What Is Ethereum?

In 2013, Vitalik Buterin, a programmer and a co-founder of the Bitcoin Magazine stated that Bitcoin needed a scripting language for building decentralized applications. Failing to gain agreement in the community, Vitalik started the development of a new blockchain-based distributed computing platform, Ethereum, that featured a scripting functionality, called smart contracts.

Smart contracts are programs or scripts that are deployed and executed on the Ethereum blockchain, they can be used for example to make a transaction if certain conditions are met. Smart contracts are written in specific programming languages and compiled into bytecode, which a decentralized Turing-complete virtual machine, called the Ethereum virtual machine (EVM) can then read and execute.

Developers are also able to create and publish applications that run inside Ethereum blockchain. These applications are usually referred to as DApps (decentralized applications) and there are already hundreds of DApps running in the Ethereum blockchain, including social media platforms, gambling applications, and financial exchanges.

The cryptocurrency of Ethereum is called Ether, it can be transferred between accounts and is used to pay the fees for the computational power used when executing smart contracts.

Today blockchain technology is gaining a lot of mainstream attention and is already used in a variety of applications, not limited to cryptocurrencies.

What Drives The Financial Markets?

The price of an asset is simply determined by the balance of supply and demand. In other words, it’s decided by the buyers and sellers. Where supply meets demand, there’s a market. But what else can drive the value of a financial asset?

As we’ve discussed earlier, there can be fundamental factors, such as the state of the economy. In addition, there can be technical factors like the market capitalization of a cryptocurrency. Also, there may be other factors to consider, such as market sentiment or recent news.

However, these are just that — factors to consider. What really determines the price of an asset in a given moment is simply the balance of supply and demand.

What is a market trend?

A market trend is the overall direction where the price of an asset is going. In technical analysis, market trends are typically identified using price action, trend lines, or even key moving averages.

Generally, there are two main types of market trends: bull and bear market. A bull market consists of a sustained uptrend, where prices are continually going up. A bear market consists of a sustained downtrend, where prices are continually going down. In addition, we can also identify consolidating, or “sideways” markets, where there isn’t a clear directional trend.

What is portfolio management?

Portfolio management concerns itself with the creation and handling of a collection of investments. The portfolio itself is a grouping of assets — it could contain anything from Beanie Babies to real estate. If you’re exclusively trading cryptocurrencies, then it will probably be made up of some combination of Bitcoin and other digital coins and tokens.

Your first step is to consider your expectations for the portfolio. Are you looking for a basket of investments that will remain relatively protected from volatility, or something riskier that might bring higher returns in the short term?

Putting some thought into how you want to manage your portfolio is highly beneficial. Some might prefer a passive strategy — one where you leave your investments alone after you set them up. Others could take an active approach, where they continuously buy and sell assets to make profits.

What is risk management?

Managing risk is vital to success in trading. This begins with the identification of the types of risk you may encounter:

• Market risk: the potential losses you could experience if the asset loses value.

• Liquidity risk: the potential losses arising from illiquid markets, where you cannot easily find buyers for your assets.

• Operational risk: the potential losses that stem from operational failures. These may be due to human error, hardware/software failure, or intentional fraudulent conduct by employees.

• Systemic risk: the potential losses caused by the failure of players in the industry you operate in, which impacts all businesses in that sector. As was the case in 2008, the collapse of the Lehman Brothers had a cascading effect on worldwide financial systems.

As you can see, risk identification begins with the assets in your portfolio, but it should take into account both internal and external factors to be effective. Next, you’ll want to assess these risks. How often are you likely to encounter them? How severe are they?

By weighing up the risks and figuring out their possible impact on your portfolio, you can rank them and develop appropriate strategies and responses. Systemic risk, for example, can be mitigated with diversification into different investments, and market risk can be lessened with the use of stop-losses.