Digital Currency

Simple Guide to Understanding Cryptocurrency

The buzzword of the 21st century – cryptocurrency. Before you meddle in the world of digital money, you’ll want to get a simple understanding of how it works.

Cryptocurrency is a digital asset/money designed to work as a medium of exchange using cryptography (i.e the art of writing or solving codes) to serve the transactions, to control the creation of additional units, and to verify the transfer of assets.

The origins of Digital Currency

The first cryptocurrency was bitcoin, which was created in 2009 by pseudonymous developer Satoshi Nakamoto and is still the best known. As of September 2017, over a thousand cryptocurrency specifications exist; most are similar to and derived from the first fully implemented decentralized cryptocurrency, bitcoin. Examples of cryptocurrency are Bitcoin, Litcoin, Swiftcoin, Peercoin, Dogecoin, Emercoin, Etherum, Dash, Potcoin, Titcoin etc.

The New Gold Rush

Within cryptocurrency systems, the safety, integrity, and balance of ledgers are maintained by a community of mutually distrustful parties referred to as miners: members of the general public using their computers to help validate the timestamp transactions adding them to the ledger in accordance with a particular timestamping scheme. Miners have a financial incentive to maintain the security of a cryptocurrency ledger.

Understanding Cryptocurrency Trading

As a beginner trading in cryptocurrency requires a few things to be kept in check:

  1. Investing the money which you think you won’t mind if you lost. (The most important and common advice).
  2. Do not panic when you see fluctuations. Cryptocurrency trading is still in its early age unless it gets matured enough, you’ll see the hills and ocean bottoms every minute.
  3. Observe the trend. Take a step back and observe how the trend is going. So that you’ll get some idea of when not to push the boat out.
  4. This is not some get-rich-quick scheme. Do not expect to wake up one morning with a billion dollars in your account. (The second most important one).

The cryptocurrency market is no different to the well-established stock market or the forex markets. To understand how the digital currency markets work, some knowledge of the stock market will do you some good.

If you have a little knowledge about the stock market, you will know the types of stock markets or the terminology used to explain current trends in the market. Like the bear and bull market.

BULL MARKET: The market is called a bull market when the prices are either on the rise or are expected to rise according to observation. From my research, I understood that current cryptocurrency market trends, DASH/BITCOIN market is a bull market as of now. This means that since the price is rising buying is encouraged. People are buying and the demand is increasing. So when the demand increases, the price increases. So there is a positive association between price and demand.

BEAR MARKET: The market is called a bear market if the prices are falling down like a skydiver without a parachute or are expected to delve into the ocean according to the market trend. In such situation, it simply means that demand is decreasing. People selling off their property to save themselves from an anticipated tornado. As the second point says do not panic when you see fluctuations in the market.

TREND LINES: Trend lines show us the overall trend in a particular market. From left to right, if the trend is ascending, then that’s a positive trend line showing that the market is marked by the bull market. And if the line is descending, then it shows that market is marked bear market. Trendlines usually connects the pivot points of all prices pointed at given time intervals and forms a rising or falling tides.


  • Vukani Nxumalo

    Vukani Nxumalo is the 'thinking' Entrepreneur & Author of 'the thinking book series' and other titles. With over 10 years experience in the Marketing Communications and Financing industries, he knows just how to unpack a business' operations to find effective ways of extracting value. An avid reader and passionate writer, when he speaks, you feel the need to just sit and listen. Nxumalo Vukani