Cryptocurrency Trading Evolution

Cryptocurrency trading has recently become a popular choice among investors who want to diversify a portfolio and earn money online, but it wasn’t always like that. Only a decade ago, digital currencies were not more than a theoretical concept trying to win over the first investors.

You probably know that Bitcoin is by far the most powerful coin currently available on the crypto market, but do you understand how cryptocurrency exchanges grew and developed? If you are interested in learning it, keep reading our post to see how cryptocurrency trading has evolved in recent years.

A Brief History of Crypto Money

The only way to understand crypto trading is to learn about the history of digital coins. It barely stretches for more than a decade, which means we can pinpoint the most important phases easily:

  • The beginning

Digital coins as we know them today are the 21st century invention, but the term “cryptocurrency” dates back all the way to 1996. It took the concept 13 years to earn media attention – a developer known as Satoshi Nakamoto launched the first decentralized cryptocurrency called Bitcoin.

According to crypto geeks, the first time someone really used Bitcoin was in 2010 when one of the early investors paid two pizzas with this digital currency. Therefore, we can conclude that Bitcoin followed the path of typical writing service – it used to be a taboo, but it evolved quickly.

  • The growth stage

It didn’t take Bitcoin more than a few years to gain popularity and attract thousands of investors from all over the world. This was a clear signal for other developers to begin experimenting with similar crypto ideas, so we entered the growth stage.

In this phase, developers designed hundreds of new cryptocurrencies – also known as altcoins – in an attempt to improve Bitcoin and eliminate some of its shortcomings (such as transaction speed or privacy). Notable altcoins include Ethereum, Dash, Ripple, etc.

  • The mainstream phase

Although cryptocurrencies are still not the primary payment method, we can claim they entered the mainstream phase because entire countries and financial institutions are showing interest in digital coins. Today, we can see that Russia, Japan, Sweden, and dozens of other countries are trying to launch their own cryptocurrencies.

The State of Cryptocurrency Trading

You’ve seen that cryptocurrency trading has entered the mainstream phase, but what does it mean in practice? What’s the current state of cryptocurrency trading?

First of all, let’s check out the price of Bitcoin. Although it fluctuates daily, we can see that Bitcoin is now worth more than $6 thousand – not bad for a coin that started at $0.00001 more than 10 years ago. Here are some other stats that you might find interesting:

  • The overall cryptocurrency market size is projected to reach $1.4 billion by 2024.
  • The number of cryptocurrencies goes well above 6 thousand.
  • Bitcoin remains the most important coin as it accounts for $6 billion of daily transactions.
  • The highest price of Bitcoin to date is $20,089 per coin, which was recorded on 17 December 2017.
  • The number of users of Coinbase, one of the leading cryptocurrency exchanges in the U.S., is nearly six million.
  • Only 3% of people currently trade cryptocurrencies.

Types of Cryptocurrency Exchanges

You don’t have to be a blockchain guru to know that cryptocurrencies are traded over unique exchanges. A cryptocurrency exchange is like a stock exchange, but focuses on on cryptocurrency tokens rather than stock trades.

Cryptocurrency Exchange

Generally speaking, there are three types of crypto exchanges:

  • Centralized exchanges

Centralized crypto exchanges are considered to be a traditional exchange channel. Just like the name suggests, it’s a centralized crypto platform administered by a central authority. It is often a company offering exchanges of different coins or fiat-to-crypto transactions. Such exchanges are highly functional, but they are more vulnerable to malware attacks.

  • Decentralized exchanges

Contrary to centralized exchanges, decentralized platforms eliminate the need for a higher authority that governs transactions. Instead, the solution is based on peer-to-peer or customer-to-customer transactions.

Jake Gardner, one of the best research paper writers, explains that decentralized exchanges don’t have high liquidity: “On the other hand, they are much safer and out of reach of central authorities, so you can conduct exchanges freely.”

  • Hybrid exchanges

There is always an in-between solution to the problem and this time it comes in the form of hybrid exchanges. Such platforms take the best of both worlds, thus improving the overall transaction abilities while keeping the process safe and sound.

If you are wondering about the biggest cryptocurrency exchanges, here are some of the most commonly used platforms: Coinbase, Kraken, Huobi, Bittrex, Bitstamp, etc.

Main Barrier to Mass Cryptocurrency Adoption

Although cryptocurrencies have a staggering potential, they don’t come without a few notable barriers that currently prevent mass adoption. We will point out the biggest obstacles here:

  • Lack of clarity: A post about Bitcoin appears every three seconds on social media, but it doesn’t make the cryptocurrency phenomenon simpler. On the contrary, people still have a lot of problems figuring out whether digital coins are really decentralized, safe, immutable, and so on.
  • Price volatility: Cryptocurrency prices can skyrocket or crash within minutes, which is not exactly a good thing for serious investors.
  • Number of coins: With hundreds of digital coins being available on the market, choosing a perfect trading option is by no means easy.
  • Scalability: Even the largest crypto exchanges cannot support more than a few dozen transactions per second. This is almost nothing compared to traditional financial providers, so it’s hard to improve the scaling potential of cryptocurrency trading.
  • Usability: Humans are not exactly experts in online security, especially when it comes to password protection. Since crypto coins require 42-digit passwords and private keys, it’s hard to imagine billions of users taking advantage of this technology.
  • Security: Some people believe that crypto exchanges are impenetrable, but the truth is that hackers can harm even the most advanced protection mechanisms. Although every system is facing the same issue, people will hardly go for the new provider without knowing that it’s not perfectly safe.

 

The Bottom Line

Cryptocurrencies have been around for merely a decade, but they are here to stay for good. The sheer power of the blockchain technology makes digital coins a worthy investment, so the only real issue is how and when governments and financial institutions are going to embrace crypto trading.

In this article, we discussed how the cryptocurrency market has evolved in recent years. We hope our post helped you figure out the basics of cryptocurrency trading, but you shouldn’t hesitate to write a comment if you need additional explanations – we would love to help you out!

 


AUTHOR BIO

Alice Jones is a business analyst and blogger from San Francisco, California. Alice writes about the latest trends in the finance industry, but she is no stranger to blockchain and cryptocurrency. Alice is the mother of two kids and a passionate yoga practitioner.

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