Crypto market is a term used to describe the trading and investment activity around digital currencies. While bitcoin and ether continue to command the greatest share of investor attention, there are thousands of other cryptocurrency options. Each of them has its own value, based on a combination of factors including the quality of the cryptology, technology that limits the number of units available and the market’s demand.
Speculators can trade cryptocurrency on a variety of exchanges, with some offering more advanced tools and features than others. Some, such as Coinbase and Binance, are regulated (requiring AML/KYC verification) while others are decentralized (allowing users greater privacy). Arbitrageurs try to capitalize on price discrepancies between exchanges, but success requires split-second execution, sophisticated tools and a willingness to endure transfer delays and fees that can erode profits.
Like any other traded item, cryptocurrencies are subject to both breathtaking highs and painful lows. Their dramatic performance often drives investor interest, which fuels more buying activity that, in turn, lifts prices even higher. Investors are largely self-directed in the cryptocurrency market, with most holding their coins in digital wallets (similar to a banking app) that are protected by passwords and encryption. Some invest through funds that track price trends and recognize bull and bear markets.
Cryptocurrency investors must also deal with the fact that, unlike government-issued currency, cryptocurrency is a taxable asset. Gains and losses must be reported to the Internal Revenue Service. The cryptocurrency market is volatile, but it can provide a wealth of opportunities for investors who take the time to learn how it works.