Highlights
Cryptocurrencies are digital assets recorded on a shared ledger called a blockchain.
Most are not issued or backed by a government or central bank.
Bitcoin was the first; thousands of others now exist.
Prices can move sharply in either direction within hours.
A CFD lets you trade the price without holding the coins or a wallet.
What Are Cryptocurrencies?
A cryptocurrency is a digital asset that can be sent from one person to another over the internet without a bank in the middle. Ownership and transfers are recorded on a public ledger that is copied across many computers, and cryptography is used to secure that record and prove who controls each balance.
Bitcoin, launched in 2009, was the first cryptocurrency. Since then thousands of others have appeared, including Ethereum, XRP, Litecoin and Solana. Some aim to be a means of payment, some a store of value, and some power applications built on their own networks. To learn about the first and largest one in detail, read What is Bitcoin?
How Do Cryptocurrencies Work?
Most cryptocurrencies run on a blockchain: a chain of blocks, each holding a batch of confirmed transactions and linked to the block before it. Because every participant keeps a copy, changing a past entry would mean rewriting the record on most of the network at once, which is what makes the ledger hard to tamper with.
New transactions are confirmed by the network rather than by a single institution. Bitcoin uses proof-of-work, in which miners spend computing power to add blocks. Ethereum and many newer networks use proof-of-stake, in which validators lock up coins as a guarantee of honest behaviour. Users hold their coins through a wallet that stores the private keys needed to authorise transfers.
Coins, Tokens and Stablecoins
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Coins
Native assets of their own blockchain, such as Bitcoin on the Bitcoin network or Ether on Ethereum. They are used to pay network fees and to transfer value.
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Tokens
Assets issued on top of an existing blockchain, often to give access to a particular application or project.
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Stablecoins
Tokens designed to track the value of a traditional currency, usually the US dollar, by holding reserves or using other mechanisms. Their stability depends on how well those reserves are managed.
What Moves Cryptocurrency Prices?
Cryptocurrency prices are set by supply and demand on the exchanges where they trade. Common drivers include:
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Supply rules
Some coins have a fixed maximum supply or a schedule that slows the creation of new coins, such as the Bitcoin halving.
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Adoption and sentiment
News about companies, payment providers or funds using a cryptocurrency, and the general mood of the market, can move prices quickly.
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Regulation
Announcements by governments and regulators about how crypto assets may be issued, traded or taxed.
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Technology and security
Network upgrades, outages and security incidents on exchanges or projects.
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Wider markets
Interest rates, inflation data and risk appetite in stocks and other assets.
Because the market trades around the clock and is smaller than major currency or stock markets, prices can be far more volatile, and moves of several percent within a day are common.
Trading Cryptocurrency CFDs
A contract for difference (CFD) lets you speculate on a cryptocurrency’s price without buying the coins themselves, so there is no wallet or private key to manage. You can open a buy position if you expect the price to rise or a sell position if you expect it to fall, and your result is the difference between the opening and closing price.
CFDs are traded on margin. Leverage increases your exposure relative to the funds you commit, which magnifies losses as well as gains, and overnight financing applies to positions held past the daily rollover. Use stop-loss orders and position sizes you can afford before you trade. See the cryptocurrencies page for the instruments available, or Bitcoin trading for BTC specifically.
What Are Cryptocurrencies - FAQ
Are cryptocurrencies legal tender?
In most countries they are not legal tender, and the rules that apply to buying, holding and trading them vary by jurisdiction. Check the rules where you live before you trade.
Do I need a crypto wallet to trade cryptocurrency CFDs?
No. A CFD tracks the price of the cryptocurrency, so you trade from your trading account and never hold the coins or their private keys.
Why are cryptocurrency prices so volatile?
The market is younger and smaller than traditional markets, trades 24 hours a day, and reacts quickly to news, regulation and changes in sentiment. Large price swings in short periods are normal.
What is the difference between Bitcoin and other cryptocurrencies?
Bitcoin was the first cryptocurrency and has a fixed maximum supply of 21 million coins. Other cryptocurrencies use different rules and technology, and many were created for purposes other than payments, such as running applications.