You’ve heard of it before. Cryptocurrency. What is it? How do you trade in it? And many other questions. Welcome to one of the most prominent digital executive emerging tech innovations worldwide.
This article will break down the basics of cryptocurrency trading. It will also give you a step-by-step guide to getting started with it.
What is Cryptocurrency?
Cryptocurrency is a digital currency. That means it’s not physical and not backed by any government or central bank. Instead, cryptocurrencies are decentralized, meaning their users control them. Therefore, they are not controlled by a central authority like the United States Federal Reserve or the Bank of England.
Cryptocurrencies can be used for many things. Some of these include buying goods or services online or paying for your morning coffee. The most popular cryptocurrencies are Bitcoin and Ether as they’re the oldest and most expensive. But there are more than 1,000 other coins with varying degrees of popularity and value.
What is Cryptocurrency Trading?
Cryptocurrency trading is the buying, selling, or exchanging of digital currencies. It works similarly to trading stocks, bonds, and other financial instruments. In addition, you can trade cryptocurrency on an exchange with other investors.
Some exchanges use their currencies (called “tokens”). These are used for trading instead of actual money. Some will allow you to trade in U.S. dollars or other fiat currencies and cryptocurrency.
You may want to invest in cryptocurrencies because they’re relatively new. They also have powerful potential for growth over time. But this also makes them volatile investments that can lose value quickly if not managed properly.
How Does Cryptocurrency Trading Work?
Before you start to trade, you must understand a few things.
Transactions are Recorded in Blockchains
Cryptocurrency trading is not like buying and selling stocks recorded in centralized ledgers. Instead, transactions are recorded on a public ledger, and this is called a blockchain. If you’ve been wondering ‘how does blockchain work?’ let me tell you.
Blockchain is a distributed ledger that all users of the network share. Every user has access to the same database and keeps it up-to-date. This aids in removing any need for centralized control or authority over it.
Expert advisors on Coruzant on blockchain believe that now is the time to invest in Crypto. According to them, Bitcoin will quadruple in three years. Cryptocurrency is now particularly popular and has great potential.
The distributed nature of blockchain makes it an ideal tool for maintaining transaction records. It also adds transparency and trust between parties involved in a transaction.
It’s decentralized, distributed, and immutable. Immutable means that it will never be altered. So you can be sure that your money is safe. In addition, there are computers worldwide constantly checking this ledger for any suspicious activity.
People can keep their financial information private from prying eyes like banks and governments. However, it also makes cryptocurrencies vulnerable if someone were ever able to gain access to your private key and steal your funds!
Mining Creates New Cryptocurrencies
A new block of transactions gets added to the chain by solving complex math problems with specialized computers. This process is called mining. Miners get rewarded with mining rewards and are also called nodes.
About a decade ago, anyone with a computer at home could mine to create new cryptocurrencies or verify existing ones. However, new emerging technology has made it a complicated process now. It takes a whole network of people pooling their resources to do it these days.
Miners get rewarded with mining rewards (or mining fees) when they add a block to the chain. These rewards are paid in the form of cryptocurrency. They can be exchanged for fiat currency, such as USD or EUR, on exchanges like Coinbase.
Mining rewards come from both transaction fees and their outputs in each block. First, a miner has to solve a mathematical problem that takes time to calculate. Once done, they can then add their block onto the blockchain.
How to Get Started Trading Crypto
To get started with cryptocurrency trading, you need to first sign up for one. That is, of course, after understanding how it works. You also need to decide if crypto trading is right for you.
After making these decisions, it’s time to sign up!
Sign up for Crypto Trading
To sign up, you will have to open a crypto account with an exchange. An exchange is an online platform where you can buy or sell cryptocurrencies.
We have two main types of cryptocurrency exchanges. They are centralized and decentralized exchanges. Centralized exchanges (CEX) can be seen as more secure. This is because they offer more control over your digital assets. Unfortunately, they are also more accessible targets for hackers.
Decentralized exchanges (DEX) give users greater control over their funds. However, they require more technical expertise to use safely.
You can also sign up via a broker. Crypto brokerage involves an individual or a firm that buys and sells crypto on behalf of a person. It is usually suitable for beginners with no idea of how the crypto market works.
To sign up via brokerage, you will need to provide some identifying information. This includes your address, date of birth, and email address. It also includes your Know Your Customer (KYC) requirements.
It’s Time to Fund Your Account
The very next step in crypto trading is to fund your account. You will want to contact your bank so that you will be able to make transfers to your new account. You can do most of these through wire transfers or debit cards.
The cheapest and most effective way to fund your account is through wire transfers. They’re free on Coinbase and Gemini, two of the most popular brokerages on the market.
Choose a Crypto to Invest In
Now that you’re signed in and have funded your account, it’s time to make the next decision. First, you will have to select one of the many cryptos out on the market to invest in.
Active crypto traders usually invest in cryptocurrencies like Bitcoin and Ethereum (or Ether). These two are relatively predictable compared to smaller altcoins. This makes trading with technical indicators a little easier.
However, many crypto traders still put their money on smaller altcoins. They find these altcoins offer a higher-upside potential. This is despite the fact that they have more risk than large-market cryptos. Risk-tolerant investors have benefited from altcoins’ rise of over 1000 in just months.
There are various trading strategies you can choose from. One of them is automatic crypto trading. Here, you can use an automatic trading platform like Coinrule. Bots will develop a strategy for the best results according to your investment goal.
These trading bots will help you make money fast, keep your coins, or diversify your portfolio. With this automated trading, you can choose either a conservative, neutral, or aggressive method of trading.
Get a Wallet to Store Your Cryptocurrency
As an active crypto trader, it’s essential to get a wallet. This way, you can store your cryptocurrency for the long term. In addition, this will help you trade more effectively and without hassle.
A cryptocurrency wallet is a software program that stores private and public keys (or addresses). This is used to receive and send any type of cryptocurrency. It is also a set of secret keys that allows you to spend Ether that you receive in your Ethereum address.
You can store your crypto coins in different types of wallets. These include paper, hot, cold, mobile, desktop, software, or hardware. The most popular desktop wallets include Exodus, Jaxx, MyEtherWallet, and MetaMask.
For mobile devices, there is the Samourai Wallet (iOS/Android). For browsers like Chrome/Firefox, you have MetaMask. There are also hardware wallets like Trezor and Ledger Nano.
These can be classified into hardware or software wallets. Hardware wallets are generally safer because they are physical and are not connected to the internet.
However, they may need additional steps for opening the account or transferring funds between accounts. This depends on the type of storage used.
Cryptocurrency trading is a new way to trade. It’s a way to transfer money without involving an intermediary. In this case, the technology of blockchain allows for seamless digital transfers. You don’t have to go through an intermediary or pay high transaction fees.
So, that’s it! You now know everything there is to know about cryptocurrency trading. Happy trading!