The features and aspects of this e-money has caused adequate disruption to the traditional and longstanding market strategies and business practices.
The market strategies have enhanced the efficiency of trading in the broader macroeconomic point of view.
Knowing About Crypto Markets
Rather, it is about the market and its evolution till the time it reaches maturity.
However, the market cannot reach this phase without its progression toward mainstream recognition along with a stable expansion.
For this, each of the market participants will play a significant role. There are five key performers of the cryptocurrency market. They are:
- The consumers and merchants
- The investors
- The tech developers
- The financial institutions and
- The regulators.
Here are the specific roles played by each of the key performers in terms of market development.
The Consumers and Merchants
The consumers have more available options for making a payment through the cryptocurrency market. It is much cheaper and faster than any other traditional money market since it is made from peer to peer.
Consumer awareness about the cryptocurrency market is not as good and high as other traditional payment systems.
And, from the standpoint of merchants and businesses, they charge low transaction fees for trading with cryptocurrencies. The volatility risk is also quite low due to immediate settlements.
Also, there is very little or no possibility of chargebacks as you may see in credit card usage in case there is a fraudulent or disputed transaction made with a retailer. The loss is borne entirely by the retailer in such cases.
As for the investors, whether individual or institutional, they need to be more confident about the opportunities the cryptocurrency market can create.
They must know more about cryptography and the underlying technology that preserves the inherent value of the currency.
This will make them more optimistic and provide them with much better reasons to invest in cryptocurrency to boost up the market.
As of now, the cryptocurrency market has only been able to draw the attention of only a few big institutional investors and Wall Street.
The Tech Developers
The current status of the cryptocurrency market is also a result of the mining efforts of several talented tech developers.
Also, others have focused on other entrepreneurial areas of it such as developing trading exchanges, providing wallet services, and even offering alternative cryptocurrencies.
However, according to the critics, the cryptocurrency market has surely attracted new talents in length and breadth but adequate market focus is needed by these tech developers to take it to the next higher level.
Along with them, the organizations and consumers need to consider this currency as a user-friendly option so that it gains the desired mainstream acceptance to make common transactions.
- The Financial Institutions
The job of the financial institutions, including banks, is to traditionally establish a connection between two sects of people – those who have money to spare and deposit to gain interest and those who need it in lieu of interest.
However, in recent years with the rise in internet banking, there is no scope for any intermediaries. The increased awareness of the consumers has made them look for alternative payment methods which has diluted the middleman position.
While disintermediation has evolved rapidly in the banking sector, alternative options for payments like Amazon gift cards, Google Wallet, Apple Pay and others have been on the rise, thanks to the advances in mobile technology and mobile payments.
This has paved the road for the cryptocurrency market to evolve significantly, which, right from the very beginning, did not have any intermediary.
Finally, it is the role of the regulators that have helped the cryptocurrency market to evolve.
Few countries have even imposed a ban on its use though several nations have opened up and started to evolve at different paces and in a few regions.
How Does it Work?
The cryptocurrency market works in a decentralized form. This means that there is no central bank or any government authority that controls the markets, regulates the issuance of the coins and backs it.
Basically, the entire market and its operation is based on a specific network of computers that helps in making peer to peer payments.
However, you can buy and sell cryptocurrencies through online exchanges or hold them in ‘wallets.’ All records of your transactions are stored in a digital record and shared as a public ledger.
When you want to make a payment with crypto to a particular user, you can do so through your digital wallet. This transaction is not completed until the receiver verifies it.
There are three main factors that regulate the working process of the market. These are:
- The blockchain technology:
The blockchain technology is the supreme factor of operation of the cryptocurrency market. It is this technology that makes its operation and working process starkly different from the traditional currencies.
It involves a shared digital register to record data or the history of transactions of each unit of the cryptocurrency showing how possession has changed over time.
It records each transaction in ‘blocks’ and adds a new one at the front of the chain.
- Network consensus:
There is also a network consensus required in the working process of the cryptocurrency market. This adds to the security aspect of the files by storing it on several computers across a specific network and not in a single location.
This can be accessed by everyone within that network. This feature adds to the transparency of the transaction as well as makes it very difficult to make any changes in it by anyone.
Since there are multiple computers, it is also not vulnerable to hacks or software errors.
Every block that is created in the chain is coupled together by cryptography. This is a complex subject that involves complicated mathematical calculations and computer science.
The good thing about this is that any attempt to make any changes in the data is identified quickly by the computers in the network.
This is because it disrupts the cryptographic links between the blocks and the computers judge it as a fraudulent transaction.
Characteristic Features of Crypto Markets
Ideally, there are four significant characteristic features of the cryptocurrency market. These are the characteristics that make cryptocurrencies so special and so different from fiat currencies.
The market, or the network to be more precise, is trustless! This means that nobody needs to trust anybody else to make a transaction.
This is because there is no central authority that you must trust to make a payment like in other currencies. This central authority often becomes the weakness causing the demise of the currency.
In this market, the ecosystem itself validates the transaction. The nodes or computers verify the signatures and allow a transaction.
You, along with the others in the network, will have a copy of the ledger to verify the entity making a transaction.
All these involve a PoW or Proof-of-Work consensus algorithm which is complex and revolutionary in modern economics. This helps each node in the network to stay honest.
In simple words, this means it cannot be undone. Period.
The blockchain technology that helps the cryptocurrency market to operate makes it impossible for anyone and everyone to rewrite history.
These unchangeable or immutable transaction records have cryptographic security which makes it extremely difficult to make any changes without the network of users being compromised.
These are also available to the public and therefore can be verified easily.
This can be defined in different ways, the most common being, it is not controlled politically or architecturally.
However, if you go by the logic behind its operation, there is a centralized nature to it where there is a commonly agreed state and nodes of the network act like a single computer.
In terms of fault tolerance, this is a system that is less vulnerable to accidental failures. This is because it works on a network of computers and separate components.
If you consider attack and collusion resistance, a decentralized system is the one that will be more expensive to attacks and hacks. It cannot be manipulated because there is no central point to hack at a much lower cost or effort.
Cryptocurrencies feature infinite token supply with maximum caps for any pre-defined fabrication parameter.
This makes it deflationary by nature, which means an increase in its demand in the market will result in subsequent increase in the price of the cryptocurrency.
The other factors that can affect its price are market capitalization, integration into accessible infrastructure, and key events such as security breaches, regulatory updates, or economic setbacks.
Does Crypto Markets Close?
Usually, crypto markets do not close, much unlike the stock markets. This global payment market and system is open always and transactions can be made from anywhere and anytime.
The exchanges work 24/7, and even on Christmas. If any particular exchange is down, which can happen often, there is always another one present there to pick up the action.
Therefore, if you want to relax, hoping the market will close, trading cryptocurrency is not for you.
The crypto markets are free and do not have a central authority to influence investors or manipulate the platform. However, with freedom comes a few inevitable risks like lax security and occasional volatile swings. So, trade wisely.