What are Cryptocurrencies
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.
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.
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.
|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|
Today’s Most Popular Cryptocurrencies:
Here are Today’s Most Popular Cryptocurrencies:
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).
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.
Please note: The cryptocurrencies market’s high volatility may offer endless trading opportunities, but also high risk of loss. Due to price fluctuation, certain crypto pairs may be suspended and/or removed from our trading platforms periodically. Please see our crypto trading conditions page for available crypto currencies. When trading with AvaTrade SA you are trading on the price changes of the digital coin, and not physically purchasing it.
- Are cryptocurrencies more volatile than forex?
The volatility of currency markets is much higher than that of stocks, commodities, indices, ETFs, and bonds. When comparing volatility between cryptocurrencies and forex, it’s important to understand the precise definition of volatility. It refers to the change in the price of an asset. While forex prices certainly fluctuate about the mean, it is nowhere near the level of volatility seen in the crypto market. The historical charts represent the extreme fluctuations in crypto prices. In October 2016, 2017, 2018, 2019, 2020, the price of Bitcoin was $693, $6130, $6276, $9226, and $13,573 respectively. In May 2021, Bitcoin was $58,000!
- Is retail ownership of cryptocurrencies greater than institutional ownership?
In the world of trading and investing, institutional ownership comprises the lion’s share of activity. While much has been made of Elon Musk’s interest in Dogecoin and Bitcoin, institutional investors comprise a minor percentage of crypto ownership. Most of it is held by smaller retail traders. Consider that bitinfocharts.com* data found that 133,304 accounts hold 85% of all Bitcoin wealth (10 BTC – 100 BTC per account). While nobody can predict crypto price movements with any degree of certainty, there is a limited supply of 21M BTC in the market. Already, 18.6 million are in circulation, with just 900 BTC mined daily.