The year 2021 has seen cryptocurrencies soar to an all-time high and fall to an unprecedented low. The volatile assets have been the talk of the decade ever since Bitcoin gained popularity in 2011 when its price suddenly increased from $1 to $32 within two months. In 2013, Bitcoin’s price went from $13 at the start of the year to $1156 before dropping to $760 in three days.
This volatile nature has seen financial analysts call Bitcoin and other cryptocurrencies dangerous to invest in since it lacks stability. If you are a person who loves taking risks and are ready to trade with cryptocurrency, then continue reading the article.
What is cryptocurrency and why is it popular?
Cryptocurrencies are assets exchanged for online goods and services. They operate like fiat money but, the difference is that the governments of various countries do not back crypto. This lack of confidence and trust by the government has made crypto an unstable means of exchange.
Cryptocurrencies operate in a decentralized market, unlike fiat notes, where all transactions are processed in the bank, which is the centralized point. Digital coins can do this with a technology known as a blockchain. A blockchain is a group of nodes that manages and records bitcoins and altcoins transactions. In simple terms, blockchain technology has computers in the cloud that maintain digital coin transactions.
One appealing feature of a blockchain is its security. Once a transaction occurs, you cannot alter or change it because its recording methods won’t permit the change. Theoretically, a person can manipulate this if they own 51% of all digital currencies worldwide. It is unlikely to happen, seeing it will require a large amount of money and coordination to pull off.
Why are digital coins so popular? There are various reasons people prefer digital coins to fiat currency, and we will briefly discuss these now.
The integrity of transaction
Crypto enthusiasts claim that it’s easier to trust the codes as they have no emotional ties, feelings, or reasons to alter or manipulate transactions, and therefore having a program to oversee and record transactions is better than the traditional banks of today.
Ease of tracking transactions
Blockchain technology allows anyone to trace a transaction easily. Tracing is possible because all transactions are time-stamped and linked to a previous transaction and then it updates all nodes and systems connected to the blockchain. Manually altering this is difficult because even if you change the time-stamp, you would have to erase all other transactions before the altered one, which is virtually impossible to do.
Privacy appeals to a lot of users of digital currencies. Their transactions do not show a name or any other detail aside from an address. The promise of this attracts a set of individuals to crypto.
Most people want to make money quickly, and what other way to do it than a volatile and risky market that presents high risk and returns on investment.
Currency of the future
Lastly, some see Bitcoin and other altcoins as the future. The government prints money as desired, sometimes for unpopular reasons like wars. Bitcoin and altcoin admirers believe using codes to control the supply of digital coins is a better alternative.
Now that we have looked at the basics, let’s understand trading.
Choose a cryptocurrency and platform
Choosing a cryptocurrency to invest in can be tricky, especially when looking for the next big coin. A good rule is to invest in digital currencies that are relatively more stable. The top stable coins include Bitcoin, Ethereum, Cardano, Binance Coin, and Tether. These coins offer more stability compared to the others.
If looking to invest in a new altcoin, make sure you check what the project is all about by reading its white paper. The white paper contains details of the new altcoin. Usually, the more detailed, the better, but this is not a guarantee it will succeed. It’s better to observe and see the movement of big players in the market before making a move.
There are many crypto brokerages or platforms you can use to trade your digital currency. Each platform has its advantages and disadvantages, and business24-7 can help you conduct your research. Platforms like Robinhood are free for U.S citizens for processing trades, while Coinbase’s easy-to-use interface is great for beginners. Other platforms have their own merits, Business24-7went into detail, highlighting the strong and weak points of the trading platforms. This information gives you the knowledge to make the right decision for yourself.
Open an account
Once you choose your preferred trading platform, open an account with the platform to trade. To open an account, you will need documents like an I.D, proof of address, date of birth, email address, etc. The document you would need to open a regular bank account.
Fund your account
You can easily fund your account by linking your bank account to your new brokerage account, after which you can transfer money into your account either by direct debit or wire transfer.
Decide how you like to trade
Like the stock exchange, there are different ways to trade and make money on crypto. The popular ones are holding your currency for a short term and trading to make profits, while the second is holding your Bitcoin or altcoin for a longer period of time. Both methods will depend on what you want to achieve with your digital coins.
There is another method that is picking up steam called CDF (Contract of Difference). They work like future contracts, hedge funds, and the likes in the fiat market. When trading short, experts advise using the Eliott wave method. The method is popular because it deals with the psychology behind trades, and it’s best for highly speculative and volatile markets like crypto.
Get a wallet
If you plan on buying and selling digital currency, you will need a wallet to store your money. A wallet stores your digital currency, and you can create different addresses under a wallet if you do not want to use only one. You use a wallet address to send and receive digital currency.
The steps outlined above are the steps you will need to start trading in cryptocurrency. While they are not exhaustive, they are sufficient as a guide in directing you for further research. The Bitcoin and altcoin world is already a complicated context to trade within, but it will only get crazier, so be sure you understand the ins and outs of it before getting serious. New digital currencies are launching, the market will rise and fall, and unpredictable events like the recent ‘Evergrande crash’ will turn anyone trading in crypto into either a very rich or a very poor person.