How to Trade in Cryptocurrencies.
In our previous post we gave you a simple explanation of how Cryptocurrencies work and that Blockchain technology is the security in the background. Many of you will be now keen to start investing / trading in Cryptocurrencies, particularly since Bitcoin’s price rocketed through $11,000 earlier this week (November 2017).
NB. All currency comparisons to Bitcoin and other cryptocurrencies in this article are based in USD$.
Learn how massive money can be made using The Bitcoin Code
Investing In Cryptcurrency
Investing and trading in cryptocurrencies is rapidly becoming a frenzy as the ‘herd’ mentality jump on board the trading wagon because they have “FOMO” – better known as fear of missing out.
- As an example if you had invested $1000 into Bitcoin around 1 year ago it would be worth over $11,000 today. (since starting this article the price has fluctuated wildly so check here for live pricing updates)
- If you were “crazy” or brave enough to have invested $1000 in Bitcoin in March 2010 when 1 Bitcoin was equal to $0.003, today it would be worth over $3 billion. Hard to imagine I know.
How The Cryptocurrency Exchanges Work
The most effective way to commence trading in this field is to gather an understanding of how the cryptocurrency exchange markets function. Mainly because of the certain level of technical knowledge required, lack of legal regulation and an overall shady atmosphere surrounding the cryptocurrency concept, viewed from the perspective of a beginner. Here we will show that trading in cryptocurrencies is not that complicated and can be very straightforward and secure if you follow a certain procedure.
A Cryptocurrency Exchange Is Totally Different To A Stock Exchange
And that is the first thing you need to understand! The world of trading cryptocurrencies is open 24/7 and therefore is extremely volatile. The value of a certain cryptocurrency can rise or fall by a huge % points in a matter of minutes. That way you can make a fortune or lose it in a very short period. However these losses or profits are “paper profits or losses” – they are neither until you sell out your position
Choose Your Cryptocurrency
Selecting a cryptocurrency you wish to trade with is the first step you need to make. You want to choose a cryptocurrency in which you believe in. That means finding out as much as you can about the currency, the operators, the uses of the currency. More details are outlined below. When you decide to perform your research, these are the aspects that you should consider prior to commencing trading:
- Infrastructure and technology (App development, Quick transaction process, Cloud storage, funding, etc.)
- The quantity, skill, and experience of its development team
- Overall popularity, rising demand, and media coverage
- Price (I suppose that you are familiar with the term “buy low sell high”)
Set Up A Secure Trading Environment
In order to actually start trading, you need to decide on where to store and trade your cryptocurrency. Thus, you will need to choose a wallet and a trading exchange that best suit your needs.
- A “Wallet” is an address on blockchain where you store your cryptocurrency. Each wallet has a public address that people use to send funds to, and a private address that you use to access and send your funds. It is of utmost importance that you do not expose your private key, otherwise, you will most definitely lose all your money. There are different types of wallets:
- Online wallets like MyEtherWallet or Blockchain Wallet are the easiest but the least secure way to store your cryptocurrency.
- Mobile and desktop wallets like Exodus, Jaxx, or Mycelium are more secure than online wallets but if your phone or PC gets hacked or broken everything in your wallet will be gone.
- Hardware device wallets like Ledger Wallet are safer than all the options above but still susceptible to damage or loss.
- Paper Wallet are the most hacker-proof but the least convenient. If you choose to keep your private key on paper be sure to deposit them in a safe place and do not use regular paper but something more durable like TerraSlate.
- After you choose your wallet it is time to select the exchange and get to trading. Exchange is a place where you can exchange your cryptocurrency for fiat. (ie government currencies – eg. US$ or Euro) Each exchange has its own specificities, rules, and fees. Be sure you completely understand them before trading a substantial amount of money. Here are some of the most popular exchanges:
After measuring all the aspects that determine reliability and quality of an exchange, such as liquidity, spread, fees, purchase and withdrawal limits, trading volume, security, insurance, user-friendliness we found that Coinbase is the one of the safest exchanges to consider. Mainly due to its beginner-friendly user interface, and an unbeatable 100% crypto insurance.
- If you want to be a serious cryptocurrency trader and know your cryptocurrency value at any given moment, you need to have a cryptocurrency tracking app. Bear in mind that these apps are not made for storing cryptocurrency. They are used only to check their value. The apps we recommend are:
- Blockfolio – The most prominent feature of this app is that it displays all currencies on your watchlist calculated in the value of the currency of your choice. Some apps are made to display the value in Bitcoin, which pointless if your mind is set on another cryptocurrency.
- Coincap – This app allows you to display currencies by different ranking factors like volume or market capitalization. You also have access to a number of useful charts in order to track what is being actively traded. Coincap also displays prices calculated in the currency of your choice.
Beware Of Scams
Due to the lack of centralization and regulation on the cryptocurrency market it presents a suitable environment for scams. Here are some of the things you should be aware of:
- There aren’t many trustworthy exchanges out there. Some exchanges are known to disappear overnight taking all the cryptocurrency with them. The most famous was the case of Mt Gox. This early cryptocurrency exchange at one point accounted for over 70 percent of all Bitcoin transactions worldwide. Until one morning the exchange suspended trading. It resulted in 850,000 Bitcoins stolen (valued at $450 million at the time)
- Be careful when choosing your cryptocurrency because smaller altcoins are susceptible to a standard pump and dump.
- In the process of initial coin offerings to raise a substantial amount of money, many cryptocurrency startups vastly overestimate their value.
- There are cases of people being cold-called and persuaded to purchase non-existing cryptocurrency. Be sure that the real investor will never cold-call you to offer you an investment opportunity.
As you can see, you can make a fortune overnight by trading in cryptocurrencies while on the other hand, you can lose everything at the same time, due to the extreme volatility of the cryptocurrency market. It is important to inform yourself thoroughly in order to set the perfect environment and to avoid any possible scams. And of course, do not be greedy especially if you are a beginner.
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