Ethereum is another cryptocurrency, but when people speak of Ethereum, they are normally talking about “ether.” Ether is the currency or token part of the Ethereum system, which is a way to run computational applications across multitudes of nodes on the Internet, in an anonymous fashion. The ether in the Ethereum system is simply the token by which to accept a non-trusting arrangement. In other words, it allows a standardized transaction between 2 parties. Ethereum is the second-largest crypto currency across the Internet, as the Ethereum system has been up for several years. The market uses a smart wallet as most cryptocurrencies do, and it also is prone to speculation. However, a significant hack of the DAO, or the Decentralized Autonomous Organization in June 2016 had someone claiming $50 million in ether. Because of this, there was a split in we now have the original block chain called Ethereum Classic, and the newer block chain simply called Ethereum.
Bitcoin is the world’s first cryptocurrency. With this means is that it is the “original” when it comes to digital and decentralized currency. That’s the biggest appeal of Bitcoin, it does not get printed by a central bank, and therefore in theory cannot expand beyond a preset limit, which is 21 million Bitcoins. Because of this, there are several advantages. The currency has a set limit as to how much can be produced. This keeps the idea of quantitative easing at bay, and allows for people to rely on a mathematical formula to understand that the market will not be flooded with Bitcoin. This system of payment is peer-to-peer, which means that end-users trade Bitcoin directly, without a bank for mediation. There is a public ledger called a blockchain that keeps a record of every transaction. Although it shows the amount of Bitcoin in every wallet, it does not identify those holders. This is what makes Bitcoin anonymous, which is a huge appeal to this currency.
One of the biggest issues that you will run into when it comes to trading cryptocurrencies is going to be the lack of liquidity at times. This leads towards very volatile markets, and that’s why it’s common to see 10% changes during a trading session. This is true even with the larger players such as Bitcoin and Ethereum. When you look at the top 100 cryptocurrencies in the world by market volume, some of them have days that trade as little as $6,000 for of transactions. Because of this, it doesn’t take much to move the markets drastically. Obviously, with the larger cryptocurrencies it takes more but at the end of the day we are starting to see larger hedge funds get involved in some of the more common markets like Ripple, Bitcoin, and Ethereum. A hedge fund throwing a few million dollars into the market can cause quite a bit of choppiness.
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