Cryptocurrency, also known as digital currency, can be defined as an online version of cash that operates free from any government or bank controls. The word crypto stems from cryptography, a process used to protect the transactions involving virtual currencies. Many investors like to trade cryptocurrency because of its highly volatile nature. In 2020 alone, Bitcoin witnessed huge price swings, going as low as $5,165 and as high as $28,990. Not to mention, the value of Bitcoin reached a new high in February 2021, rising above $58,000.
Hence, it comes as no surprise that more and more people worldwide have started taking an interest and are keen to invest in cryptocurrencies. Trading in cryptocurrencies can seem confusing for beginners as the process of trading in crypto is different from what many investors are used to. In this article, we outline the four steps that will help you kick off trading in cryptocurrencies.
Choose an exchange to trade on
Much like fiat finance, you need an exchange where coins are traded to invest in cryptocurrencies. To do so, you will need to register, put some funds in your account, and then start buying and selling crypto. However, it would be best if you chose a trusted exchange. Therefore, beginners are advised to choose popular crypto exchanges such as Bitcoin Era, Coinbase, Gemini, and eToro.
Once you’ve chosen a reliable crypto exchange, the next step involves obtaining a cryptocurrency wallet.
A cryptocurrency wallet lets you store and exchange cryptocurrencies. There are two kinds of wallets – Hot and Cold. In a Hot wallet, cryptocurrency is stored in the cloud on a trusted exchange or provider and accessed through a computer browser, desktop, or smartphone app. In a Cold wallet, an encrypted portable device like a thumb drive allows you to download and carry your bitcoins. When you’ve chosen the wallets you’d like to use, and you are all set and ready to start investing.
Cryptocurrencies are highly volatile assets whose prices can go up and down significantly in just a few hours. Several events can trigger such price volatility, so one must constantly monitor market information. The best way to stay up to date with crypto-related news is to follow major publications and blogs in the industry such as Coindesk, News Bitcoin, and, Hackernoon. You can also find more handy tips on social media such as crypto-related subreddits, Telegram and Discord channels, and Quora threads.
Cryptocurrency trading has a range of differences when compared with traditional fiat exchanges. Trading in cryptocurrencies is not just buying coins and storing them in your wallet. It means going long (buy) or short (sell) in the crypto market. There are a lot of factors that determine when you buy or sell cryptocurrencies. These include the supply and demand of cryptocurrencies, the number of competing cryptocurrencies, the exchange it trades on, and, more.
To get good at crypto trading, you’ll need to find reliable sources of information, perform your research, choose the most suitable exchange and wallet, and find portfolio management tools.