Cryptocurrency trading is a new business opportunity in the digital space. Just like the stock or Forex markets, cryptocurrencies markets are volatile, and their value fluctuates with time. Investors can identify, exploit an arbitrage opportunity, and profit when a particular cryptocurrency’s value rises or falls. Since this is a new idea, we have compiled a beginner’s cryptocurrency trading guide for those who want to get acquainted to the concept.
Let’s begin by explaining a cryptocurrency. In simple terms, a cryptocurrency is money in electronic form or digital currency. The companies behind the creation of cryptocurrencies essentially develop encrypted software that is transferable from one party to another. Cryptocurrencies are decentralized, and are not governed by any form of financial institution. Transactions executed by cryptocurrencies are confirmed and recorded on a public ledger free from manipulation. These types of deals constitute Cryptocurrency Trading.
In 2009 an individual or group of individuals known as Satoshi Nakamoto developed a decentralized coin and cash system – Bitcoin – the world’s first cryptocurrency. Bitcoin’s success led to the creation of other cryptocurrencies known as altcoins. Some of them include Litecoin, Ethereum, Ripple and Dash.
Cryptocurrencies became popular amongst the tech-savvy individuals. Today, most people want a piece of the action. The growth is attributed to the fact that cryptocurrencies are not regulated by governments or banks. That makes transactions easier, faster and minimal fees are charged, if any. Participants have also assured anonymity, and many love this feature.
Cryptocurrencies are preferred by online merchants, web casinos and software developers. For example, a large e-commerce business sells its products to clients around the world. Customers who choose to pay by debit or credit card have to incur international money transfers costs. The business also incurs withdrawal expenses. Transactions using bitcoin would be much cheaper, and settlement would take a shorter time. That’s the power of cryptocurrencies.
An Introduction to Cryptocurrency Trading
The lack of regulation for cryptocurrencies makes them highly volatile. Price fluctuation is primarily due to forces of demand and supply, but can also be caused by reasons such as news events and the media. Investors who can “predict” which direction a particular cryptocurrency is taking can profit from the movement. For example, investors who predicted the value of Bitcoin would rise were correct. Any investor who bought Bitcoin early last year at approximately $4,000 and sold it now would make a profit of over $10,000.
Recently, cryptocurrency’s popularity has increased enormously around the globe. Sophisticated investors have taken crypto trading a notch higher. You can now profit from the change in the value of one cryptocurrency in relation to another. Trading is done on cryptocurrency exchanges (such as GDAX, Kraken, ShapeShift, or CoinBase).
Market analysis of information such as trade volume and price enables an investor to “bet” the general direction of the price trend. The investor then decides to buy or sell a particular cryptocurrency pair. Let’s use an example. An investor who anticipates that Bitcoin will increase in value in relation to Litecoin will execute a buy order for the BTC/LTC pair. If the trade goes in their favor, then a profit is made from the transaction. If the deal goes against the decision the investor makes a loss and an equal amount is deducted from their account.
Crypto trading works more like Forex trading. However, account holders have digital wallets where coins earned from crypto trading are deposited. The wallets enable them to send and receive cryptocurrency, and also act as a personal ledger. Users need to secure their wallets with passwords and other identification keys. The wallets can be cloud or hard drive-based.
Today’s market is full of trading robots. The robots analyze market information on behalf of the user, making trading for beginners very easy. Instead of putting your money in a savings account, give crypto trading a shot.
Crypto trading is done directly by two investors on a similar exchange. A single investor may also do trading through a crypto broker. The two scenarios depend on the type of exchange. Most platforms do not permit customer to customer trades. The process of crypto trading is very simple. You just need to pick an exchange, open an account, then submit your identification details. Once the company verifies your details, all you need to do is deposit funds, and you are all set to start trading.
Beginner traders are recommended to open an account with CoinBase crypto exchange. It has a great user interface, plus an insurance for client funds. Let’s look at this example of how to trade cryptocurrency, by buying Bitcoin on Coinbase.
How to Buy Bitcoin With CoinBase
To get started at CoinBase, users are required to go through a couple of steps. First, you need to set up an intermediary bank account. Then follow these steps:
Sign up and create a digital currency wallet where you can securely store digital currency.
Connect your bank account, debit card, or credit card so that you can exchange digital currency into and out of your local currency.
When you sign in, access the “Buy/Sell Bitcoin” tab.
Select your preferred method of payment, and click “Buy Bitcoin”.
Check your credited Bitcoin on your dashboard.
Crypto Trading needs to be treated with proper discipline for optimal results. Beginners without knowledge of how to trade cryptocurrency, enter this space with a lot of hope to make quick bucks. Word of advice, over speculation often leads to significant losses that could wipe your entire account. However, with the right knowledge benefits from trading cryptocurrencies may be infinite.
We will continue to do more research on your behalf and compile more details on digital currencies. In the meantime, should you have any questions or thoughts, do not hesitate to leave us a message below.