Cryptocurrency

DEFINITION of 'Cryptocurrency'

A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency is that it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. The anonymous nature of cryptocurrency transactions makes them well-suited for a host of nefarious activities such as money laundering and tax evasion. The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009. Bitcoin's success has spawned a number of competing cryptocurrencies such as Litecoin, Namecoin and PPCoin.
 

BREAKING DOWN 'Cryptocurrency'

 
Cryptocurrencies make it easier to transfer funds between two parties in transactions; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, enabling users to avoid the steep fees charged by most banks and financial institutions for wire transfers.
 
A major drawback of cryptocurrencies is that because they are virtual and do not have a central repository, a user’s digital cryptocurrency balance can be wiped out by a computer crash if a back-up copy of the holdings does not exist.
 
Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.

RELATED TERMS
  1. Bitcoin

    A digital or virtual currency that uses peer-to-peer technology ...
  2. Digital Gold Currency - DGC

    An electronic, private currency backed by gold bullion. Companies ...
  3. Functional Currency

    The primary type of money that a company uses in its business ...
  4. Currency Symbol

    A graphical symbol used as a substitute for the actual name of ...
  5. Key Currency

    The currency used as a reference in an international transaction ...
  6. Reciprocal Currency

    In the foreign exchange market, a currency pair that involves ...
Related Articles
  1. Retirement

    Top 5 TIAA-CREF Funds for Retirement Diversification in 2016

    Discover how to safely diversify your retirement savings and receive excellent investment returns using a selection of TIAA-CREF low-fee mutual funds.
  2. Investing Basics

    If You Had Purchased $100 of Bitcoins in 2011

    Learn how an investment of $100 in bitcoin in 2011 would have performed over the years, and find out what your purchasing power would have been for each year.
  3. Forex Education

    Bitcoin May Be The Currency Of The Future

    Forget the dollar or the euro. Bitcoin may be the next big currency to hit the world.
  4. Forex Fundamentals

    What Causes A Currency Crisis?

    Find out what can cause a currency to collapse, and what central banks can do to help.
  5. Forex Education

    The Impact Of Currency Conversions

    Will a rising or falling dollar hurt you or your company? In this article we explore the impact of currency converisons on consumers, comanies, and countries.
  6. Forex Education

    A Primer On Currency Regimes

    Currency regimes are dynamic and complex, reflecting the ever-changing landscape of their respective nations' monetary and fiscal policies.
  7. Forex Education

    Calculating Profits And Losses Of Your Currency Trades

    The forex is a risky market, and traders must always remain alert about their trade positions. Learn how to keep on top of your currency trades.
  8. Forex Education

    Tiger Trading: Long-Term Charts For Short-Term Currency Trades

    Stock traders can add currencies to their portfolios by using this patient investing strategy.
  9. Forex Education

    4 Ways To Forecast Currency Changes

    Whether you are a business or a trader, having an exchange rate forecast to guide your decisions helps to minimize risks and maximize returns.
  10. Forex Education

    How Inflation-Fighting Techniques Affect The Currency Market

    Central banks use these strategies to calm inflation, but they can also provide longer-term clues for forex traders.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  3. Is Bitcoin legal in the US?

    The digital currency known as bitcoin was created in 2009 by a person called Satoshi Nakamoto, but whose true identity has ... Read Full Answer >>
  4. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  5. Can hedge funds outperform the market?

    Generating returns that exceed those provided by the broader market is the goal of nearly every investor. However, the methods ... Read Full Answer >>
  6. Who decides when to print money in India?

    The Reserve Bank of India, or RBI, manages currency in India. The bank's additional responsibilities include regulating the ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center