Over the past decade, cryptocurrencies have become a central topic in discussions about the future of global finance. Terms like Bitcoin, Ethereum and blockchain are now part of everyday vocabulary, but what do they really mean? Read this article and find out all about cryptocurrencies, what cryptocurrencies are, cryptocurrency prices and how to invest in conditions of high volatility.
What are cryptocurrencies?
Cryptocurrencies are digital currencies that use cryptography to secure transactions and control the creation of new units. Unlike traditional money, they are not issued by a central authority, such as a bank or a government, but operate on a decentralized network called a blockchain.
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Blockchain technology and its role
Blockchain can be likened to a digital ledger that stores all transactions made. It consists of blocks containing sets of transactions, each block being linked to the previous block.
The Difference Between Cryptocurrencies and Traditional Money
Traditional money (dollar, pound sterling, leu) is regulated by central authorities according to the needs of the economy at any given time. Cryptocurrencies, on the other hand, are autonomous and operate decentralized, based on the consensus of network users. Transactions are fast, transfer costs are low and access is global, i.e. anyone with an internet connection can buy cryptocurrencies.
Examples of popular cryptocurrencies
Bitcoin (BTC): the first blockchain network ever created. Bitcoin is the first digital currency issued and is currently one of the most popular cryptocurrencies, considered “digital gold”.
Ethereum (ETH): platform created to enable the development of decentralized applications and smart contracts
Litecoin (LTC), Ripple (XRP), Cardano (ADA), Solana (SOL): other major cryptocurrencies, each with unique features and functions.
History of cryptocurrencies
The emergence of the world’s first digital currency, Bitcoin
In 2008 Satoshi Nakamoto published a whitepaper describing Bitcoin, a decentralized digital currency. In 2009, the first version of bitcoin was publicly launched and a new era of decentralized digital currencies and transfers began.
Cryptocurrency market evolution
After the success of Bitcoin and blockchain technology, thousands of other cryptocurrencies with different functions and features emerged. They introduced technological innovations such as smart contracts (Ethereum) and faster transaction speeds (Litecoin, Ripple).
Milestones in the Development of Cryptocurrencies
2013: Bitcoin reaches $1,000 for the first time.
2017: Bitcoin surpasses 20,000 USD.
2020-2021: Growing institutional interest and widespread adoption of cryptocurrencies. More large companies start accepting payments in Bitcoin.
2022: The FTX platform, one of the largest cryptocurrency exchanges, collapses. This event triggered a serious crisis of confidence in the market and raised alarm bells about the need to implement global regulations.
2023: An accelerated growth of the DeFi (decentralized finance) and NFT ecosystem takes place.
2024: The year 2024 brings with it the adoption of clear cryptocurrency regulations in the US and EU. This creates a stable legal framework encourages institutional investment and cryptocurrency prices start to rise.
2025: Cryptocurrencies are integrated into traditional financial systems, a number of banks start offering crypto services. Central bank-issued digital currencies (CBDCs) are launched in several countries.
If you’re passionate about digital investing, it’s important to know all about cryptocurrencies and the factors that influence their value.
Cryptocurrency prices and influencing factors
Here are four factors that play a crucial role when it comes to cryptocurrency prices: supply and demand, institutional adoption, technological advancements and market sentiment.
The role of supply and demand
Just like any other asset traded in the market, cryptocurrency prices are influenced by the relationship between supply and demand.
Limited supply: Most cryptocurrencies have a fixed number of units that can be created. For example, Bitcoin has a maximum supply of 21 million coins. This limitation creates a sense of scarcity and can accelerate price increases when demand is high.
Increasing demand: As more investors, companies and governments recognize the potential of cryptocurrencies, demand is growing.
Institutional adoption
When it comes to cryptocurrency pricing, another deciding factor is institutional adoption.
Examples of adoption: More and more companies are accepting payments with Bitcoin or Ethereum. Financial giants such as PayPal and Mastercard have also integrated cryptocurrency transactions on their platforms.
Impact on price: As these large organizations enter the cryptocurrency market, the value of digital assets can increase significantly.
Technological progress
The cryptocurrency sector is closely linked to technological innovations. These can influence both investor interest and the price of coins.
Launch of upgrades to blockchain technology: Technological upgrades, such as Ethereum blockchain’s migration from Proof-of-Work to Proof-of-Stake consensus mechanism, increase interest in cryptocurrencies.
Advances in transaction security: Improvements in transaction security are helping to increase investor confidence.
Developing real-world applications: Cryptocurrencies also gain value through practical use cases. For example, the use of blockchain in industry through smart contracts or NFTs (Non-Fungible Tokens) creates new markets.
Market sentiment
Last but not least, market sentiment plays a key role in determining cryptocurrency prices. Investors are often influenced by news, events and trends and most novice investors seek to find out everything about cryptocurrencies before making their first purchase in order to avoid making a mistake.
Social media buzz: Platforms such as Twitter and Reddit are places where discussions about specific cryptocurrencies can create waves of interest. A notorious example is Dogecoin, which is heavily promoted on social media channels by Elon Musk.
Fear and uncertainty: Negative events such as attacks on exchange platforms, strict regulations imposed by governments or crashes of other digital assets can cause panic and affect prices.
All about cryptocurrencies: how to invest in conditions of high volatility
Investing in cryptocurrencies is an attractive opportunity for many investors. However, the extreme volatilities of the cryptocurrency market can be a serious hindrance, especially for those taking their first steps in the field. How can you invest wisely in cryptocurrencies while making sure you protect your capital?
What cryptocurrency market volatility means
Volatility refers to rapid and significant price fluctuations in a given market. In the case of cryptocurrencies, this can be extreme as the price of an asset can rise or fall by tens of percent in a single day.
Why does this happen, what are the factors that cause suchsudden pricechanges ?
Lack of clear regulation: Unlike traditional markets, cryptocurrencies are still in the early stages of regulation.
High/low trading volume: Cryptocurrency markets can be influenced by the volume of trading going on at any given time.
Speculation: Both investor excitement and panic contribute to price fluctuations.
Global news and events: Every political statement or decision regarding cryptocurrencies can have a significant impact on the market.
Benefits and risks of investing in cryptocurrencies
Benefits:
1. Potentially large gains: Rapid price increases can bring significant profits.
2. Easy access to the cryptocurrency market: Anyone with internet access can buy cryptocurrencies.
3. Transactions decentralization: Financial transactions take place without banks or other financial institutions intervening.
Risks:
1. Financial losses: Volatility can generate massive loss of money in a short time.
2. Lack of regulatory certainty: The market remains a relatively uncertain terrain.
3. Fraud and hacking: Without proper security measures, your assets may be at risk.
Tip: Before investing large sums, it would be a good idea to do your research and understand everything about cryptocurrencies.
6 steps to invest wisely in cryptocurrencies
1. Before investing, understand the cryptocurrency market
Read about what blockchain means, how Bitcoin differs from others and which projects are the most promising.
2. Diversify your portfolio
Don’t invest all your capital in one currency. Diversification minimizes risk.
3. Use a secure platform
Choose a trusted trading platform. For example, secure and intuitive apps such as Abarai, where you don’t need an ID card or KYC documents for small transactions up to a limit of Rs 5000.
4. Set a firm budget
Invest only the amount you can afford to lose. Volatility can lead to losses, so financial planning is extremely important.
6. Keep up-to-date with the news
News has a direct impact on the cryptocurrency market. Subscribe to alerts from trusted sources and avoid decisions based on rumors.
How to manage volatility
1. Don’t invest emotionally: Decisions guided by fear or over-enthusiasm are the enemy of the successful investor.
2. Constantly review your portfolio: Based on performance and financial goals.
3. Be realistic with expectations: Past 300% increases are not always repeatable.
4. Invest for the long term: Volatility can be overcome by those with patience.
Cryptocurrencies as a hedge against inflation
What is Inflation and why is it important to protect ourselves?
Inflation is the general increase in prices over time, which causes the purchasing power of money to fall. In simple terms, with the same amount of money, you can buy fewer goods and services than before. This is affecting global economies and investors are constantly looking for ways to protect their capital. Traditionally, gold, real estate and government bonds have been seen as “hedges” against inflation. But in recent years, cryptocurrencies have also entered the picture.
Current global economic context and the challenges for traditional investments
In a world where geopolitical conflicts, economic crises and the monetary policies of central banks cause constant disruptions, the value of fiat currencies often suffers from instability.
Low or negative interest rates, excessive money printing and rising costs of living lead investors to seek more efficient alternatives. Against this backdrop, traditional investments can suffer:
Real Estate – Although considered stable, real estate comes with high maintenance costs and taxes.
Gold – It is a classic inflation-proof asset but has a costly process to buy or store.
Government bonds – Because of low yields, government bonds are not of interest to investors during periods of high inflation.
Why can cryptocurrencies protect you against inflation?
1. Lack of Centralized Control
Unlike fiat currencies, cryptocurrencies are not controlled by any central bank. Their supply is generally limited (as is the case with Bitcoin), which means they cannot be “printed” to meet market demands. This eliminates the risk of devaluation caused by inflationary measures.
2. Cryptocurrencies have their own price dynamics
This dynamic is not directly influenced by traditional market turbulence, which can make them attractive in times of economic uncertainty.
3. Transparency and flexibility
Blockchain networks offer complete transparency of transactions. In addition, cryptocurrencies can be bought, stored or sold quickly and without intermediation – perfect for investors looking for affordable options. Unlike real estate or gold, cryptocurrencies can therefore be traded quickly, at any time, without intermediaries.
4. Global Accessibility
Cryptocurrencies are accessible from anywhere, eliminating geographical barriers or limitations imposed by traditional financial systems. Anyone with an internet connection can invest, essential in a globalized economy.
5. Emerging Technology
Cryptocurrencies like Ethereum are not just coins; their ecosystem enables participation in DeFi projects, NFTs and other emerging technologies.
Conclusion
If you’re passionate about digital investing, it’s important to know all about cryptocurrencies and the factors that influence their value, so we invite you to read our article titled: “Cryptocurrency evolution: from Bitcoin to DeFi, NFT and Metaverse”.