A guide to investing and trading cryptocurrencies
Overview
Cryptocurrency can be referred to as money on software platforms. It is a new internet-based mode of carrying out financial transactions without physical established institutions interference. Cryptocurrency makes use of cryptographic functions to ensure a secure way of carrying out cashless transactions. Since its inception, several cryptocurrencies have evolved, and the technology has continued to attract more people. https://www.etoro.com/discover/markets/cryptocurrencies.Currently, there exist more than 1600 cryptocurrencies carrying different market weights and values.
Cryptocurrency is equipped with essential features that safeguard the industry users. For example, confirmed transactions carried out are irreversible. This ensures that once a transaction has been done, nobody can interfere with it. Another property is that the accounts and sales are not directly linked to physical identities in the real world. This ability makes it possible for its users to carry out operations anonymously.
Cryptocurrency investing and trading
Cryptocurrency trading merely is earning through speculating on the rising and falling of cryptocurrency prices. Trading is done through two main ways; using CDF trading accounts or buying and selling the underlying coins using exchanges.
CFD trading involves the trader speculating on the movements of cryptocurrency prices using a derivative technique. If a trader thinks that cryptocurrency prices will rise, they can go “long” buy or go “short” if they believe the currency price will fall.
For one to start cryptocurrency trading using exchanges, all they need is to create an exchange account that grants them access to the cryptocurrency market. Examples of the popular exchanges are coinbase, binance, BitMex, Kraken, etc. A trader should consider several factors before choosing an exchange to use. A good exchange should guarantee safety, availability, fast rates, and a good reputation. Once an exchange has been selected, the trader should create an account. With the trader’s exchange account, the user is now ready to buy a cryptocurrency and start trading. To ensure one’s cryptocurrency security, a trader is supposed to create a wallet. This is the storage for all account authentication details such as public address and private key.
The top three cryptocurrencies are;
Bitcoin-This is the oldest and commonly used cryptocurrency. It is used as a gold standard in the cryptocurrency industry. Since its inception, the bitcoin value has tremendously grown from zero to more than $650. It has gone global with its use rising to more than 200,000 transactions in a single day.
Ethereum-This is the most flexible cryptocurrency with several clones such as DigixDAO and Augur. For this reason, ethereum is considered to be a family of cryptocurrencies. This property makes it the best instrument for block-chain applications.
Ripple-Unlike the other top two cryptocurrencies, ripple doesn’t have a mining option. All its coins are in a pre-mined state. XRP, which is the native ripple currency, specializes more on a network to process IOUs.
Ripple trading
Ripple cryptocurrency, unlike the other two significant cryptocurrencies bitcoin and litecoin, wasn’t created to replace fiat currency. It competes with other global financial institutions in facilitating more quality and cheaper money transfers. However, just like other cryptocurrencies, one can speculate its native currency XRP price movements.
To trade with ripple, a trader needs to make use of an IG. Here, the trader does not own any cryptocurrency but is just allowed to predict XRP against the dollar.
When using an exchange, the trader would typically have to sell dollars in exchange for XRP. If the ripple’s prices rise, a trader can sell his/her XRP for more dollars, making a profit.
The pros and cons of trading and investing in crypto
Pros
The market hours-The the fact that cryptocurrency does not have a centralized governing body makes it available throughout for trading. This means that people can keep transacting 24/7 across the globe.
Improved liquidity-This refers to the ease in which cryptocurrency can be converted to cash without affecting market prices. The cryptocurrency market is considered illiquid, and that makes it a good venture as even small trades can have a massive impact on market prices hence higher returns.
Security-Cryptocurrencies are considered to be very secure unless a transaction is approved using the account’s private key, and no transfer can occur.
High market volatility.
The ability of cryptocurrency to go long or short.
Cons
Technology failure-Cryptocurrency trading is purely software work, which, with time, may fail or become obsolete. If this happens, then a trader can end up losing all their investment.
Technical mastery is required-The The current crypto trading systems are a bit complicated and can be hard to operate for people with limited computer knowledge. Due to these complexities, it is easy for people to lose their hard-earned cash while trying this trade.
Cryptocurrency trading Brokerage risks-This being a new technology, there are many unknowns when it comes to broker charges and the software reactions. Some of the brokers run shady deals, and it is straightforward for someone to lose their cash.
Conclusion
With the continued growth in technology, cryptocurrency is there to stay. Considering the many benefits that it offers also, many people are moving their wealth to cryptocurrency. However, this is a field that people should trend with care to avoid accruing significant losses because there are still many uncertainties surrounding the technology.