Cryptocurrencies are an emerging market which have become increasingly popular as major cryptocurrencies like Bitcoin and Ethereum have entered the mainstream.
The majority of cryptocurrencies, also referred to as simply ‘cryptos,’ are powered by Blockchain technology. They differ from established fiat currencies in that they are decentralised assets currently unregulated or controlled by any one country, central bank or regulatory authority.
While cryptocurrencies are not accepted as legal tender in the vast majority of countries around the world, their potential to change the wider financial landscape has made them impossible to ignore and has opened up investment and trading opportunities.
The Blockchain technology that drives most cryptocurrencies also has wider implications for everything from client-server models to food supply chains and enhanced cyber security protocols.
Trading cryptocurrencies is quite different from more traditional markets like Forex or Indices as, because they are relatively new assets, they are not influenced by many of the same forces as other more established markets.
What moves cryptocurrency markets?
Because cryptocurrency markets are so new, there are less correlating assets that drive price changes and because they have been designed as decentralised assets free from regulatory control, things like data releases, rate changes and political upheaval do not affect them as much as fiat currencies.
Cryptocurrency prices are sensitive to potential moves towards greater regulation as well as a range of factors like:
- Disagreements within crypto communities over upgrades, for example when a cryptocurrency undergoes a hard fork (This can occur when its Blockchain diverges in two different directions)
- Attacks on cryptocurrency exchanges which expose security flaws
- News stories and rumours of greater central bank control or of countries potentially banning cryptos
There are a range of cryptocurrencies on the market, some better known than others and each with varying degrees of volatility.
Some of the cryptocurrency markets you can trade at ETX as a spread bet or CFD include:
- Bitcoin - the "original" crypto and still the market's most valuable coin
- Bitcoin Cash - the result of the first "hard fork" in Bitcoin's original chain, Bitcoin Cash is a standalone cryptocurrency
- Ethereum - a different, perhaps more ambitious project which aims to fundamentally change the way the internet works
- Litecoin - Designed to support cross-border payments with faster transaction times than competitors
- Ripple - Created to address issues such as versatility and speed of international payment solutions
For a full list of our current cryptocurrency prices and spreads, as well as available market hours, see our comprehensive trading costs page.
What are some of the biggest cryptocurrencies?
If you're new to online trading, working out the differences between some of the leading cryptocurrencies and deciding which to trade can be difficult. These are all relatively new assets so understanding how each crypto fits into the wider market is crucial before you embark on developing your own trading strategy.
Here we'll run through some of the most popular cryptocurrencies available to trade with ETX on our award-winning TraderPro platform.
This short guide should give you a better understanding of each of the cryptos we currently offer as well as their main strengths and weaknesses.
Bitcoin - BTC
Bitcoin is the original decentralised cryptocurrency or peer-to-peer digital payment system designed to challenge traditional financial models by using Blockchain technology for transactions with other currencies, services or products. Bitcoin was launched in 2009 by “Satoshi Nakamoto,” an anonymous internet user, or group of users, who mined the first Bitcoin. The digital currency was created with a finite number of possible Bitcoin that can be mined and there are a total of 21 million in existence. Coins are mined using the processing power of computers or networks of computers, to solve increasingly difficult algorithms.
To set the value of the very first Bitcoin, original Bitcoin enthusiasts and miners negotiated prices in USD on the bitcoin talk forums. At the time of its inception, each Bitcoin was worth roughly $0.05.
As Bitcoin grew and angel investors and entrepreneurs like Chris Larsen, Joseph Lubin and the Winklevoss brothers invested heavily in its success, so its price rose dramatically. At its highest ever recorded price point, in December 2017, each Bitcoin was worth just under $20,000.
Bitcoin Cash - BCH
Bitcoin Cash was created in 2017 as a result of a hard fork in Bitcoin’s Blockchain, the independent digital ledger that is used to record and verify every Bitcoin transaction. When a cryptocurrency forks and its blockchain splits, two new chains of information are created resulting in two separate versions of the cryptocurrency. This can happen when there is not a majority consensus within the community over the direction of the cryptocurrency.
The hard fork which created Bitcoin Cash was a result of concerns over the block limit size and processing time of Bitcoin’s original design. The new currency promised faster processing time and more flexibility for users.
Ethereum - ETH
Ethereum is an open source computing system that aims to democratise the way the internet is run, and the way that global data is stored, by using decentralised applications. Ether is the cryptocurrency designed for the operation of Ethereum and is used to ‘pay’ miners who mine Ether coins which, like other cryptos, are recorded in a decentralised, publicly distributed Blockchain.
Ether was designed to be much faster than Bitcoin with its block time around 15 seconds, compared to BTC’s 10 minutes. Unlike Bitcoin there is currently no hard cap on the amount of ETH coins that can be mined.
Ripple - XRP
Ripple was created as a payment solution using blockchain technology to transform how digital transfer systems operate. By removing or minimising many of the costs of global payment transfers, and operating in real-time rather than with delays and lengthy payment processing times, Ripple aims to facilitate fast, seamless international payments.
One of the few cryptocurrencies that has excited more mainstream, established financial institutions, the potential of Ripple for global trade is huge.
Major banks and institutions like Santander have partnered with the Ripple network to bring instant international payments to users around the globe, even integrating Apple Pay support. Ripple’s attraction to investors is its ability to act as a common currency that can support other transactions.
Litecoin - LTC
Litecoin is another crypto set up with the aim of simplifying and facilitating cross-border payments at little cost. itecoin offers faster confirmation and processing times than Bitcoin does although it has also been designed to be harder to mine at greater quantities.
Litecoin is incredibly similar to Bitcoin in the way it is mined, operated and run although there is a wide consensus that it may be more efficient.
Is cryptocurrency trading for me?
Rather than trading on a cryptocurrency exchange and having to open a digital wallet (which can be difficult to set up and complicated to manage) to store actual coins, when you trade cryptocurrencies with ETX you’ll be speculating on market movement with a spread betting or CFD trading account. This has a number of benefits over directly buying a particular cryptocurrency. You won’t need a digital wallet and so won’t be exposed to potential network hacks, and because you’re speculating on price movement rather than owning the underlying asset you can go both long and short on cryptos.
Remember, cryptocurrency markets are some of the world’s most volatile markets, with big price swings very common. When you trade cryptocurrencies at ETX you can use all of the same smart risk management tools you can use on our more established markets. Cryptocurrency trading could be for you if you have a good understanding of the market and a strong trading strategy that relies on astute evaluations of potential risk.
Read the next section of this guide to trading cryptocurrencies to learn more about how to trade the different types of cryptos we’ve covered here.