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World 0 · Start Here · lesson 5 · level 1

Crypto: digital coins that never sleep

Crypto is a digital asset recorded on computer networks that trades all day, every day, with prices that can swing far more than most shares.

In one line

A market that never closes, not even at midnight on a Sunday. Meet crypto.

Explained simply

Crypto coins are digital tokens written in a giant shared notebook that thousands of computers keep up to date together. People buy and sell them online at any hour of any day, even at midnight on a Sunday. Their prices can jump up or drop down a lot very quickly, which makes them one of the riskiest things to trade.

The lesson

A crypto asset, such as bitcoin, is a digital token recorded in a shared digital record called a blockchain, which many computers keep up to date together instead of one bank. Most crypto coins are not a slice of a company, so no company's profits stand behind their price, only what buyers and sellers will pay. Crypto trades 24 hours a day, 7 days a week, and a coin can be split into tiny pieces, down to 0.00000001 of a bitcoin. Prices can swing a lot in a single day, which is why regulators, the official watchdogs of money and markets such as the Reserve Bank of India and the US SEC, have warned people about crypto's risks.

A worked example

Illustrative example: you buy 0.01 of a coin priced at 50,000 rupees, which costs 500 rupees (0.01 times 50,000). If the coin rises 10% in a day, your piece is worth 550 rupees (500 times 1.10). If it then falls 20% the next day, it is worth 440 rupees (550 times 0.80), which is 60 rupees less than you paid (500 minus 440), even though it went up first.

The same idea at four levels

1. Beginner. Crypto coins are digital tokens that people buy and sell online.
2. Foundation. Crypto trades all day, every day, with no closing bell.
3. Intermediate. Most coins are not a slice of a company, so their price rests only on what buyers and sellers will pay.
4. Advanced. Crypto prices can swing much more than most big companies' shares, so a small amount can gain or lose a lot in a day.
5. Expert. Coins kept on a crypto trading website or app depend on it staying safe and honest, which is one more reason regulators tell people to be careful.

Mistakes to avoid

• Thinking a crypto coin is a slice of a company, like a share.
• Thinking the price rests at night or at weekends, when crypto never stops trading.
• Buying because a coin went up a lot last week, when jumpy prices can fall just as fast.

Goal of this lesson: Explain what a crypto asset is, how it differs from a share, and why its price can jump so much.