Trading in the crypto market is relatively simple and it deals mostly with the buying and selling of cryptocurrencies. Cryptocurrency is a digital asset that can be owned by different individuals and it can be used as a form of exchange between those individuals. According to Ask Traders, digital currencies can be bought or sold through crypto brokers and all ownership records are stored using a digital ledger that is based on a technology called a blockchain. Of course, it is important to know that these digital currencies only exist in electronic form that is disbursed over a decentralized system.
Most traders have probably heard about Bitcoin, Ethereum, or Litecoin. Of course, these are examples of very popular cryptocurrencies (or cryptos, for short) that one can own and trade, or even convert to cash if needed. These digital coins are generated via crypto mining. If you are not interested in crypto mining, traders can make money by trading on different cryptocurrency exchanges.
To start trading, you buy either Bitcoin or Ethereum using fiat currencies (such as U.S. dollars, the British pound, or euros) depending on the crypto involved. After trading is successfully completed and you intend to cash out, you can always convert your crypto back to cash. There are a lot of cryptos that one can trade including the ones stated earlier such as Zcash, Dash, Monero, Ripple, Tether. However, Bitcoin and Ethereum are currently the most popular of them all. Crypto trading is similar to forex trading in many ways as both involve currencies trading.
How do you trade cryptocurrencies?
Just like foreign exchange, cryptocurrency trading involves predicting where the price will go and buying and selling to gain profit. These activities are done via an exchange, which is also referred to as a cryptocurrency exchange. First, create an exchange account via one of the many popular exchange platforms, then indicate the monetary value you intend to place in your account. The system gives an equivalent cryptocurrency which is stored within your wallet. The cryptocurrency remains in your wallet until you intend to trade.
For certain cryptos, there is a limit to the amount of cryptocurrency that can exist. For example, Bitcoin can only have 21 million coins. This might seem a little unfair. However, you can have decimal values of these coins. For example, you can buy 0.034 ETH (Ethereum) which would correspond to a particular amount in euros or U.S. dollars.
Aside from using an exchange, you could use CFD trading. The only negative issue involved with CFD trading through a foreign exchange platform is that you don’t own the digital currencies. Coinbase, TradeStation, eToro, Kraken are among a long list of cryptocurrency exchange platforms that anyone can use to trade.
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Of course, these different platforms have different means of depositing or trading these currencies.
Market prices cryptos will go higher or lower based on investor demand for each coin. That’s why Bitcoin is the biggest crypto out there. The demand for it is massive. Apart from demand, several factors drive the prices of different coins including news, policies, and events. Let’s talk about trading now that you have your cryptocurrency in your wallet. Certain exchanges trade via peer to peer exchanges or some transfer form one customer’s DCP accounts to another based on the trades that occurred in the past.
Before you trade on any crypto exchange, it is important to know their means of operation and their validity so as not to fall victim of hacks and fraudulent activities which can often lead to loss of money. Check for their availability; are they available in my country? Check for their credulity: How long have there been in business? How many people use the platform? How effective is their service? Are people complaining?
Several questions need to be asked in order to feel safe using such an exchange. After you have trade, you can receive your earnings in fiat currency and so the best and simplest way is to sell through the cryptocurrency exchange platforms. Some platforms even give credit cards powered by VISA or MasterCard, however, this is only with bitcoin.
Why trade in crypto markets?
With cryptocurrency, every transaction is stored within a public ledger. Although, the identity of the owner is encrypted and this creates greater security for all parties. The growth of these different cryptos which are traded is expected to continue growing exponentially.
It can also be safe to say that these currencies could be the future of financial transactions. So why don’t you get used to it now before it’s too late? These markets keep expanding as new currencies are born, giving traders more room for development and financial gains.
Pros of Crypto Trading
- Transparency – the history of each coin can be seen from the day it was mined, and this gives room for verification if need be. This is made available via blockchain technology.
- Instant and Accessible – you can access your coins or crypto anywhere, anytime, and these assets can be traded anywhere (unless that exchange platform decides not to make their platform available in your country).
- Absolute anonymity – nobody gets to know your identity because such information is encrypted; only the financial information of each coin is available.
Cons of Crypto Trading
- Volatility is high – prices can drop at any time. These erratic changes can be gains for certain traders, but these moves might create massive losses for other traders.
- Difficult to understand – since it’s not based on fiat currencies, it is easy for beginners to misunderstand a lot of things.
- No security in terms of loss – once you lose it, you can’t have access to it. Hackers can take away all your hard-earned money if you use unsecured platforms.
Whether it is Bitcoin, or Ethereum, or Litecoin, crypto trading has become an incredibly popular way of making money. Traders get several advantages at the same time because you can profit and you get to be a key driver for a decentralized future.
The volatility of these currencies and the fear of hacking via these exchange platforms can be a potential drawback, but it is important to know that you can gain a massive amount of money if you research, prepare a strategy, and select safe and reliable crypto exchanges. Always keep your wallet and coins safe, as they are the key to a successful future of transactions.