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What is Cryptocurrency Trading?

Updated: Apr 4, 2021

Ever since 2017, cryptocurrency trading has been an area of interest for new and old investors alike. Notably, cryptocurrency trading involves speculating on future price movements within the market. In its simplest form, trading requires the buying and selling of cryptocurrencies in a manner that produces profit. In order to accomplish this task, you need to have a firm grasp on what cryptocurrencies are and what affects their market movements.


Cryptocurrencies are decentralized digital assets that rely on a network of computers to validate their authenticity and the overall state of the network. Unlike fiat currencies such as the dollar, there is no government or central authority backing these coins. Instead, cryptocurrencies rely on mathematical protocols to reduce human intervention and provide the world with a truly unique financial instrument.


Importantly, cryptocurrencies exist only as a shared digital record of ownership. This means you can’t handle or even touch a cryptocurrency. Instead, these assets exist only in the digital realm. Consequently, no crypto transaction is complete until it is verified by the network nodes (miners) and added to the blockchain.


Interestingly, there are multiple different types of blockchain assets one can trade today. Each asset has its own regulatory and trading requirements that you must adhere to. The three main types of blockchain assets in the market today are cryptocurrencies, utility, and security tokens.


Cryptocurrency traders often have one of two goals: to accumulate Bitcoin or make a profit in USD. In a crypto bull market, it’s pretty easy for your portfolio to increase in USD value, but it’s more challenging for Bitcoin value to increase. To track your portfolio’s Bitcoin value, you can trade altcoins against Bitcoin on exchanges like Coinbase Pro.

By actively trading your cryptocurrency, you risk losing your crypto to the market. Since cryptocurrency prices are so volatile, it’s not uncommon for traders to lose money quickly trading cryptocurrencies. This is why so many crypto enthusiasts just HODL their Bitcoin.


Cryptocurrency Trading

Once you have chosen an exchange that is known for its quality and security, you are ready to begin trading. Keenly, the setup process is simple. You just need to register with your new platform and fund your online wallet. Funding your wallet can vary in the processes required and depending on if you want to fund it with fiat currency or using other cryptocurrencies.

Notably, there is a tiny learning curve that you must overcome when switching between platforms. Each exchange utilizes a slightly different approach and interface. Additionally, there are variances in transaction times, costs, and daily limits to consider.


You will also need to take into account your location. Certain exchanges do not permit users from specific countries to participate in their platform. For example, you can only trade on exchanges that require KYC and AML regulations if you live in the US.


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