Crypto For Beginners  •  Lesson 10 of 10
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The crypto market is a dynamic space that may seem daunting at first. Use this summary of our Crypto for Beginners course to recap the fundamentals of cryptocurrency and consolidate your understanding of what crypto is, how it works, and the components of a well-informed approach to investing in the market.


What is crypto and how does it work?

Cryptocurrency is digital currency based on a distributed network called a blockchain.

Unlike fiat currencies, which are controlled by a central authority (such as a bank), crypto operates on a decentralized, peer-to-peer system in which transactions are recorded using cryptographic encryption.

Anyone with internet access can send or receive cryptocurrency, making crypto an accessible, immutable, and highly secure method of exchange.

Crypto market capitalization

Despite the differences between traditional finance (TradFi) and decentralized finance (DeFi), the crypto industry has adopted some traditional metrics to assess the value of various cryptoassets. Market capitalization, for example, allows investors to gain insight into the relative size and value of a cryptocurrency.

Cryptocurrencies typically fall into one of three categories:

  • Large-cap cryptocurrencies: market cap of over $10 billion 
  • Medium-cap cryptocurrencies: market cap between $1 billion and $10 billion
  • Small-cap cryptocurrencies: market cap lower than $1 billion 

Coins and tokens

Different types of coins and tokens offer different opportunities for investors to engage with the crypto market.

CoinsTokens
Primary function is to be used as a digital currency or store of valueDiverse range of functions, from representing ownership to enabling access to services
Self-sufficient networks built on independent blockchainsReliant upon the infrastructure of existing blockchain platforms
Gain value based on their own scarcity, utility, and adoptionDerive value from the success of projects on the network they operate within

Keeping your crypto safe

Without a central authority to protect their assets, crypto investors must understand how to keep their crypto secure by using a crypto wallet. There are various different types of wallets to choose from, but all operate using the same three elements to facilitate the connection between a user and their crypto:

Public addressA wallet’s unique identifier, specifying the target destination or sending address for crypto transactions.
Public keyProves ownership of crypto by verifying that an individual is the owner of the public address.
Private keyActs as the password needed to interact with a wallet.

Decentralized finance (DeFi)

DeFi describes a decentralized financial system that encompasses a wide range of blockchain-based financial instruments, including:

  • Decentralized exchanges
  • Lending and borrowing protocols
  • Opportunities for passive investment (such as staking and yield farming)  

DeFi now exists as an alternative to mainstream finance and is one of the most important elements regarding the mainstream adoption of crypto.

Managing your portfolio with an investment strategy

A well-thought-out investment strategy is a tool for investors to safeguard their assets from risk, and optimize their portfolios for returns.

A good investment strategy should combine insights from both fundamental and technical analysis to monitor market conditions, understand trends, and identify patterns in price movements.

  • Fundamental analysis relies on “real-world” information such as whitepapers, company reports, global news stories, or market sentiment.
  • Technical analysis relies on data from crypto charts to see patterns and make predictions about future price movements.

Crypto Fear and Greed Index

The Crypto Fear and Greed Index is an indicator that measures the mood of the market, and the emotions of the investors influencing it. 

Investors can use it to identify market trends, understand how others are trading, and better time their own market entry or exit.

The Index categorizes crypto market sentiment from “extremely fearful” to “extremely greedy”, with a value between 0 – 100. 

Final thoughts

Now that you have completed the Crypto for Beginners course and understand the fundamentals of cryptocurrency, you are well-poised to start your investment journey. Consider taking a second look at any of the articles, test your knowledge or make your first crypto investment now!

QUESTION 1 OUT OF

At what point is a block in a blockchain timestamped?

When it is filled and linked to the previous block
Before it is filled with any data
At the point at which a chain of 10 blocks has been created

Correct!

Incorrect!

What does an ‘ICO’ stand for?

Initial Coin Offering
Initial Crypto Offering
Initial Capital Owned

Correct!

Incorrect!

What is a liquidity pool?

A collection of tokens that are locked into a smart contract, used to facilitate trades on a decentralized exchange (DEX)
A collection of tokens that help to validate transactions on a Proof of Stake (PoS) blockchain
A decentralized application (dApp) that connects smart contracts with real-world data

Correct!

Incorrect!

The Crypto Fear and Greed Index measures market sentiment. True or False?

True
False

Correct!

Incorrect!

What is a custodial wallet?

A wallet provided by a third-party service, managed on behalf of the investor
A wallet owned and managed by an investor themselves
A wallet secured by an extra key

Correct!

Incorrect!

Which of the following is not an element of a crypto wallet?

A public address
A public key
A private address
A private key

Correct!

Incorrect!

What is the market cap of large-cap cryptocurrencies?

Over $10 million
Over $100 million
Over $10 billion

Correct!

Incorrect!

Which of these strategies would best suit a value investor?

Investing in large-cap cryptocurrencies
Investing in medium-cap cryptocurrencies
Investing in small-cap cryptocurrencies

Correct!

Incorrect!

What are smart contracts?

Decentralized applications (dApps)
Self-executing programs that run automatically when the terms of an agreement are met
Peer-to-peer agreements to buy and sell crypto

Correct!

Incorrect!

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