Due to the volatility of the crypto market, you can earn much higher amounts much faster than through regular investments. This article highlights all the crucial information you need to know before you start trading cryptocurrencies. Reading it, you’ll learn what cryptocurrencies are, the most common cryptocurrencies and whether you can use the same ones for trading as you do for investing. Let’s get started!
What Are Cryptocurrencies?
Cryptocurrencies are digital currencies used in online payment systems. They are decentralized, which means they don’t rely on central banks to verify transactions. Because of this, anyone with a reliable internet connection can send and receive payments in cryptocurrencies. This eliminates the need for carrying physical money or relying on cards and similar payment forms for specific transactions between two parties anywhere in the world. Cryptocurrency coins are made through a process called mining. During this, a computer will solve complex mathematical problems, after which the coins are generated. However, you can also buy cryptocurrencies from brokers and store them in your wallet. Cryptocurrency transactions are verified by encryption through advanced coding. This allows you to store and send crypto data between the ledgers and wallets – the digital space your crypto assets are stored in. The frequently updated ledgers are called blockchain. They are public and contain records of all transactions made by all the holders of that currency. The benefits of using blockchain technology are still being evaluated, but that said, this technology shows promising results in financial aspects. The first digital currency, Bitcoin, was created in 2009 and is still in use today; it is often considered one of the most popular options. All other non-bitcoin cryptocurrencies are collectively called altcoin to distinguish them from the original digital currency. Something many fail to realize is that owning cryptocurrencies does not mean you own anything tangible. You simply own a key that allows you to record the number of units you have and move assets between interested parties. Most of the time, cryptocurrencies are bought with the purpose of trading them for profit. Each type of coin has a varying value in relation to fiat (government-backed) currencies, like USD, and can be cashed out to make this profit. They can also be traded for other cryptocurrencies. Apart from buying and investing, digital currencies are also used for trading bonds, stocks, and other financial assets.
What Are Some of the Most Common Cryptocurrencies?
The number of cryptocurrencies is fast growing. Here are some of the most popular digital currencies:
Bitcoin – As mentioned before, Bitcoin has been around since 2009 after being created by Satoshi Nakamoto, a pseudonym for an unknown entity, and it is just as popular as it has ever been. Ethereum – Ethereum is a cryptocurrency developed on the blockchain platform by the same name in 2015. It’s also called Ether (ETH) and is the most commonly used cryptocurrency after Bitcoin. Litecoin – Like the previous currency, this coin is also similar to Bitcoin. However, it is characterized by high volatility (which means higher risk and higher potential profit) and the ability to come up with new innovations, such as faster payments and approaches that allow a large number of transactions. Ripple – While its use isn’t reserved for cryptocurrencies, Ripple still represents great crypto to invest in. It relies on a distributed ledger system you’ll get automatic access to.
Cryptocurrency Trading vs. Investing
Like with any other financial asset on the market, there are notable differences between cryptocurrency trading and investing. Broadly speaking, both investors and traders are looking for financial gain, but they use different methods to achieve it. Trading is the short-to-medium-term approach to buying digital currencies and selling them when their value has gone up enough to make a profit. Well-planned buying and selling can affect a currency’s value. This method uses the market’s volatility to profit, targeting smaller returns and entering and exiting individual trades rather frequently. Investing, on the other hand, is the medium-to-long-term strategy of buying and holding a currency and selling only when it has increased in value significantly. Generating return through investment typically takes a couple of years, or sometimes even decades. The targeted number of returns is therefore much larger for each investment than it would be for trading. A good example of how the value of the digital currency may increase over several years is Bitcoin. When it was first created in 2009, it was worth around $0.01 per bitcoin. By 2017, its worth had risen to over $17,000 per bitcoin.
How to Learn How to Trade Cryptocurrency
Researching the many trading platforms available is one of the most important aspects of starting to trade cryptocurrency. They usually offer various learning materials, and some even let you play with a test account, which are are great for learning how to trade cryptocurrency for beginners.
Make Sure You Choose the Broker That Fits You the Best
The first step is to register a cryptocurrency brokerage account. This will require you to fill out a registration form, containing details like your name and address. Fortunately, this only takes a couple of minutes, and after you will be able to start funding your account through them. You can deposit the cash via bank transfer, credit or debit card, and Skrill.
Analyze the Crypto Markets and Find Suitable Currencies
You’ll break these down into even smaller divisions (such as 0.1 of a bitcoin) that you can sell. This will allow you to gain much more in the long run than you’ve lost during that time. Cryptocurrency trading is not a get-rich-quick scheme, which means you can’t expect to start earning heaps of financial assets right away. Consider it a long-term investment that allows you to gain more financial wealth over time, and you’ll be much more likely to succeed. The key point if you want to learn to trade crypto for beginners is that, when choosing a strategy for buying and selling cryptocurrency, you should consider factors beyond the values of the assets themselves. For example, you may want to consider investing in an automated crypto trading tool to gain the best results given your investment goals. Automated trading is a straightforward approach that helps you make money more quickly by letting an algorithm work for you to hold the coins you have or diversify your portfolio. You can simultaneously trade on one-or-more platforms manually while trading on several others through an automated system. If you use your funds for actively trading crypto, you’ll need to have them on the exchange platform itself because you need to have constant access to them. However, if you plan to hold the funds for the mid-to-long term, you should get a cryptocurrency wallet. You can choose between software wallets and hardware wallets. The latter offers more security because they store your data on a device you can keep offline. When it comes to software wallets, choose one suitable for all digital devices.
How to Trade Cryptocurrency Step by Step
Only after you’ve understood the rules should you look into suitable cryptocurrencies. This is the best way to learn whether your strategy will work, so be sure to take advantage of this approach. The more you practice different strategies, the easier it will be to start trading in real life. Long-term results or the immediate ones should all be considered. What you especially want to avoid is the ICO (initial coin offerings). While they may seem convenient, they are also much riskier and could easily place an inexperienced trader under financial strain. To do this, you may need to sell some of your assets when their value is high. This way, you’ll earn money and will have some to invest in other assets. There are many factors that affect changes in a cryptocurrency’s value and you can’t control all of them. Therefore, make sure to put aside enough savings to achieve certain goals (for example, retirement or a car fund) before putting using any for crypto trading. You should exercise caution and ensure that there is potential in the asset you want to invest in. By the time you hear about a trend in more mainstream media, it is likely past its peak. The following example of crypto trading gone wrong can help reiterate the importance of undertaking proper research on any currency you are considering: Paycoin was launched by respectable miners with a great deal of knowledge about the market and offered the largest market caps at the time of its launch. However, it failed to deliver one of the crucial aspects of crypto trading – security. The creators were in such a rush to market it to potential investors that they ended up launching an unsafe system. As soon as the potential buyers realized this, almost everyone cashed out and no one else invested. The founders and those left holding Paycoin lost all the money they had invested. You’ll need to keep yourself up to date with all that’s happening in this market. There are several ways to go about this. For example, you can subscribe to email blast services or use the handy Google Update feature to access current information. This is another reason to take your time learning about how things work – so you can choose wisely and bring the number of possible mistakes to the minimum. Another issue you’ll need to prepare for is the mental impact of your loss. Losing money is never good news, and the more you lose at a time, the more anxious you get. This can lead to even more mistakes, and the downwards spiral continues. Diversifying your portfolio, after you have got the hang of your initial currency, can help you avoid this. The less you put into one individual currency, the more the other will help offset its risks. The more versatile your trading strategy is the more you are likely to minimize your risks and improve your returns. Beyond this, you can access cryptocurrency trading courses, read books and attend interactive workshops – all created to help expand your knowledge and improve your trading game. Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply. 80.2% of retail investor accounts lose money when trading CFDs with this provider. The most reliable day-trading crypto platforms are Bitstamp, Crypto.com and Coinbase. The latter is a trading site recommended for beginners. There is also an app called Webull, which provides a similar solution for mobile users. If you are looking to obtain some additional background knowledge on what technical analysis is, you will find plenty on websites like Binance Academy, which is the ideal place to learn technical analysis cryptocurrency. The first one offers five different strategies and expert advisor systems. The latter provides tons of trading examples, all through interactive teaching but both are great ways to learn how to trade cryptocurrency. eToro is another reliable US trading platform with solid trust in the community, as is Gemini. If you are looking to trade internationally, you can make the safest exchanges through Kraken. There will always be risk when you learn how to day trade cryptocurrency but there are apps out there where you can play investing games to get a feel for what it’s like. These include a comprehensive insight into buying, selling, trading, investing, staking, and mining cryptocurrencies – and all that while keeping you engaged. Cryptocurrency Foundations is a similar course offered by LinkedIn Learning and is also recommended for newbies. All these programs can help you to learn how to day trade crypto and much more. Currently, the most recommended investment options are Uniswap (UNI) and The Sandbox (SAND). Current technical analysis of the financial markets shows that these two currencies are the most likely to pay high dividends within the next two to three years. For example, Binance Coin (BNB) is one of the best exchange-based cryptocurrencies you can buy nowadays. Whereas Uniswap (UNI) and Chainlink (LINK) hold the place for the best-decentralized exchange token to buy and hold and the best interoperability token to buy, respectively. Bear in mind that no investment or trading strategy is complete without a risk. Make sure you understand the hazards of crypto trading before you decide to buy your first currency. Start with one currency and never invest all your savings at once, no matter how enticing the return prospects are. It will take time until you begin to earn from investing and trading crypto - but when you do, this will allow you to have a sustainable way of earning an income. This income can be used for several purposes, with serving as funds for retirement being the most common one.
