The crypto market is the digital space where cryptocurrencies are bought and sold, just like shares on a stock exchange. Investors and users can get exposure to this new asset class by buying a coin outright or using leveraged derivatives that allow traders to take long and short positions (see our lesson on CFDs).
The prices of cryptocurrencies fluctuate, depending on supply and demand. The latter is often determined by the number of people who want to own a particular coin, as well as how much they’re willing to pay for it. The former is influenced by the cost of production – for example, mining coins requires expensive hardware and energy – and also by regulatory changes, such as a government banning their use.
Whether a coin has a low circulating supply or high total and max supply is another factor that shapes how investors value it. The circulating supply is the number of tokens that are currently in circulation and available to buy, while the total and max supply is the maximum amount of tokens that can be created at any one time.
Once you’ve decided to buy a cryptocurrency, you can fund your exchange platform account through a deposit or wire transfer. Once your funds are credited, you can start placing orders for a coin. All purchases are recorded in a shared, global digital ledger called the blockchain. The coins you purchase stay in your digital wallet, while records of any sales are automatically added to the blockchain.
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