We live in a time where we are slowly replacing physical money with the increasing use of digital assets. The world has started using new types of digital currencies called cryptocurrencies.
It is clear to everyone that the growth of interest in this digital money will not stop anytime soon. Many companies use them as a payment method, and some even develop their own crypto. All this increases the popularity of the crypto industry itself even more.
To become a part of these changes, keep on reading this article. You will learn what cryptocurrencies are, how they work, and how to start trading crypto.
What Are Cryptocurrencies?
Cryptocurrency is a sort of payment system that does not depend on financial institutions verifying transactions. It is a peer-to-peer system that can allow anyone from anywhere in the world to send and receive payments.
Unlike physical money, cryptocurrency payments exist only as digital entries in an online database that describes specific transactions. When you transfer funds in cryptocurrencies, every transaction is documented.
How Does Crypto Work?
Cryptocurrencies run on a blockchain – a digitized, decentralized ledger, i.e., a document of all crypto transactions.
To better understand what decentralized finance is, check out this text on the tradecrypto.com website.
So-called miners who use powerful computers and influence transactions are in charge of Blockchain. Their function is to make an update for every single transaction. Also, they ensure the authenticity of the information.
That guarantees that each transaction is secure and processed correctly and securely. Miners are paid a certain percentage of each transaction for their work.
Since there is no bank as an intermediary, there are no transaction fees. The identity of the buyer and seller is unknown, but everyone can see each transaction in the blockchain network.
How to Start Trading Crypto?
The best way to buy and sell cryptocurrencies is through digital currency exchange sites. That means you shall familiarize yourself with all the exchanges and their security.
You also got to choose the type of wallet you will use and embrace specific cryptocurrency trading strategies.
However, before embarking on this adventure, give yourself time to educate yourself on this topic first. To start trading crypto, you must first learn to trade crypto but understand the whole concept, too.
Let’s start with our short and simple guide: How to trade crypto for beginners.
Make a cryptocurrency brokerage account.
Given that you are reading this article, we suppose you do not own any cryptocurrency yet. In that case, you’ll need to create an account on a trusted platform. To do that, you’ll need to complete the Know Your Customer (KYC) requirements.
That includes providing your physical address, date of birth, Social Security number (in the US), and email address.
Coinbase, Crypto.com, and eToro are among the most popular exchanges in the market. Their user-friendly interface allows consumers to buy and manage their digital assets easily.
Deposit your account.
The next step is to connect your bank account to your brokerage account. After that, you’ll be able to deposit your account. You can do that using your credit or debit card, but wire transfer is also available. Wire transfer is usually the cheapest option. On Coinbase, it’s even free.
Pick a coin to work with.
Now you can research the market and choose the crypto you will trade. Since Bitcoin and Ethereum move more predictably than other altcoins, these are also the primary choices of most active traders.
Some of them put a part of their money into smaller altcoins but note that it is a much riskier option.
Choose a strategy.
There are multiple indicators when it comes to crypto trading. You should consider a variety of factors before you start trading.
Many traders use a strategy called Elliott Wave Theory. It focuses on psychology to explain the market sensation. That’s why it works efficiently for volatile assets such as cryptocurrencies.
Consider automated crypto trading.
When you define a strategy that will help you produce better results, you should consider automated crypto trading since that gives you the same results. What is the advantage of that? It gives you the comfort of knowing the strategy is doing its job.
To identify the best ways to trade in the crypto markets, you can perform manual or automated options. Actively trading crypto on some platforms while using automated trading bots on others is also an option you could consider.
Store your cryptocurrency.
As we mentioned above, before all of these steps, you choose a type of cryptocurrency wallet. That’s where you will store your funds so you can access them.
A software wallet is a good option, but hardware wallets offer better security. The main reason hardware wallets are more secure than software wallets is because they store your crypto offline.
What Else Should You Know Before You Start Trading Crypto?
- Trading Crypto isn’t the way you can get rich quickly. If that’s your major motive to start trading cryptocurrencies, you should step back and think about it again.
- It is a challenging and risky industry. If you don’t own trading and risk management skills, it can result in capital loss you were not ready for.
- Given that this industry is still under-researched, cryptocurrency regulations are still a controversial topic. Make sure to research cryptocurrency accounting. Digital assets are still unregulated but rest assured that it will change soon.
Final Thoughts
Since the crypto industry is constantly evolving, we all need to learn more about it. It is crucial to keep up with the dates. Cryptocurrencies are an exciting new financial instrument whose volatility can be a fantastic opportunity to generate profits.
However, it also means that the risks are higher. You have to be careful what you invest in and combine fundamental and technical analysis to predict market movements correctly.
It takes a lot of effort and time to invest to get some knowledge and experience. Only after that, you can say that you have mastered particular skills to be a successful cryptocurrency trader.
