So firstly, in this beginners guide to Cryptocurrency, let’s have a look at what Cryptocurrencies are, why they’re so common, and how you can exchange them.
WHAT IS CRYPTOCURRENCY?
A cryptocurrency is a form of electronic or automated currency that uses ‘encryption’ strategies to control its availability, to help conceal its movement among entities, and to which there is no centralized authority. We have written this beginners guide to cryptocurrency trading as it can sometimes be a little hard to grasp at first. It is because of this ‘encryption’ that this virtual money gets its name-‘Crypto’ currency-and is what renders it more revolutionary in contrast to existing types of currency such as Swiss Francs or the US Dollar.
The main distinctions between cryptocurrency and standard currency are:
- Virtual only:
Unlike actual cash that you can hold in your wallet, Cryptocurrencies such as Bitcoin or Litecoin are only accessible in electronic format.
- Encryption Techniques:
As described above, the main function of Cryptocurrencies is their encryption to monitor payments and regulate their distribution.
- Decentralized technology:
Decentralized: possibly one of the very enticing aspects of digital currency is the fact that Cryptocurrencies trade ownership on a solely peer-to-peer transaction, i.e., person-to-person grounds, with no need for a third entity among them, such as a corporation. In this way, it is deemed economical to transfer cash to a peer than conventional ways of money transfer by a 3rd person. This decentralized function was among the major elements in the rapid growth in popularity of Cryptocurrencies and is believed to be reportedly used on the black market for currency transactions such as money laundering or terrorist activity.
- What is Blockchain?:
Owing to its decentralized existence, Cryptocurrencies use a collective digital database to register transfers known as Blockchain. The blockchain is crucial to the effective execution and security of the entire Cryptocurrency network since it is the only active database for Cryptocurrency exchanges.
- No monetary authority & circulation:
Typically, the supply of money is controlled by a central financial institution, such as the Bank of England or the US Banking System. There is no such banking system for Cryptocurrencies. Instead, some Coins have small stocks, such as Bitcoin. Bitcoin has a limited quantity of 21m by 2140, and presently there are 16.5m in existence. The way a consumer will build Bitcoin is through a strategy called mining, which is simply the answer to a massively complicated mathematical formula. Early fans in Bitcoin were compensated with an extra 50 Bitcoins to effectively mine them, thereby incentivizing the production process. Over time, the statistical equation is getting more and more complicated, dramatically diminishing availability and, in essence, controlling the demand.
WAYS TO EXCHANGE AND DEAL WITH CRYPTOCURRENCY:
So, you did your homework, you learned your bitcoins from your Ethereum, and you’re now fully prepared to exchange. How are you doing this? Ok, there have been two ways to sell cryptocurrencies; through a marketplace or a CFD dealer. There are both favorable and unfavorable choices, such as protection, control, forum, and leverage.
EXCHANGING CRYPTO THROUGH A CFD BROKER:
Let’s take a deeper look below at Crypto exchanges from a CFD broker. There are a relatively few CFD brokers selling Cryptocurrencies through their payment system, and this is perhaps a far more versatile way to exchange Crypto for a myriad of purposes, such as:
- Go long or short:
Typically, by trade, you can only go long, i.e., earn profits when Cryptocurrencies increase their value. CFD brokers encourage you to be both long and short. In short, you can earn profits by making assumptions that Trading volumes would collapse in price.
- Different markets:
CFD brokers bring numerous Crypto markets through that same network as other types of investments such as bonds, indexes, derivatives, and standard forex. So, you could have all of them under one roof and treat them the same.
You can swap Crypto CFDs with leverage, which means you can make your investment capital function more effectively. It’s valued at around $5,000 now. Within the next year, it might have been worth a lot more than that. So, if you only have a small amount of capital to spend, CFDs can be a more effective option for you. It’s worth noting here that the future gains are amplified with leverage since your risk is higher than the capital spent. All fine, if the stocks go to your advantage, but if they don’t, the dangers are also much bigger. So be vigilant of that.
You’ve also heard reports of people’s bitcoin wallets being compromised and robbed. Well, coverage is much stronger with a CFD broker, however, if you want a managed FCA dealer, the capital is covered by the Financial Services Compensation Scheme (FSCS) up to the very first GBP 50,000.
As we have already stated in this beginners guide to cryptocurrency trading, digital Crypto trade is unrestricted and decentralized. This has some benefits in terms of the open flow of funds, but it also coincides with the possibility of a lower degree of security for members. As CFD trading is supervised, that means there’s a structured entity looking for you. Such regulators now provide greater security than others.
WHY EVERYONE IS SO CRAZY TO INVEST IN CRYPTOCURRENCY?
As described earlier, cryptocurrencies are probably one of the greatest technological developments since the dot.com explosion. A fully decentralized money system that runs on a strictly peer-to-peer framework is groundbreaking. Taking into account that most conventional currencies have centuries of experience, this modern digital development is still in its infancy. Many investors have opted to buy into this breakthrough.
- LIMITED SUPPLY:
Coins such as Bitcoin provide a fixed supply. There are presently about 16m bitcoins in existence, with 21m allowed by 2040. This reduced supply may have the effect of promoting more price inflation, especially if interest proceeds to rise and the crypto industry starts to standardize, i.e., if it is more embedded within the international payment network. This lack of supply could also decrease the potential of investing in cryptocurrencies.
Put bluntly, most people will be happy with a 5-10 percent annualized increase in their investment account. Indeed, most of the main indices are rising at about 5% on average per year. Well, from January 2017 to September 2017, the value of Bitcoin rose by upwards of 400 percent. But you can see, by contrast, that many people are trying to leap into the crypto craze at the outset, hoping that they’ll benefit from this kind of return.
BEGINNERS GUIDE TO CRYPTOCURRENCY TRADING TOP WATCH TIPS:
Cryptocurrency trading entails all of the dangers of dealing in any other industry, as well as several special challenges.
The value of cryptocurrency is unpredictable. This is one of the factors that make it appealing to investors, but that also renders it very dangerous. Double-digit intra-day price fluctuations are normal, and abrupt changes can unfold in just a few minutes.
- Unprecise trends:
Markets frequently follow patterns, and sometimes they don’t. This is a concern when selling something, but the peculiar features of the cryptocurrency industry make it a special danger.
- To be over-exposed:
Don’t gamble more than you can afford to risk yourself. Restrict your risk and try creating take advantage and avoid loss orders to minimize your exposure in the case of dramatic fluctuations.
- Use unnecessary leverage:
Many cryptocurrency platforms will deliver up to 100x leverage, drastically increasing future risks. The cryptocurrency instability, paired with high leverage investing, will see holdings liquidated incredibly rapidly.
- You don’t know when to walk away:
If you’re over or under, it’s vital to recognize when to shut your spot and either make a profit or cut your damages.
- Unregulated and distorted economies:
Cryptocurrency markets are relatively unmonitored contrasted with more conventional markets. It’s an unspoken rule that wash trade and market exploitation are widespread. They are also much less transparent than most other marketplaces, which may lead to uncertainty and make it easy for well-moneyed ‘sharks’ to control prices, force insolvencies, and such. Exchanges themselves are often suspected of exploiting their own stocks against their investors.
This is the end of our beginners guide to cryptocurrency trading—we hope you liked it! If you’ve read this article from beginning to end, you will then have a clear idea of what crypto trading is, the distinction between short-term and long-term dealing, and some crucial points to know before you get started. Not only that you know the risks and dangers you should look out for before starting crypto trade and also the related necessary things. Please note, you can always talk to a financial planner before you make any purchases and always do your analysis.