The dynamic moves of cryptocurrency

Introduction

With the digitalization of economies and technological transformation , Cryptocurrencies were introduced as a medium of exchange . The transactions are performed using a secure mechanism that keeps a record of the transaction. Cryptocurrency is a combination of encryption technology with blockchain . Cryptography provide a quick , reliable, and cost-effective solution for transferring funds . An interesting fact is that the price of cryptocurrencies is very dynamic; it changes with certain factors . The first cryptocurrency was introduced in 2009 called Bitcoin , latter on many digital currencies were introduced, which effects the co-movement of currencies in the market . In this study, we will focus on understanding the factors( variables ) which impact the price of cryptocurrencies . The study shows that the price and variations of cryptocurrencies are linked with market attractiveness , macroeconomic factors, and supply-demand mechanism . The e-currency has a threat to be hacked , misused, and devalued because its price is not stagnant, and it’s not governed by any regulatory body . Through carefully investing at right in this industry will yield an abnormal stream of revenues and returns.

As the world is transforming rapidly with the era of digitalization, there has been a significant change in the medium of currencies, it has been transformed from Gold (metal-based ) coins to paper money (currency notes) and paper money further modifies to plastic money (ATM cards) which is further advanced to next level of digital currencies. We have heard many times “ higher the risk, higher the returns”, or “more risk more returns”, so it means we can’t earn heavy returns without some risk. The risk is inherent uncertainty, which could result positively or negatively. And returns are the associated benefits. Before describing the potential risks and returns associated with the cryptocurrencies, let's discuss what the cryptocurrency is, what are the different cryptocurrencies available in the market and how these instruments can be effectively utilized to gain the maximum worth and reduce the potential risks and issues which might devalue the currencies in the future. Here we will analyze the critical factors which determine the monetary worth of a cryptocurrency. The basic reason which motivates me for this study is “ the value of cryptocurrencies is diversely changing with the span of time”.

Introduction

Cryptocurrency is a new trend of the past decade in the financial ma. It, it a typed of digitalized instruments that can be used or transfer from individual to individual, individual to companies, and companies to companies. The cryptocurrencies are designed, and the record of transactions is secured by an advanced encryption technique called “cryptography”. To maintain security in the transaction ,the record of each transfer and sale of the instrument is maintained on Cryptographwhich, it hinders the excessive duplication of the instrument and illegal production of cryptocurrency instruments. These digital currencies are monitor and controlled by CBDC ( central bank digital currency) . The digital currencies are transfers by Blockchain medium ; it acts as supply chain which provides a database medium for cryptocurrency system. The cryptocurrency is a digitalized medium of exchange that can be used across countries, with ease and a secure mechanism. There are some issues in keeping the cryptocurrency. The value of cryptocurrency is not stable over the period of time, at a moment, it can be worthy. The next moment it can be lesser or higher in monetary worth as it is becoming a significant phenomenon in the world, so various attempts are done to investigate and understand the dynamics behind the rise and fall of cryptocurrencies.

Initially, it was introduced by David Chumin in 1983, it was named as electronic money or ecash .Bitcoin was the first cryptocurrency introduced in the market , latter on various cryptocurrencies were introduced such as Ripple, Ethereum, Cardano, Stellar, Litecoin, NEO, NEM, other . The relative worth of currencies can be summarized in the graph below in Billion dollars .

Fluctuations of cryptocurrency prices

The cryptocurrency is considers as dependent variables as it is effected by many risk factors , which could affect the stakeholders worth and impact the investment in the market .

1. Cryptocurrencies are volatile – it means they are highly reactive to the sudden moves of market , so the value of currency fluctuates to thousands. Its value drops and raise in thousands .

2. Cryptocurrencies are unregulated – the cryptocurrencies are not controlled or govern by any government or banks. So, cryptocurrency mechanism is simple controlled by market forces or speculation of industry. It’s expected that after certain virtual currency polices the pricing of cryptocurrencies will became stable .

3. Cryptocurrencies are exposed to be hacked – as a digitalized instrument there is always a threat of being hacked and unethically transferred from database .

4. Price variations – it’s a speculative product , so its profit and loss will be accumulated according to the net value of currency .