Introduction to the crypto market – everything you need to know about cryptocurrencies, blockchain and more

The crypto market is both fascinating and unsettling. As a financial service provider specialising in the secure custody of crypto assets, we witness the high level of interest in this topic every day. Again and again, we hear the same questions: What exactly are cryptocurrencies? How does the blockchain work? And how can you invest in digital assets safely? In this in-depth guide, we aim to give you a clear and accessible overview of the most important aspects of the crypto market.

The crypto market – a borderless digital marketplace

Imagine a global marketplace where digital assets are traded around the clock. Unlike traditional stock exchanges, there are no trading hours or geographic restrictions here. Whether you’re in Tokyo, London or New York, trading never stops. The most well-known assets are, of course, Bitcoin and Ethereum, but the market now includes more than 10,000 different digital assets.

A brief history of the crypto market

The history of the crypto market is still young but highly dynamic. It all started in 2008 when Satoshi Nakamoto published the now-famous whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System”. Who Satoshi Nakamoto is – whether an individual or a group – remains unknown to this day. This origin story only adds to Bitcoin’s legendary status.
On 12 January 2009, the first bitcoins were sent from Satoshi Nakamoto to Hal Finney. Bitcoin was born. As described in the whitepaper, Bitcoin was intended as a digital payment method – not the investment asset it is mainly used as today. In the early days, purchases were actually made with Bitcoin – like the legendary transaction of two pizzas for 10,000 bitcoins, which would be worth several hundred million euros today. This story vividly illustrates both the enormous potential and extreme volatility of this asset class.

One of the most important and revolutionary aspects of Bitcoin is its decentralisation. Unlike traditional currencies, there is no central authority, such as a national bank. The system is maintained and operated by its users. So when people ask who actually owns crypto, the answer is: no one – and everyone. This may sound confusing at first, but it’s one of the core principles of this new technology.

Blockchain – the digital backbone

Blockchain technology is the foundation on which Bitcoin and the entire crypto market are built. But what exactly is a blockchain?
Think of it as a digital ledger maintained simultaneously by thousands of computers. Every transaction – every movement of assets – is recorded in this ledger and cannot be altered afterwards.

Here’s how it works: suppose you want to send Bitcoin to someone. That transaction is stored in a block along with others. This block is then validated through complex mathematical calculations (known as mining) and added to the existing chain of blocks – hence the name “blockchain”. Each new block contains a reference to the previous one, creating a tamper-proof chain.

This system is extremely secure – and transparent. Once the owner of a particular Bitcoin address is known, all of their transactions can be tracked. The often-heard argument that Bitcoin is only used for illegal purposes no longer holds water in this context.

The most important blockchains in the crypto market

Bitcoin, often referred to as “digital gold”, remains the undisputed leader – the legendary number one among blockchains. Its limited supply of 21 million coins makes it a scarce asset – like gold. Many therefore view Bitcoin as a digital store of value and a hedge against inflation.

Next in line in terms of market capitalisation and importance is Ethereum. It goes a step further than Bitcoin by introducing smart contracts. These are self-executing contracts that work without intermediaries – like a vending machine that dispenses a product when money is inserted. A simple example is that you could create a smart contract that automatically issues a loan once someone deposits a certain amount as collateral.
This may sound simple, but it opens up entirely new possibilities for automated financial transactions – and in many cases, it makes banks and insurance companies obsolete.

Another interesting development is the rise of stablecoins. These cryptocurrencies are pegged to “real” currencies like the US dollar or euro, enabling trading and exchanging of crypto across different blockchains. The most well-known stablecoin is Tether (USDT), which is, theoretically, pegged 1:1 to the US dollar.
Stablecoins act as a bridge between the traditional and crypto financial worlds and are often used as a “parking spot” between trades or as a more stable alternative to volatile cryptocurrencies.

Decentralised finance (DeFi) –the bank of the future?

Imagine using banking services without the need for a bank. That’s exactly what DeFi enables. Whether it’s loans, savings products or insurance, everything runs via smart contracts on the blockchain. You could, for example, take out a loan without speaking to a banker or proving your creditworthiness. Instead, you’d provide other cryptocurrencies as collateral.

This may sound futuristic, but it’s already happening. Billions of euros are currently locked in DeFi protocols. However, this area is still highly experimental and comes with significant risks. We therefore advise special caution when considering DeFi investments.

Volatility and risk management

Let’s talk about a crucial point: volatility. The crypto market is known for extreme price fluctuations. Price swings of 20% or more in a single day are not uncommon. This makes crypto investments risky – but also attractive for investors willing to accept that risk.

The reasons behind this volatility are diverse: The market is still relatively young and heavily influenced by news and sentiment. Regulatory announcements or statements from prominent figures can cause massive price movements. Additionally, the market is less liquid than traditional financial markets, amplifying the fluctuations.

How can you invest in cryptocurrencies?

The classic approach is through crypto exchanges such as Binance or Coinbase. There, you can directly buy and sell digital assets. However, you’re also responsible for their secure storage. For that, you need a crypto wallet – your digital wallet.
There are different types of wallets: software wallets on your smartphone and hardware wallets that function like USB sticks.

As a practical and secure alternative, nxtAssets offers regulated financial products that allow you to invest in cryptocurrencies via your regular brokerage account. This eliminates the need to deal with technical aspects like wallets and simplifies tax treatment. Our products are securely held in Germany and subject to strict regulatory requirements.

Mining and the token economy

Crypto mining is the process through which new coins are created and transactions validated. Miners provide computing power and are rewarded with new coins. However, mining is very energy-intensive and usually no longer profitable for private investors. The trend is moving toward more sustainable validation methods such as proof-of-stake, where coin ownership – rather than computing power – determines who validates transactions.

Non-fungible tokens (NFTs) are another exciting innovation. Unlike Bitcoin, these tokens are unique and not interchangeable – that is, non-fungible. One Bitcoin is identical to another, but each NFT is unique. NFTs are often used for digital art, virtual land or in-game items.
The NFT market has seen a major boom in recent years, with some NFTs selling for millions. However, this market is also highly speculative and volatile.

Initial coin offerings (ICOs) and token sales offer crypto projects a way to raise capital – similarly to an IPO. Investors can get in early on new projects. However, caution is advised – many ICOs have turned out to be worthless or even fraudulent.

Security and best practices

The security of crypto investments is a critical issue. Time and again, we hear about crypto exchange hacks or lost wallet access.
Here are some essential security tips – especially if you choose to invest directly instead of through ETPs:

• Use strong, unique passwords and enable two-factor authentication wherever possible.
• Store your private keys (the access codes to your wallets) securely – preferably offline.
• Be wary of links and emails that seem too good to be true. Wallets are a favourite target for scammers.

Collateralised ETPs such as Bitcoin direct or Ethereum direct offer significantly more protection and a simpler entry point into crypto investing.

Outlook and conclusion

The crypto world is evolving at a rapid pace. What’s cutting-edge today may be outdated tomorrow. New technologies – such as Layer 2 solutions for better scalability or interoperable blockchain networks – promise even more exciting developments.

For beginners, we recommend focusing on well-established cryptocurrencies and only investing money you can afford to lose. Stay well informed and sceptical of promises that sound too good to be true.

At nxtAssets, we see it as our mission to provide you with secure and regulated access to this exciting asset class. We are committed to maximum transparency and security.
Our partnerships with established financial institutions and our custody services in Germany under strict regulatory oversight give you the confidence you deserve when investing in digital assets.

The future of the crypto market?

We’re no oracle. But what we can say with certainty is this: blockchain technology and digital assets will fundamentally reshape the financial world. We look forward to accompanying you on this exciting journey – with the security and reliability you expect from a German financial service provider.