If you’re interested in trading cryptocurrencies, you’ve probably heard of Bitcoin and Ethereum already. There are now hundreds of other crypto coins that have popped up as well. And as the crypto world has grown, so too has the amount of information available to help you get started. This post aims to share some helpful tips along the way on how to begin trading cryptocurrency.
Understanding Cryptocurrency Is The First Step
Cryptocurrency is a digital currency generated through mining (proof of work) or by the amount you own (proof of stake). You can exchange cryptocurrency for other cryptocurrencies or fiat options such as US Dollars, Euros and more. A cryptocurrency system typically utilizes a peer-to-peer network to facilitate transactions and generate new units for the system’s money supply.
Is Crypto Trading The Same As Trading Stocks?
Not entirely. Crypto trading is much more volatile than trading stocks. This is one of the reasons why many people are hesitant to invest in crypto, i.e. they’re afraid that their investment will significantly fluctuate over time and lose its value completely. Crypto trading requires quick decisions and features no formal disclosures (aside from signing up to an exchange) or any regulatory oversight. Despite the high volatility, traders have numerous opportunities due to the wide range of options available for purchases or sales. Additionally, most stock traders will invest with a long-term view, while most crypto trading is done on a short-term basis. While this is not always true (many traders will buy and hold Bitcoin and Etherium), many will wait until the price is high enough to sell for a price greater than they purchased it.
Nonetheless, there are some similarities in the sense that you use leverage to your advantage. When trading stocks, leverage is the ratio of the market value of an asset to the cost incurred to buy it. The leverage ratio is determined by dividing the total amount of debt by the total amount of equity. The higher this number, the more insolvent a company will be. You can consider using leverage with your crypto assets as a force multiplier for your investments. It puts the user at an advantage over others because they can buy more assets with less capital. After considering these factors, what is the best way to begin your trading career?
Open A Brokerage Account
Cryptocurrency brokerage accounts are a type of digital account that holds your cryptocurrency assets. It is a way to store and trade your digital assets while also converting them into cash. A cryptocurrency broker offers a variety of services for different purposes. These can range from trading, storage, or management of digital assets. There are various ways to open this type of account, depending on the broker’s customer base and location. Some brokers require you to fill in their online form before opening an account with them, while others operate via phone calls or emails. Some critical things to look for when looking for an exchange include:
A cryptocurrency exchange faces many security challenges. The most significant risks come from a hacking attack on a website that exposes customer data or account credentials or a lack of segregation between customers’ funds and those belonging to the exchange owner or operator. Therefore, you should ensure that any broker you choose has basic security measures in place and options for 2FA.
Customer service on cryptocurrency platforms isn’t always the greatest. This is unfortunate since if something goes wrong with your account, you’ll need an exchange that responds quickly to your demands. If you come across an exchange that has received good scores for service, this is a significant benefit that could enhance your experience. Your chosen exchange should have phone, instant chat and email support at a minimum.
The amount of currencies available for trading varies greatly between exchanges. Some will only have dozens of options on their platform, while others may have hundreds. If you have the time to investigate and are more experienced, a cryptocurrency exchange with many options, including lesser-known coins, could be the best option for you. However, if you are serious about learning more, you should choose an exchange that provides more opportunities rather than fewer.
Locations That They Serve
Certain jurisdictions will have different laws surrounding the trade of these assets. Perhaps the best example of this is the recent banning of all forms of crypto trading in China. Therefore, you should be aware that you might have to think outside of the box if you are in countries that deem it illegal.
With the better exchanges, there will be a trading fee as well as extra commissions. However, you should also look out for fees associated with withdrawing your assets from the platform into your wallet, as these can add up if you’re not careful.
Withdrawal And Deposit Methods
In other words, they should be seamless regarding both your money and your assets. You should be able to deposit money in various methods and withdraw it as efficiently as possible into your bank account or cryptocurrency wallet.
Fund Your Account
Once you have signed up for an account, you will need to fund your account with your fiat currency of choice. The best way is typically bank transfer, but it will depend on your chosen exchange.
Choose A Cryptocurrency To Put Your Money Into
The cryptocurrency market is highly speculative, so there are no guarantees on the value of the assets you trade. Savvy investors will hedge across a range of options to spread the risk. Most people will agree, though, that you should invest in Bitcoin and Etherium at the very least. Nevertheless, some other exciting proof of stake options to consider as part of a diverse portfolio include:
Safely Store Your Cryptocurrencies
A crypto wallet is a digital repository that stores your cryptocurrency. Mobile wallets, for example, are easy to set up and use, but they require you to take security measures such as turning on two-factor authentication so thieves can’t get in if they find your phone. Whatever opinion you choose, it is always a good idea to get your assets out of the exchange and into something you have control over.
Trading cryptocurrencies can be an enriching experience. There are plenty of reasons to begin, but you should always research and understand what you are doing.