Taking into account the fact that cryptocurrency itself as a concept and as a financial asset has only been in existence for a decade, the growth and development of the industry and the network of businesses that support the cryptocurrency industry are staggering, to say the least.
Fuelled by the promise of astronomical profits from the continued and growing influx of new traders marching into the
marketplace, the number of cryptocurrency trading platforms such as exchanges and brokerages has exploded exponentially over the past few years.
And what is perhaps even more staggering is that the rate of the growth of the industry, as well as the rate of the growth of the value of cryptocurrencies, is actually increasing even more in 2020 than it has done over the past few years, with it looking like the years to come we’ll be seeing an explosion in adoption of cryptocurrencies like we have never seen before.
In this guide we are taking a deep dive into the future of the cryptocurrency market, starting by looking at its history and the core of what cryptocurrencies actually are and how they function, before taking a look into some of the largest online trading platforms for cryptocurrencies and finishing off with the possible future of the cryptocurrency market.
At this point, most people on earth have heard of the name
Bitcoin, a smaller amount of people actually understand why Bitcoin is, and an even smaller amount has ever bought or sold Bitcoin personally.
However, the exposure of Bitcoin and other cryptocurrencies, both from a sense of understanding what they are as well as a sense of actually having the first-hand experience with them, is growing exponentially within the mainstream, with cryptocurrency becoming more and more of a regular fixture in the lives of many people every day.
In the most basic sense possible, Bitcoin is simply a form of digital money, being that it is a unit of currency which can be used to pay for products and services, pay bills and other transactions, send money from one side of the world to the other, and pretty much anything else that can be done with money apart from holding it in your hand.
But when we look deeper at what Bitcoin is and the reason that the popularity of cryptocurrencies have grown in the rapid fashion they have, it becomes clear that Bitcoin is not simply a digital form of money, but is instead a completely new way to look at what the meaning of the word money actually is.
Bitcoin is like a form of upgraded money with new features, advantages, and benefits, such as the pseudo-anonymity of transactions that are made using Bitcoin, meaning that there is no financial record connecting your name directly with a transaction.
The point of the creation of Bitcoin however was to design a financial network that was outside of the scope of the existing mainstream financial system, which is centralized in the way that it functions, and instead allowing for users to manage their own funds and be their own bank.
The History of Cryptocurrency
The first time that the term “cryptocurrency” was ever used publicly was in the release of the
Bitcoin Whitepaper in late 2008, penned by an anonymous group or individual known as Satoshi Nakamoto, and what has effectively become the blueprint for, not only cryptocurrencies but also blockchain technology and digital currency market as a whole.
After Nakamoto released the whitepaper and showed it to a relatively small and tight-knit group of enthusiasts in the fields of cryptography, computer science, and various kinds of financial anarchist groups, it was only a short number of months afterward in early 2009 that the Bitcoin blockchain commenced operation and the first block was mined.
The early few years of Bitcoin are extremely murky with a tiny number of slowly growing early users communicating only via a few places and having to initiate trades between each other using the command line, with there being no trading platforms available at that point in time.
In the first years of Bitcoin the value of a single coin was so small that it technically had no value and even when the value of Bitcoins started to be measured after months of the Bitcoin blockchain operating, a single dollar could buy thousands of Bitcoins.
However over time, more and more users were drawn into the cryptocurrency market by the substantial profits that were beginning to be made by trading and investing in Bitcoin, and as the market grew, infrastructure around the purchase and sale of Bitcoin began to form.
How Many Different Cryptocurrencies are There?
For many of the earliest years of the life of Bitcoin, it was either the only cryptocurrency in the world or the only cryptocurrency in the world worth paying attention to, being that any other cryptocurrency for a long time was essentially a carbon copy of Bitcoins code with a few edits.
Everything changed in the cryptocurrency world however with the launch of the world’s #2 cryptocurrency, Ethereum, In 2014 where Ethereum took a completely new and revolutionary angle at what a cryptocurrency could actually be for the first time.
The creators of
Ethereum envisioned a cryptocurrency that could be traded in the same way that Bitcoin was being traded, but that also could be used programmatically with the help of documents known as “small contracts” in order to be able to program applications and to run them on top of the Ethereum network.
One of the most important knock-on effects of the launch of Ethereum, if not the most important, was that people quickly began to realize that creating a new cryptocurrency on top of the Ethereum network was incredibly easy compared to having to create the code for a token from scratch.
This allowed for an explosion of new cryptocurrencies to come about in what was known as the “ICO boom” of 2016 and 2017, and as well as being able to create whole new cryptocurrencies using Ethereum, it also provided the means to create a new mechanism for having a cryptocurrency version of an IPO in the stock world, known as an “ICO.”
How are Cryptocurrencies Different from Normal Money?
Many have pointed out the coincidence that Nakamoto launched Bitcoin in 2008 just following the collapse of the mainstream financial markets around the world in the Global Financial Crisis.
Cryptocurrency is a form of money that can be used in many of the same ways as fiat currencies such as the USD and EUR, however, there are a number of significant differences which have allowed cryptocurrencies to grow rapidly over the past decade.
The main difference between cryptocurrency and fiat currencies is that cryptocurrency is decentralized, being that there is no central authority that is responsible for the creation and monetary policy of each of them.
Instead, cryptocurrencies use a revolutionary technology known as blockchain in order to autonomously create and distribute new amounts of cryptocurrency in a way that is shared throughout the entire network of participants, and that does not require or allow the control of a central party.
What is Blockchain?
Blockchain technology has had a far-reaching impact on a wide range of different fields and industries in its relatively short life, and today blockchain is not just being used for financial applications such as cryptocurrencies but is also used for a wide range of non-financial applications as well.
Blockchain is the data structure that was created by Satoshi Nakamoto in order to allow for cryptocurrencies to function properly, and as the name dictates, blockchains are a chain of blocks of data.
The link between each block is the cryptographic hashing of all of the data in the previous block, which is then stored in the following block as a way of maintaining the integrity of all of the data in the blockchain, in order to ensure that none of it has been modified.
If a malicious programmer tries to edit one of the previous blocks to show that they now get a free 10 Bitcoin sent to their wallet, the new cryptographic hash will be different to the hash that was originally stored, and this will, in turn, change the hashes of all of the following blocks in the chain.
This ingenious mechanism ensures that all data that is added to a blockchain is immutable after the fact and that no one can edit a blockchain without everybody else being aware of this and being able to disregard the fake and illegitimate chain.
How does the Crypto Market Work?
The cryptocurrency market started out as a loosely connected group of people that held thousands of Bitcoins worth a fraction of a cent each, which was only in connection with online communities where they traded directly with each other.
However, quickly the number of cryptocurrency owners grew and as a result, cryptocurrency trading platforms began to spring up in order to allow traders and investors to interact in a seamless way, and for a market to be formed.
Trading platforms are the central hubs of the cryptocurrency industry and today represent more than 90% of the interactions that occur between cryptocurrency users, with billions of dollars every day flowing through the doors of many different exchanges and brokerages.
The second most widely used types of platforms in the cryptocurrency industry are cryptocurrency news sites and blogs which have audiences of millions of cryptocurrency users and enthusiasts, and that provides the information regarding current affairs in the cryptocurrency market.
Listing sites are platforms that list a wide range of different cryptocurrencies and provide prices and trade volumes for them, with Coinmarketcap being the largest.
These platforms are another integral part of the cryptocurrency industry and provide users with up-to-date information about the direction that the market is moving in, and the best performing crypto assets.
There is also a bevy of new types of cryptocurrency platforms springing up all the time, with forums, faucets, and giveaway sites, and airdrop and bounty sites all being important parts of the industry, and being widely used by cryptocurrency enthusiasts every day.
Exchanges and Brokerages
Platforms, where cryptocurrency users can trade cryptoassets, can be broadly divided into exchanges and brokerages, with both of these being similar to each other, but having some distinct differences.
Cryptocurrency exchanges are trading platforms that facilitate the connection of different traders together and allow them to use their systems in order to seamlessly create buy and sell orders for a wide range of different cryptocurrencies.
Cryptocurrency brokerages are similar to exchanges in that there will often be the ability to look at charts for the current price of trades, however, the main difference is that brokerages are platforms which themselves directly trade with individual traders, or that have third parties that they allow to trade directly with traders.
Cryptocurrency trading platforms are easily the most widely used places on the internet for cryptocurrency users to interact with each other, and the largest trading platforms online have millions of users, with billions of dollars passing through those platforms in trades every day.
Crypto Listing Sites
Cryptocurrency listing sites, such as Coinmarketcap and Coingecko, are platforms that have been around for as long as there have been multiple types of cryptocurrencies available to trade.
These platforms list a large number of different cryptocurrencies, and for each cryptocurrency, they display a range of data about them, with that data often including the name and symbol of the cryptocurrency, the current number of units that are in total supply, the current price of one unit, and the total value of all units in existence, also known as the marketcap.
A wide range of other data can also be found on these platforms that are useful for traders and investors alike, and this can include in-depth details of the size of different cryptocurrency trading platforms, data relating to the cryptocurrency market as a whole, and data relating various types of tokens in the cryptocurrency industry that are running.
Although many cryptocurrency listing sites have APIs to allow traders to directly access a range of data from the platform, it is most common for users to physically visit the frontend of these websites to be able to have visual and graphic representations of price, volume, and other metrics.
Software and Hardware Wallets
While it is possible for traders to hold the cryptocurrencies in wallets that are inbuilt into all exchanges and brokerages, it is common for a lot of traders to store their funds in wallets that are external to exchanges and brokerages, with the main distinction between different types of wallets being whether or not they are software or hardware wallets.
Software wallets are fully software-based and are essentially websites or web apps which allow traders to send their cryptocurrencies to the platform, and then to store them in the platforms on wallet systems.
Hardware wallets are physical devices which run software on them that allow for the secure storage of cryptocurrencies with the only way for those funds to be re-accessed and sent elsewhere being physical access to the device itself.
For the three different ways of storing cryptocurrencies, storing cryptocurrency on trading platforms is best for convenience, storing cryptocurrency on hardware wallets is best for security, and storing cryptocurrency and software wallets is the best for a balanced mix of convenience and security.
PrimeXBT is a margin-trading-centric trading platform that allows users to access global cryptocurrency and traditional asset markets, and that manages up to $2 billion worth of global trade every day.
PrimeXBT has some of the
lowest fees of any cryptocurrency trading platform on the market today with a flat rate of 0.05% across all assets, and this has helped the platform to grow exponentially over the past few years as traders and investors have sought to cut their costs and boost their profits.
PrimeXBT’s user interface is easy to get the hang of for both beginners and experienced traders, and there is a wide range of powerful tools and features that allow traders to design and implement effective strategies within the cryptocurrency and traditional markets of the world.
PrimeXBT also has advanced
bank-grade security features integrated into the core of its system such as mandatory Bitcoin address whitelisting and the cold storage of digital assets with multi-signature technology, with these protective measures ensuring that PrimeXBT has never been hacked and has one of the best security reputations in the cryptocurrency industry.
Traders can also create passive income revenue streams by becoming an affiliate of PrimeXBT using their unique
4-tier referral program, which provides rewards for indirect referrals as well as all direct referrals, and that the top three affiliates in 2019 earned more than $1 million. Kraken
Kraken is a cryptocurrency-only trading platform that has been around for a number of years and that has been a part of the industry throughout its development and growth.
Kraken is perhaps most well known for being a security-orientated trading platform, with both of its founders coming from a security background and working to audit the infamous Mt. Gox implosion that occurred in 2014.
Perhaps most notable about Kraken is that over the past few years the platform has undergone a complete revamp, both of its technical systems, as well as its user interface, and today is a much more powerful and modern platform than it used to be.
However, it does remain to be seen whether some of the issues with Kraken’s trading engine that has been long-standing are now resolved, with many traders in the past complaining about the fact that on the high loads the trading engine at Kraken would freeze and they would lose money.
Saying this, overall Kraken is a professional trading platform that is worth checking out for anybody that is seeking a good place to trade or invest in cryptocurrencies.
Every four years, the cryptocurrency market goes through a cycle where new all-time highs are reached at the end of a bull run that lasts for roughly 12-18 months, and this has occurred for the last 3 bull runs, including the one in 2016 and 2017.
One of the noticeable differences with the last bull run compared to the two previous ones was that there was a much larger amount of media attention and penetration of cryptocurrency exposure into the mainstream as a result of the bull run itself.
Up until 2017, cryptocurrency had been a relatively esoteric financial asset class and had not yet reached a widespread level of common knowledge within the general public, however after 2017 until now, there is a much greater amount of understanding of what cryptocurrencies are within the general public.
As a result of this, a large number of new traders have entered the cryptocurrency market in the last three or four years, and this huge influx of new traders and investors has led to both prices and trade volumes ballooning since then.
Since 2017’s bull run, there has also been much greater interest from institutional investors, such as hedge funds, that typically focus on traditional assets, but since 2017 have been gradually moved further into the business of cryptocurrencies.
Unlike a regular cryptocurrency retail traders who have no restriction to whether or not they can buy and sell cryptocurrencies, institutional investors are responsible for the successful investment of their clients’ funds, and as a result, they have thresholds of risk which they must meet in order to be able to place investments on their behalf.
For many years cryptocurrency has been completely unregulated, and the infrastructure both legally and technically has simply not been in place for large-scale institutional investors to be able to legally create investments that relate to the cryptocurrency market.
However, as the industry has matured, and as it has progressively integrated with wall street and the rest of the traditional market, it has become a much more inviting environment for institutional investors to be able to move into.
The significance of this trend is that the size of the cryptocurrency market is dramatically smaller than the size of the traditional asset markets around the world of stocks and forex, and therefore even a relatively small transfer of the investments from the traditional market into the cryptocurrency market has a significant impact on price.
Time to Build
Another important-yet-underappreciated factor since the bull run of 2017 is that the bear market that was seen over the last few years gave cryptocurrency projects an opportunity to focus more on building their technologies then on worrying about generating profits.
In 2016 and 2017 that was an enormous influx of new cryptocurrency projects that were formed, however many of these projects were put together in the space of months and then subsequently generated millions of dollars of investment, but didn’t actually have any infrastructure or technologies to back up the reason for these investments.
However, since then, many of these projects in the cryptocurrency industry have been working hard to realize the promises that they made when they created their projects by building new blockchain-based technologies that will revolutionize the commercial world.
One of the greatest examples of this has been the world’s second-largest cryptocurrency, Ethereum, and that project’s ability to spend the last two or three years in heavy development of the second version of the Ethereum platform, which will iron out a large number of glitches that were affecting the network previously.
Perhaps the most pertinent thing at this point that could happen in the future is the continuation of the cycle every four years for the price of Bitcoin and other cryptocurrencies to increase rapidly in a bull run, with the next one event predicted to start in the coming months and end at the end of 2021.
Another major possibility for cryptocurrencies is the continued push into the mainstream, with the potential for a cryptocurrency to be widely used in daily life over the coming few years.
Another less obvious but equally as important possibility that has the potential to completely change the cryptocurrency market in the coming few years is for the ability for institutional investors to freely transfer large amounts of funds into cryptocurrencies, with this pushing the price of all cryptocurrencies much higher.
In 2020, we are resting on the edge of a new chapter in the life of cryptocurrency, with the coming years predicted to see incredible growth in the cryptocurrency market and its widespread expansion throughout many different parts of normal life.
For a technology which has only been in existence for a little over 10 years, cryptocurrency has come a long way and today is beginning to bear the fruits of the work that has been in place to build businesses, applications, and solutions that are based on digital currencies and blockchain.
Cryptocurrency trading platforms continue to be at the epicentre of the cryptocurrency market, yet while there is has been a huge expansion of the number of cryptocurrency trading platforms that have entered into the market, this has meant that it is more important than ever to be selective about which platforms to trade with.
The two platforms that we’ve mentioned above represent the top-tier of the
cryptocurrency industry and are both well worth checking out if you are looking for a high-quality and secure place to buy and sell cryptocurrency.