptocurrency work. While it can be a bit overwhelming (especially when compared to traditional stock and bond markets), it ultimately boils down to your confidence in the coin of your choosing. With recent regulation changes, the need for trust has never been more critical. So keep up with market trends and ensure you have a trusted source for news about the market you’re interested in. Trading and investing in cryptocurrencies isn’t easy, but it’s worth it when done carefully.