Hi Platinum Crypto Followers,
The cryptocurrency market has recovered significantly since the beginning of the week, thank the crypto Gods (or should I say whales).
The total market capitalization increased to $265 billion, while an average daily trading volume increased to $57 billion; notably, Bitcoin’s market dominance spiked above $70.0% for the first time since the beginning of 2017. As the market has changed sentiment recently I thought I would write this article for all the new commers to the industry looking to get a positive start in the crypto space.
Crypto In The Spotlight
Cryptocurrencies have been the on the spotlight for quite a while over now. The introduction of bitcoin in 2009, there has been a lot of reactions from government, the economic world, and technology world.
These digital coins introduced a paradigm shift especially in the financial sector all over the world. Their introduction was aimed at providing an alternative to the traditional currency: the fiat currency. Conventional financial institutions did not take to these new currencies warmly; they strongly opposed their adoption. Also, most governments did not endorse their adoption due to their decentralized nature.
However, these coins were much embraced by investors. A lot of trading platforms were launched to facilitates the buying and selling of bitcoin and other cryptocurrencies. A lot of people started investing in these coins at the expense of fiat currencies. In the bit of making these coins go mainstream; some organizations started accepting payment using digital currencies. Others went further and formed their cryptocurrencies on the blockchain.
Currently, a lot of people have embarked on cryptocurrency trading. Some do it as individuals while others as organizations. Either way, there are some basic knowledge that one needs to have to start trading.
How The Cryptocurrency Markets Operate?
Before anything else, it is essential to know how the cryptocurrency markets operate. Below are two important nature of cryptocurrencies that will come in handy in understanding how crypto trading works:
Volatile: Cryptocurrencies are said to be volatile due to their continually changing prices. This price movement occurs due to many factors that affect the crypto world. We will look more into these factors as we proceed.
Mining: Cryptocurrencies which are created on a Proof of work system are only created by mining. This mining happens when a new block is added to the blockchain. Most of the cryptocurrencies have a maximum number of coins to be mined.
Bitcoin dominance: The whole crypto market is primarily controlled by bitcoin price trends or rather what affects the price of bitcoin.
What is Cryptocurrency Trading?
Cryptocurrency trading is the Exchange of cryptocurrency with other assets. One can exchange with either fiat currencies or other cryptocurrencies. Just like Forex, one trades these currencies in pairs, that is, either crypto to crypto or crypto to fiat.
Cryptocurrencies are traded on platforms known as Exchanges. These exchanges enable people to buy, sell, send, and store crypto assets. Since there are more than 1600 coins in the crypto market, different exchanges support certain coins. There are some which major in only one currency while others work with several.
To trade, one needs to have registered with an Exchange. However, before you decided on which exchange to use, you have to consider the following factors.
Validity: It is essential to thoroughly look into the exchanges to ensure that the platform is a valid one. Many scammers have stolen from people claiming to be Exchanges but turn out to be Ponzi schemes.
Safety: Ensure that the Exchange has secure storages options. You can look at the type of digital wallets they use or maybe if they have ever had cases of theft. Proper storage is a priority when it comes to crypto trading.
Reputation: Looking at the reputation of the exchange platform will help one avoid being victims of scams. Look out for people reviews on the Exchange. Make sure it has a good reputation.
Exchange Rates: Every Exchange has a certain exchange rate that one has to pay once they transact with the platform.
How Does Crypto Trading Work
Since we now have a clear picture of how cryptocurrency works, we are now going to get into details about how it is done. As mentioned earlier the first thing to do is to find an exchange. Below are the steps one has to follow in order to trade.
Get a cryptocurrency wallet
Getting digital wallets is the first thing one has to do when planning to invest in digital coins. Just like the way fiat currencies are stored in physical wallets, cryptocurrencies are stored in digital wallets. However, digital wallets do not store the digital currencies because, in the real sense, they do not exist. Instead, they store what we call the private key and public address.
Private Key: this is an address associated with the owner of a wallet, and it is used to stamp transactions carried out by the owner of the wallet. It gives the wallet owner the right to access digital coins belonging to them.
Public address; this is the address seen by the rest of the people on the blockchain whenever they transact with you.
In simpler terms, the private key can only be accessed and used by you while the public address is what people will use when sending currencies to you. You should not share out your private key.
Types of Cryptocurrency Wallets
There are different types of digital wallets. We have Hardware wallets, also known as cold storage and software wallets, also known as hot storage.
Cold storage: There are significant categories of cold storage. There are
- Hardware wallets
- Paper wallets
Paper wallets print the address on a piece of paper after a transaction then one scans the codes, and the transaction is completed. On the other hand, hardware wallets store the crypto assets in devices that are in the form of a USB. These keys can only be accessed by connecting the device to a computer.
A good example of a hardware wallet is the Trezor one: it was the first cold storage device to be produced massively. Other models are; Ledger Nano S, Keepkey, Ledger Nano X and Digital Bitbox, among others.
Advantages of cold storage
- They are safe from online attacks which are currently on the rise.
- Only the owner of the wallets can access the keys since it cannot be removed from the device.
- It is a good long-term storage of cryptocurrencies.
- For some devices, one can regain their assets in a case where the device is destroyed, or it is stolen.
- Multiple addresses can be stored in a hardware wallet.
Disadvantages of cold storage
- They are hard to use for beginners.
- It is vulnerable to theft and destruction since they are always carried around.
- Most lose all the assets in are where they are destroyed
- The devices are prone to design flaws that might cost the owner his assets.
Hot storage: these are wallets that store their assets online and thus the name software wallets. There are three major types of software wallets. We have:
- Desktop wallets: One downloads these wallets from the net into their desktop. The store the keys on the computer
- Mobile; one gets the wallets into their phone and store the keys on the phone.
- Online; one stores the keys on the internet.
Advantages of Hot storage
- They are versatile since they can store a considerable amount of addresses compared to cold storage.
- It is easy to work with them; they don’t require technicalities
- They are convenient since they can be used in any device.
Disadvantages of hot storage
- Prone to cyber crimes
- A desktop wallet can only be accessed on one computer. If the keys were not backed up and the computer crashes, one will lose their assets.
- Unauthorized people can access the keys through your devices.
Open An Account
After settling on the Exchange platform that you will use, you will be required to open an account with them. For almost all cryptocurrency exchanges, this is the most natural part. Most of them only need your names, email address, and a password.
After getting a wallet and opening an account, you are ready to trade. There different types of crypto trading.
Crypto to Fiat: One gets to trade different cryptocurrencies with fiat currencies. As mentioned out earlier, this kind of trade is done in pairs. For instance, you can choose to trade bitcoin with the US dollar, BTCUSD pair, or ETHEUR pair. Every coin has fiat currency value attached to it and when carrying out this kind of trade, one has to pay the amount of maybe dollars equivalent to the number of coins desires.
Crypto to crypto; the other option is exchanging one cryptocurrency with another. This option is mostly applicable to altcoins since most are first traded with bitcoin which is then traded with the typical currency.
There are different methods of payment when it comes to crypto trading. Some of these methods will be used depending on the type of trades outlined above. You can choose to pay using any of the methods below:
- Buy with Cash
- Exchange with cryptocurrencies
- Bank transfer
- Credit and Debit cards
Basics Of Crypto Trading Strategies
Whether you plan to invest in bitcoins for a long term or short term, it is vital to learn the right
trading strategy. Getting into it without having the basic knowledge, you might end up losing a lot of money in the long run.
Analyse the market
First, you have to study the price movement of the coins. This studying, commonly referred to as analysis can be done in two ways: we have Fundamental Analysis and Technical analysis. Fundamental analysis refers to a study of the market in order to know what causes the fluctuation in prices. On the other hand, technical analysis refers to the studying of cryptocurrencies charts to understand the trends of different coins in the market.
Most traders use trading charts to help them in getting a clear picture of how prices change with time. Most people get into trading without studying these charts: this is a risky venture.
There are different types of cryptocurrency charts with the Japanese Candlestick Chart being the famous one. It consists of candlestick; they represent the prices of a coin in a specified time and different indicators that show the market trends. Using this specific chart, one gets to know when to buy or sell the coins.
There are two types of candlesticks: Red and green. The red candlesticks signify that the buyers are controlling the market, and the prices will likely drop. On the other hand, the green candlesticks indicate that buyers are dominating the market, and they will make the prices go up.
When to trade
It is advisable to buy your crypto assets when the prices are low and sell them when the prices are high. It is important to note that trading in the crypto market is controlled by a market order. Get into the market when you are sure of the market movement. You can choose to withhold your assets when the market is indecisive.
What Makes Cryptocurrencies Go Up And Down?
The prices of cryptocurrencies keep on changing with every passing hour. This volatile nature makes investing in bitcoin be considered as a risky venture. However, if the trends are well studied, it can be an up-and-coming venture. One can earn money by trading bitcoin at the right time.
To know this ‘right time,’ one needs to be aware of the thing that makes these prices fluctuate. Below are some of the reasons why the prices change.
Mining; whenever the mining process becomes hard, probably electricity costs have increased, or the difficulty has been raised, the prices will increase. These increases are meant to compensate the miners and also generate profit.
Cryptocurrency security alarms: for instance, people will refrain from investing in bitcoin and other cryptocurrencies when there are a lot of scams cases related to the coins.
Government interference: whenever government endorses or objects cryptocurrency operations, the prices will go up and down, respectively. Investors might refrain from trading with the fear of being caught on the wrong side of the law and on the other hand feel free to trade.
Conflict in the crypto world; Whenever a particular coin is bringing controversial in the market, people tend to avoid investing in the currency. For instance, the bitcoin hard fork that happened affected its prices.
Changes in the financial world; If any changes affect the economy as a whole, cryptocurrencies will not be exempted, especially when it has to do with the fiat currency.
Can I earn money trading bitcoin?
One can earn money by trading bitcoins apart from buying Bitcoin. There are different strategies that one can use to make money from bitcoin trading. These strategies are not as technical as trading seems like. There is:
Buying and Holding
People in the financial world well know this form of investment. It works well for cryptocurrencies since their prices keep on changing. One can buy a specific amount of bitcoin and keep them (hold) until their rates go higher than the one you purchased at. This method is the most common way of earning many while trading with bitcoin
Day trading Cryptocurrencies
This method mainly involves the technical analysis of cryptocurrency charts. It requires someone that knows how to study and analyse the market trends. In a day, the price of a coin can changes drastically. Day traders take opportunity of this and make profits by buying the coins when the prices are low and selling when the prices are higher.
This form of earning requires one to make use f both fundamental and technical analysis. This is so because, in a day, the price of a coin may stagnate making the trader make losses instead of gains.
This is a type of trading where a trader is selling bitcoin when the prices are at their all-time high to make a profit. A trader opts to stay for some time in one position until an opportunity to make profit appears. For instance, a trader may remain in one position for weeks or even months until the prices rise high enough to make maximum profit.
These are small tasks that one does for someone and earn some money. In cryptocurrency trading, you can offer technical analysis advice to traders even trade for someone else at a fee.
If you’ve booked your session above, we look forward to speaking to you soon!
Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Live from the Platinum Crypto Trading Floor.
Earnings Disclaimer: The information you’ll find in this article is for educational purpose only. We make no promise or guarantee of income or earnings. You have to do some work, use your best judgement and perform due diligence before using the information in this article. Your success is still up to you. Nothing in this article is intended to be professional, legal, financial and/or accounting advice. Always seek competent advice from professionals in these matters. If you break the city or other local laws, we will not be held liable for any damages you incur.