Many investors prefer to trade cryptocurrency because it is an extremely volatile asset. If you can choose the right time of the market, cryptocurrency trading can give you much higher returns than traditional investments. So what is cryptocurrency and how to get started? Find out in this detailed post.
What is Cryptocurrency?
Although there are many different types of cryptocurrencies, they all have one thing in common: they work on blockchain technology, making them decentralized. Decentralizing financial operations through cryptocurrencies has a number of effects compared to the traditional financial system, including:
- Cut down on almost all the overhead costs associated with banks
- Less expensive transactions can be sent and received internationally
- Inflation or finite supply is coded – no need to trust the Federal Reserve
- Financial derivatives such as trading strategies and loans can be directly coded on certain cryptocurrency blockchains, replacing the need for financial intermediaries.
The largest cryptocurrency is Bitcoin and it is used as a “digital gold”. Essentially, Bitcoin is a commodity that is used as a store of value. Ethereum is the 2nd largest cryptocurrency with a market cap of $ 210 billion. Developers can develop smart contracts on the Ethereum blockchain to create decentralized alternatives to traditional banking functions, like lending and trading.
Pros and cons of investing in cryptocurrencies
Investors are attracted to the cryptocurrency due to its high volatility. It’s not uncommon for cryptocurrency prices to fluctuate by more than 10% in a single day. This is great if you are looking for high returns, but if you are a risk-averse investor investing in cryptocurrencies may not be for you.
Cryptocurrency Trading Steps
Here are the 5 basic steps to trading cryptocurrencies.
Step 1: Create a cryptocurrency brokerage account.
Unless you already own crypto, you will need to create an account with a crypto broker. Popular crypto brokers you can choose from: Coinbase, Gemini and eToro.
To create an account, you will need to provide your crypto broker with personally identification information, similar to opening an account with a stock broker. Some of the common information you need to provide when setting up your account include Social Security number, address, date of birth, and email address.
Step 2: Fund your account
Once you are registered with a crypto broker, you will need to connect your bank account. Most crypto brokerage firms offer bank financing through debit cards and wire transfer. Wire transfer is often the cheapest option to fund your account –– it’s free on Coinbase and Gemini.
Step 3: Pick a cryptocurrency to invest in
Most crypto traders actively allocate the majority of their capital to Bitcoin and Ethereum. These cryptos move more predictably than smaller altcoins, so trading with technical indicators can be easier.
Step 4: Choose a strategy
There are many trading indicators to choose from, and most traders consider many factors when buying and selling cryptocurrencies. If you are new to investing, you may want to consider purchasing a cryptocurrency trading course.
If you are an experienced trader, you probably already have a strategy that you use to trade stocks. A personal favorite trading strategy that many traders use is Elliott Wave Theory.
Step 5: Store your cryptocurrency
If you are actively trading your cryptocurrency, you will have to store your coins on an exchange to gain access to them. If you are buying your crypto to keep the medium to long term, then you should get a crypto wallet.
Cryptocurrency wallets come in the form of software or hardware wallets. Both are secure, but hardware wallets offer the best security, as they store your cryptocurrencies on a physical, offline device.
Final Thoughts
Through this article, you’ve learned what is Cryptocurrency and crypto trading steps. You also know how to cryptocurrency them with a simple way.
Cryptocurrencies have the power to change our lives forever. They can help you regain control of your money and information. Some people will ignore them and hope they go away. But there are also others who will join this party. You will be one of them?
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