A cryptocurrency is a digital coin, designed to be transferred between people in virtual transactions. Cryptocurrencies exist only as data and not as physical objects; you cannot actually hold a Bitcoin in your hand or keep Ethereum in your safe. Owning a Bitcoin means you have the collective agreement of each and every computer on the Bitcoin network that it is currently owned by you and – more importantly – that it was legitimately created by a miner. AvaTrade South Africa is an industry-leading broker with some of the best trading conditions available, including the lowest crypto spreads on the market.
We invite you to learn more about Cryptocurrencies with our “What are Cryptocurrencies?” and “How to trade Cryptocurrencies?” guides.
What Cryptocurrency Miners Do
Cryptocurrencies are handled like cash but are mined like gold. Mining is simply the process of verifying a crypto transaction. People around the world transfer e-coins from wallet to wallet, while miners use computer-processing power to maintain the blockchain and verify these transactions. When a new crypto is launched, its founders announce how many coins will be mined. Once the quota is reached, no further coins can be produced. The first digital coin introduced was Bitcoin, which remains today the benchmark for all other digital coins. Among other currencies that have made their way into the cryptocurrency hall-of-fame we have: Ethereum, Ripple, Litecoin, NEO, EOS, Stellar Lumens and a number of derived currencies, including Bitcoin Cash and Bitcoin Gold.
Cryptocurrency Dividends
While many of the most popular cryptocurrencies use the Proof-of-Work consensus mechanism that’s explained above, not all of them use this method. There are a number of blockchains that rely of variations on the consensus mechanism known as Proof-of-Stake (PoS). Proponents of the PoS consensus method point out that it is far more environmentally friendly since it does not use computing power to validate blocks.
Instead it has a group of validating nodes, anywhere from 21 to 100 in most cases, that do all of the transaction validation and creation of blocks. These nodes are selected through voting, with each token representing one vote for the node. In some PoS forms the nodes with the most tokens are elevated to validating nodes. In these blockchains token holders are able to delegate their tokens to a specific node to increase the nodes total number of tokens. The token holder does not give up their ownership of the tokens, but simply their voting rights.
The validating nodes receive all the block rewards when creating a new block, but they will also share them with other token holders who have voted for them or delegated their tokens to allow the node to become a validating node. All these PoS blockchains allow for staking or delegating tokens, and those who choose to do this are rewarded with some of the block rewards. In this way a Proof-of-Stake token is like a dividend bearing stock in that it makes regular payments to holders of the token. The more tokens staked, the larger the reward or dividend. Unlike dividend bearing stocks, which may make a payment annually or quarterly, many of the PoS blockchains make their payments weekly, daily, or even hourly.
Blockchain – The Technology Behind Cryptocurrencies
Unlike traditional transactions, cryptocurrency transfers are not handled by banks or other financial institutions. Every time someone pays via e-coin, his payment is recorded on a digital ledger called the blockchain.
What is Blockchain
A list of transaction records, called blocks, which are linked to each other and encrypted. The blockchain is continuously growing and is completely open to anyone. Each block in the blockchain contains:
- 1.The details of the sender, receiver and amount of e-coins.
- 2.A hash, which serves as a unique fingerprint.
- 3.A hash of the previous block in the chain.
When a new block is created, it is sent to all the users in the network. Each user then verifies the block and it is added to the blockchain.
Each one of the numerous cryptocurrencies existing today has its own blockchain, and the complex math that is at the heart of the blockchain is computer generated. In order to run a transaction on the blockchain you need an e-wallet (or cryptocurrency wallet).
What is Tangle
The biggest problem of the Blockchain is its reliance on miners. This is exactly why the cryptocurrency called IOTA (the Internet of Thigs Application) was created in 2016. IOTA also battles increasing transaction fees and network scalability. IOTA’s blockchain is called Tangle. It is a blockchain with no blocks and no chains. In this system, the users themselves are responsible for validating transactions. This means there’s no need for approval from miners; so users enjoy a fee-free transaction and an increased process speed.
What is a cryptocurrency wallet
A piece of software or hardware that gives you the ability to store and exchange your cryptocurrencies. Each cryptocurrency wallet is encrypted and unique. When you send funds you actually broadcast an encrypted message to the recipient. Only the recipient’s cryptocurrency wallet can decrypt that message and thus receive the funds. A hardware cryptocurrency wallet is considered to have key advantages over other software wallets:
- It is immune to viruses or malware
- Its private keys are not exposed to your computer
- Does not require an import to a software
- More secure and interactive
- Uses an open source software that allows you to validate the entire device operation
- Can host multiple cryptocurrencies
Why Trade Crypto CFDs With AvaTrade South Africa?
- Uncompromised Safety –
With six regulatory authorities and segregated accounts, your money is protected at all times. - Many Cryptos to Choose From –
Trade on the wide variety of cryptos available on our trading platforms. - No Hidden Fees –
We offer zero commissions and no bank fees on transactions! - Crypto Never Goes to Sleep –
AvaTrade South Africa (SA) is one of the few brokers offer around-the-clock service and support in 14 languages. - Generous Leverage –
Increase your initial capital with generous leverage and get far more exposure to trade than your account balance. Up to 2:1 (for EU residents) 25:1 (for non-EU residents). - Limit Your Risk –
You can preset profit and loss levels by using stop losses or take profit limits when you trade. Determine the maximum amount you are prepared to risk when speculating on the price, or set a price at which you want to take profits. Future orders like Buy Stops and Buy Limits are also available. - Trade Cryptos Against Fiat Currencies –
Unlike many exchanges out there, who are restricting their clients to trade only Crypto to Crypto, our clients can trade Cryptos against Fiat currencies (USD, EUR, JPY etc.), as well.
Cryptocurrency Trading at Avatrade ZA vs. Crypto Exchange| Feature | AvaTrade ZA | Exchange |
|---|
| Onboarding/registration process | Traders can start to trade immediately | Opening a south african account directly is a lengthy process |
| Speed of opening a trade position | Immediately | Each trade is confirmed via an arbitration panel and takes up to 30 seconds |
| Regulation | AvaTrade SA is Regulated on 5 continents and continuously monitored | Cryptocurrency exchange are not subject to regulatory authorities |
| Earning potential | Potentially profit even when markets are moving downward | Earn only when the traded asset is on an upward trend |
| Security | No risk of hacking or cryptocurrency wallet theft | High risk of hacking and cryptocurrency wallet theft |
| Trade execution | Immediate | Clearing house required |
| Liquidity | Extremely liquid | Liquid |
| Commissions | None | Mandatory |
Today’s Most Popular Cryptocurrencies:
Here are Today’s Most Popular Cryptocurrencies:
Bitcoin,Bitcoin Cash and Bitcoin Gold
Bitcoin
This mega-powerful currency has not only opened the gate for other currencies, but also leads the cryptocurrency world with pride. It is governed to make sure no extra Bitcoin is produced, as a maximum quantity of 21 Million Bitcoin units was agreed to. When introduced, the rate was $1 to 1,309 BTC. The wheel has turned, and when Bitcoin reached the all-time high of $19,783.21 in 2017, it was certainly a meaningful milestone for Satoshi Nakamoto, the creator of Bitcoin. Bitcoin has since gone on to create other milestones, and in 2021 it printed another higher around $70,000. Bitcoin Cash (BCH) was created by the Bitcoin hard fork on August 1, 2017, resulting in a new version of the blockchain with different rules. By switching from the main Bitcoin blockchain to a new version, the software now has a capacity for a larger number of transactions. Bitcoin Gold (BTG) is the second fork from Bitcoin (i.e. the second version to stem from Bitcoin’s source code). It retains Bitcoin’s transaction history, meaning that if you owned Bitcoin before the fork, you now own the equal amount of Bitcoin Gold. This cryptocurrency aims to introduce an alternative mining algorithm that is less susceptible to ASIC-based optimization, therefore allowing users to earn more with their computer cycles.
Alt-Coins
Altcoins is the general term associated with the cryptocurrencies launched after Bitcoin’s success. At first, these were mere copies mimicking the original Bitcoin. Today, there are over 1,000 of these, and the list just keeps growing. Most crypto coins are launched following an ICO (Initial Coin Offering – a form of crowdfunding) in which the developers raise cash by offering a limited number of initial coins to finance technological development. So far, besides the list below, we can find names, such as Namecoin, Peercoin, Bytecoin, Deutsche eMark, Novacoin, Cryptogenic Bullion, Quark, DarkCoin and Mangocoinz (for smartphones).
Ethereum (ETH) is more than just a currency – it’s like one giant computer housing many computers around the globe. Ethereum can respond to sophisticated requests. Its ability to store revolutionary computer programs, known as smart contracts, gives Ethereum an edge over Bitcoin and has attracted attention from banks around the world. This, among other factors, has led to a jump of almost 10,000% in 2017! Considered the little brother of Bitcoin in its early years, Ethereum has grown into its own and powers important innovations in the crypto arena, such as decentralized finance and NFTs. The 2022 launch of Ethereum 2.0 will likely see the platform become more efficient, faster, and cheaper than it has ever been since its launch.
Litecoin (LTC) is similar to Bitcoin in many of its characteristics and is also one of the more veteran cryptocurrencies out there. However, there are two main differences between Litecoin and Bitcoin: Speed and amount. While it takes 10 minutes to create a Bitcoin block, Litecoin demands roughly 2.5 minutes to create a block – meaning 4 times the speed. Moreover, Litecoin attracts many users, as it can produce 4 times the quantity of Bitcoin! However, as Litecoin uses highly complex cryptography, often mining it is more complicated than other cryptocurrencies.
Ripple (XRP) can be described as the next generation of payment networks. Originally set up to engage financial industry leaders, the digital currency has been a leading technology so far. This cryptocurrency exploded in 2017, going from $0.0063 to over $1. . It peaked at around $2.5 in January 2018, but the company behind the coin (Ripple Labs, Inc.) has faced regulatory headwinds that have weighed heavily on the coin. As of March 2022, XRP trade below $0.8.
The e-coin that is considered Ethereum’s biggest competitor. The EOS blockchain gained its fame because of the way it effectively records and secures transactions. It is similar to the Ethereum blockchain but faster, more scalable, and allows users to build decentralized applications more efficiently. Market analysts are promoting the currency as ‘The Most Powerful Infrastructure for Decentralized Applications’ and expect the coin to be dumped and pumped, which could provide some interesting short-term opportunities.
Chainlink is a decentralized blockchain oracle network that runs on the Ethereum platform. Oracle networks allow external systems to be connected to the blockchain, thus enabling smart contracts to be based upon real-world inputs and outputs. Chainlink is one of the most promising blockchain oracles that seeks to eliminate the limitations of smart contracts – the ability to interact with off-chain data and systems. Chainlink was founded in 2017 and it quickly crossed the $1 price in January 2018. After years of muted price action, the altcoin exploded in 2021 when it hit a peak above $50. However, the coin has since tumbled from those heights and as of March 2022, it trades below $20.
Uniswap is a decentralized exchange that runs on the Ethereum platform. It helps facilitate the peer-to-peer exchange of crypto tokens available on the Ethereum platform (usually referred to as ERC-20 tokens). Uniswap is fully decentralized, and it works as an automated liquidity pool provider. Launched in 2018, Uniswap has grown to become one of the leading crypto decentralized finance (DeFi) platforms. After trading below $10 during its first couple of months, Uniswap picked up pace in 2021 and rallied to a peak of above $45. It has since retreated and it lingered below $10 as of March 2022.
MIOTA is the cryptocurrency token utilized on IOTA, a distributed ledger designed to enable communication and transactions in the Internet of Things (IoT). IOTA pioneered Tangle, a system of nodes used to confirm transactions. Tangle obligates users to validate two transactions before initiating one of their own. This unique consensus algorithm is claimed to guarantee decentralization of mining, higher scalability, and faster network speeds than standard blockchain platforms. MIOTA was launched in 2016, and it quickly rode the crypto boom cycle of 2017 as it rallied to a peak of above $5. The coin then tumbled to below $0.5 by mid-2018. There was a brief recovery in 2021 when highs of circa $2.50 were revisited, but by March 2022, the coin fell to below $1.
The Crypto 10 Index is an innovative crypto fund managed by BITA, a German-based financial technology company. the index is designed to track the overall performance of a basket of 10 leading cryptocurrencies. The current top constituents include Bitcoin, Ethereum, Polkadot, Binance Coin, and Solano. The Crypto 10 Index is generally considered the benchmark index for the cryptocurrency market. B10 was launched in 2016 and it uses US dollars as its base currency. B10 crossed above the psychological 10,000-price in February 2021 and peaked above 25,000 by May 2021. After a period of volatility, B10 traded around the 13,000 area as of March 2022.
What are Stablecoins?
Stablecoins are the newest class of cryptocurrency. Because cryptocurrencies are so volatile market participants needed a way to hold their capital in digital form without suffering from that volatility. Thus the stablecoins were born. These special types of cryptocurrencies offer price stability, liquidity, and are backed by a reserve asset in many cases to ensure value. Most of the stablecoins have their value pegged to the U.S. dollar and attempt to maintain a value of $1 at all times. There are currently three types of stablecoins; those backed by fiat currency, those backed by another cryptocurrency, and algorithmic stablecoins that have nothing backing them but instead use a working mechanism to maintain a stable price. The most popular stable coin is Tether (USDT), but there are many others such as the USD Coin (USDC), TrueUSD (TUSD), Dai (DAI), Paxos Standard (PAX), and others
Leveraged Cryptocurrency Trading
On Wall Street, most crashes have been triggered and overextended by leverage. But this can also be seen in cryptocurrencies, where in recent months, investors have witnessed massive tumbles in practically all coins and tokens, except, of course, Stablecoins. After hitting a high of just around $65,000, Bitcoin tumbled to around $30,000 and has been unable to break above $40,000 as of July 2021.
Ethereum has also fallen from around $4,400 to around $1,700. This has been the recurring theme in many other crypto coins and tokens, with some losing as much as 80% of their value within a couple of weeks of hitting their all-time highs.
There are many reasons for this plunge, but it is no coincidence that it happened when many exchanges enabled easy leveraged cryptocurrency trading. Like in other assets, trading cryptos with leverage allows investors to amplify their profits, but it also significantly magnifies their losses. But the impact of leverage in cryptocurrencies is even bigger because they are inherently more volatile than other asset classes. While professional traders can handle risks and rewards of leverage, the same cannot be said of retail traders.
During the 2020 coronavirus pandemic, many retail traders (understandably) joined the crypto community as they sought other income-generating means. While institutional players were the major catalyst of the late 2020 and early 2021 crypto bull run, retail traders also reaped big as their leveraged bets overextended the rally.
But leveraged crypto trading also accelerated and deepened the subsequent plunge. This is a trend that professional traders have observed and become wary of. Leveraged cryptocurrency trading is now capable of influencing price direction, kick-starting trends, or overextending price cycles. This means that with leverage, crypto coins and tokens can only be even more volatile. For professional traders, this is an opportunity as much as it is an additional risk.
What Makes Cryptos Ideal for Trading
Cryptocurrencies allow traders to diversify their investment portfolio, as their price is mainly determined by demand and supply; Their value has a low correlation to national economies or political scenarios. Once Bitcoin surpassed the price of gold in 2017, US markets introduced 2 ETFs on Bitcoin and drew more and more institutional money into the world of cryptocurrencies. In 2017, Indian PM Narendra Modi has announced the gradual replacement of paper currency with electronic currency; In March 2018, the Marshall Islands announced that they would be introducing a cryptocurrency to replace US dollars as their main currency; other central banks are investigating the adoption of blockchain-like technologies… in short cryptocurrencies are probably here to stay. A growing number of crypto investors all over the world have already discovered the benefits:
- Cryptocurrency trading allows traders to diversify their investment portfolio, as cryptocurrency price is mainly determined by market sentiment, demand and supply
- Benefit from a wide range of today’s top traded cryptocurrencies
- e-coins offer a new form of high-volatility investment
- Cryptos are traded 24/7, even during the weekend
Trading Cryptocurrency CFDs
AvaTrade South Africa offers its clients the opportunity to trade CFDs on the largest and most popular cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. This allows the clients to speculate on the price movements of these cryptocurrencies without exchanging any actual digital assets. Because there are no cryptocurrencies being exchanged there’s no need to worry about wallets, private keys, or addresses. Perhaps even better is there’s no need to worry about hackers stealing your coins. CFD traders can fully focus on taking advantage of the price movements of the underlying cryptocurrencies without any of the worries that come with ownership of crypto assets.
