In a world where DeFi is evolving rapidly and being used in almost every sector, the crypto market brings us a place to sell and buy the token of our choice without the prying eyes of any central authority like Banks or governments. Unlike traditional stock markets that are controlled by a central authority and close on particular days, the crypto market is a global marketplace that runs 24/7 throughout the year. In this article, we will look into the crypto market, its importance, and the various risks associated with it.
What Is Crypto Market?
The crypto market is a global marketplace where you can buy and sell your desired cryptocurrency or other crypto-related assets. In the crypto market, there are more than hundreds of exchanges. They can be either centralized or decentralized. It is through these exchanges that trading of cryptocurrencies takes place. In essence, the crypto market is like any other market and these exchanges are the shops from which we buy or sell things.
The concept of the crypto market was born with the original cryptocurrency, Bitcoin. The coin was first created to replace the fiat currencies. As technology advances each day, it’s normal for people to want more convenience, especially in markets and other shops. By creating a digital currency that is tamper-resistant and easily transactional, BTC aims to revolutionize Finance. And that’s exactly what it did.
But as it progressed, online platforms that let people buy BTC also started allowing people to trade their coins with others and even for fiat currencies. Pretty soon, it became a common practice. People started buying BTC, holding it, and then selling it when its value peaked for a profit. And soon, it wasn’t just BTC, other coins also emerged and people started doing the same with them. This is how the crypto market came into being.
Importance Of Crypto Market
The Crypto Market is a very important aspect of DeFi. Here are the key features that highlight exactly how important it is.
- Financial Inclusion: The crypto market allows people to manage their assets digitally from anywhere as long as they maintain a connection to the internet, even in places with limited banking services.
- Transaction Speed: Crypto transactions can at the most take a couple of minutes to process, unlike traditional transactions that may take days to fully transact your funds to the recipient.
- Decentralization: This is one of the key features of the crypto market. As the blockchain technology that is the base of the cryptocurrency is decentralized, it adds an additional layer of security behind the transactions.
- Alternative To Fiat Currency: As normal fiat currencies can lose their value over time, cryptocurrencies can be considered their best alternatives.
- Passive Income: Through staking your crypto coins on exchanges, you can earn passive income. This is in association with the verification of transactions in a blockchain.
- High Gain: Investing in cryptocurrencies can sometimes provide you with a large amount of profit.
- Improvised Resource Management: As data is collected and distributed among all the nodes in the network, the resource management exhibited by cryptocurrencies is considered highly efficient.
- Paving The Way To A New Commerce: If cryptocurrencies become a part of our day-to-day transactions, then it could lead to the formation of new and innovative commerce.
Potential Risks Associated With The Crypto Market
The crypto market is an innovative marketplace. However, there are also many risks associated with it. Here are a few of them.
- Volatility: The crypto market is one of the most volatile places out there. The price of the coins in the market can change at a moment’s notice. They can sometimes fall even by thousands of dollars without any warning causing major losses among investors.
- Lack Of Regulation: Cryptocurrencies are not regulated. That is, they are not regulated by government or other central figures like banks. This could lead to several negative consequences like market instability and illicit activities.
- Lack Of Financial Metrics: The coins in the crypto market do not have stable financial metrics. This makes it extremely hard to predict their value in the present as well as for the future. It can result in increased volatility in the market.
- Technical Glitches & Hacking: As cryptocurrencies are digital assets, they can be susceptible to glitches in the program and are vulnerable to various malicious cyber attacks like hacking.
- Hard Fork & Discontinuation: Cryptocurrency trading can be greatly influenced by hard forks or discontinuation of a crypto coin. This could lead to increased volatility in the market. They can be due to a number of reasons ranging from developer disagreements to accidental errors.
- Frauds & Scams: As the crypto market is a decentralized place, it is prone to fraud and scams. This is one of the main disadvantages of the cryptocurrencies.
Final Remarks
As the increased adoption of blockchain and DeFi by various institutions continues, the crypto market is expected to grow by a lot in the coming years. The current market capital of the crypto market as a whole is about $3.7 trillion, which is twice as much as registered the previous year. With Trump about to ascend to his office in January and the UK bringing various regulatory reforms to compete with him, the future of the crypto market is brighter than ever. So, if you want to get involved in the crypto market, now may be the best time as most coins are currently raging in the market making a lot of profit to a wide range of investors and traders alike.
