Online Trading of Cryptocurrency

Since 2009, the stock market has been abuzz with cryptocurrency as an investment and trading option. However, cryptocurrencies possess characteristics of neither currency nor asset. For an instrument to be classified as a currency, it must be a promissory note wherein a certain value is promised by the issuer to the holder, the instrument must be backed by a sovereign nation, and the printing of the currency, is based on a tangible asset. As has been stated above, an instrument is an asset when it has a tangible value or tangible benefits. This is further supported by the fact that virtual currencies are neither backed by a sovereign nor can they be used as a legal tender to buy or sell goods and services. Yet, there has been a massive surge in the price of cryptocurrency, raising questions about it being a bubble.

All leading cyptocurrencies have denied this fact and have claimed that their prices fluctuate due to the choices made by a substantial number of market participants. They state that choices are affected due to a loss of confidence in the currency, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed. Thus, just like other currencies, products, or services within a country or economy, prices of virtual currencies depend on the perceived value and supply and demand. If people believe that virtual currencies are worth something, they will pay, especially when they think that the value will rise in the future. This makes it a game of perception, and perception makes the market unstable.