Sunday, April 21, 2024

Cryptocurrency and Cryptocurrency Trading – An Instrument to Invest In

In the present time, whether you are using YouTube, Facebook, Twitter, or any other social media platform, You must have seen advertisements regarding Cryptocurrency. The article under reading will explain it to you in detail.

Many people have started shifting to this online trading platform. It is being used as the instrument of online trading. Now without wasting a single second of your time let start with the detailed overview of the topic under discussion.

What is Cryptocurrency?

A cryptocurrency or crypto is a process that includes digital currency that can be used to buy goods and services but uses an online ledger with strong cryptography to secure online transactions. The purpose of these transaction currencies is profit, with speculators at times taking prices skyward.

What is Cryptocurrency trading?

Cryptocurrency trading is that the process of keeping an eye on cryptocurrency price imbalance via a CFD trading account or transaction of the underlying coins via a crypto unit.

Before a person starts investing in online crypto trading, he/she must know what kind of options they will have to choose from. In the beginning, the users had access to only one type of crypto-trading but with time. The crypto exchanges have become innovative in providing users the ability to perform crypto-trading in more than one way.

What is CFD trading on Crypto:

CFDs trading are derivatives, which enable you to take a position on crypto price movements without taking ownership of the underlying coins. You’ll go long (‘buy’) if you think that crypto will rise in value, or short (‘sell’) if you think that it’ll fall.

Both are leveraged products, meaning you simply got to put up a little deposit – referred to as margin. To realize full exposure to the underlying market. Your profit or loss is still calculated consistent with the complete size of your position. So leverage will magnify both profits and losses.

How does Cryptocurrency Work?

Cryptocurrency is a way of payment that can be traded online for goods and services. Many units of crypto have issued their own currencies, often called tokens, and these can be used especially for the goods and services that the crypto unit provides. You’ll in need to trade real currency for the crypto to approach the good or service. The technology that a crypto use is called a blockchain. Blockchain is a decentralized technology; i.e. widely spread across the number of computers that controls and records transaction. Security of this technology is a priority.

Cryptocurrency Trading
Cryptocurrency and Cryptocurrency Trading – An Instrument to Invest In 3

Eminent Cryptocurrency Trading Units:

When a person puts a step in online trading, the first thing that comes to mind is whether it will be profitable for him or not. It is true that the very (decentralized) nature of the crypto-industry makes it a risk-asset. However, there are several crypto-trading exchange units that have been serving users for years without causing any issues or distress.

Some of the big names in the cryptocurrency trading units are Crypto Engine, Binance, Bisq, Coinbase Pro, and Coinbase.

How many crypto units are there? What are they worth?

There are approximately 6,700 different cryptocurrencies units are working in crypto trade publicly, according to a market research website name And cryptocurrencies continue working as a mushroom, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies till 27 January 2021 was more than $897.3 billion, according to the abovementioned market research website, and the total value of all bitcoins was fixed at about $563.8 billion.

Best capitalization of cryptocurrencies

CryptocurrencyMarket Capitalization
Bitcoin$563.8 billion
Ethereum$142.9 billion
Tether$25.2 billion
Polkadot$13.9 billion
XRP$11.4 billion
Cardano$9.7 billion
Chainlink$8.3 billion
Litecoin$8.1 billion
Bitcoin Cash$7 billion
Binance Coin$6.2 billion

Data according to Jan. 27, 2021.

The Need for Cryptocurrency Trading:

When Bitcoin (BTC) was introduced as a cryptocurrency, the only way of acquiring it, was through mining. With the passage of time, crypto exchanges came into being. And provided people the opportunity to perform the sale, purchase, and exchange of cryptocurrencies.

As crypto was acquirable through mining. In the beginning, the platform was manageable by people who were tech-savvy and had experience in computing/programming.

The cryptocurrency trading platform was introduced to the industry to make it to the masses. And most importantly, to the investors who were interesting in spending their money on cryptocurrencies.

Cryptocurrency Trading
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Traditional Ways of Cryptocurrency Trading:

When it comes to traditional cryptocurrency trading, it is somewhat similar to Stocks trading. instead of purchasing the assets of a company. You purchase the tokens or some part of the tokens of the cryptocurrencies.

You will be surprised to know that, at present, there are more than two thousand cryptocurrencies out there in the crypto-trading markets to choose from. Some of the major cryptocurrencies currently being traded are Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), etc., which the investor can choose to trade with.

Before trading can be started, the first thing that needs to be done is to top-up the wallet provided by the crypto exchange the person signs up with. Then, the user can choose the crypto-asset he/she needs to trade in. Once selected, the user needs to visit the crypto markets and observe the trends, price fluctuations, historical reports, and demand and supply of crypto assets. Then make a decision based on the data collected.

The process is as simple as stock trading, where you buy an asset. When its price is low sell it when its price is high, and the difference is your profit.

Ever wondered why cryptocurrencies were created? The origins of digital currencies can be traced back to the desire for decentralized and secure financial transactions. Explore the fascinating history and motives behind the creation of cryptocurrencies to gain a deeper understanding of this innovative financial landscape.

Why is cryptocurrency Eminent?

The eminent properties of cryptocurrency have a variety of reasons. Here are some of the most prominent:

  • Supporters think crypto like Bitcoin is the currency of the future and are struggling to buy them now, presumably before they become more valuable
  • Some supporters like the fact that crypto detaches central banks from controlling the money supply since over time these banks tend to reduce the value of money via inflation
  • Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized mechanism and recording process and provides more security as its priority over traditional payment systems
  • Some speculators like cryptocurrencies because they are rising in value and charge no interest in the currencies’ long term.

Is Cryptocurrency a Good Place to Investment?

In some investors’ point of view, the cryptocurrency investment is not real and they think of it as “the greater fool” theory of investment. As those investors think it mere speculation, not real investment. Because cryptocurrencies do not generate cash flow, so for you to profit, someone has to pay more for the currency than you did.

On the other hand, a well-managed business increases its value over the period by growing the profit and cash flow of the operation.

As NerdWallet writers said, cryptocurrencies such as Bitcoin are not safer. While some others think of the investment community have advised would-be investors to steer clear of them. A legendary investor, Warren Buffett compared bitcoin to paper checks: “It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a mode of transmitting money also. Are checks worth a whole lot of money? Just because they can transmit money easily?”

For the supporters of cryptocurrencies such as Bitcoin as the currency of the future, it should keep in mind that a currency needs stability so that merchants and consumers can determine what a fair price is for goods for example, In December 2017; the value of Bitcoin was $20,000, its value then dropped to as low as about $3,200 after a year. Later; by December 2020, its value was raised again.

This price volatility creates a conundrum. If the value of bitcoins increases in the future, people are less likely to spend and circulate them today, making them less viable as a currency.

Ways to Buy Cryptocurrency?

Cryptocurrencies, including Bitcoin, are available to exchange with U.S. dollars, while others demand that you have to pay with bitcoins or another cryptocurrency.

If you want to have cryptocurrencies, you must have a “wallet,” which is an online app that can hold your currency. Normally, you have to create an account on an exchange, and then you can transfer real money to buy any cryptocurrencies such as Bitcoin or Ethereum, etc.

You can create a wallet, buy and sell Bitcoin and other cryptocurrencies on a famous crypto trading exchange named Coinbase. Some other online brokers offer cryptocurrencies, such as eToro, Tradestation, and Sofi Active Investing. Robinhood also provides free cryptocurrency trades that are available in most, but not all, U.S. states.

Are cryptocurrencies legal/lawful?

There’s no question of the legalization of crypto in the United States, though China has completely banned its use, and ultimately whether they’re legal depends on each country. It is a matter of each individual how to protect themselves from fraudsters who see cryptocurrencies as an opportunity to bilk investors.

How does A Crypto User protect Himself? 

If you want to trade in cryptocurrency and want to protect yourself as well then must follow the following information:

  • Who is the owner of the company? A recognized and well-known owner is a positive sign.
  • Are there other well-known investors who are investing in it? It’s a good sign if other good reputed investors want a piece of the currency.
  • Will you own a stake in the company or just currency or tokens? This differentiation is important. Having a stake means you want to participate in its earnings as an owner while buying tokens means you will use them such as bitcoins and chips in a casino.
  • You also must get information about the currency whether is already developed, or the company looking to raise money to develop it.
  • It can take a lot of work to examine a prospectus; the more detail it has, the better your chances it’s legitimate. But legitimacy and currency success cannot combine.

Above all these, crypto has many risks such as the risk of theft, as hackers always in try to break through the computer networks that maintain your assets. A bankruptcy occurred in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Such types of risks are not available for investing in stocks and funds on major U.S. exchanges.

Related Article: The heatmap to learn more about the latest top gainers

Reason to Trade in Cryptocurrencies:

It is completely okay to think about why one trades in cryptocurrencies when there are other reliable trading instruments in the online trading markets such as FX, Commodity, Stocks, and Indices trading. The main reason is that in the past couple of years, the crypto industry has gained more success, user base, investments, and mainstream recognition than any other online trading instrument.

As per the statistics from back 2018, there were only 35 million unique users in cryptocurrency trading. As per the stats from 2020, the number has gone all the way up to 100+ million unique users.

Even the major financial institutions have now started investing in cryptocurrencies and most prominently, in Bitcoin (BTC). It was just two months ago when Bitcoin (BTC) was sitting at $10,000 per BTC, which as of now has increased to $19,204. Therefore, if you are thinking about investing, then it is the best time to invest in cryptocurrencies.

Abubakar is a writer and digital marketing expert. Who has founded multiple blogs and successful businesses in the fields of digital marketing, software development. A full-service digital media agency that partners with clients to boost their business outcomes.

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