A journey to a thousand miles they say begins with a single step, and learning cryptocurrency basics is certain the starting point. The best thing is that you don’t need a degree as you can easily gain years of knowledge simply by getting key fundamental concepts right.
Without wasting time, let’s get on to the basics!
What is cryptocurrency trading?
For starters, cryptocurrency is a digital coin or asset transferred virtually between individuals. But unlike fiat currencies, cryptos do not exist as physical objects but only as data – you cannot hold Ethereum in your hand as you would a quid. Rather, cryptocurrencies are held in special hardware and software devices called wallets, which enable you to withdraw and deposit funds to trading platforms. So, what is cryptocurrency trading?
Crypto trading is pretty much like trading shares or fiat currencies. It entails speculating price movements of digital assets such as Bitcoin via a CFD account or an exchange. A crypto exchange only allows for buying and selling using coins while a CFD trading account provides for profit-making using price movements without necessarily owning the underlying assets.
CFDs enable traders to buy (go long) if they anticipate a price rise or sell (short) if they expect a coin’s price drop.
Both buys and sells allow for margin trading – meaning you only need to deposit a small amount to trade. The amount you leverage will magnify your profits.
Exchanges, on the other hand, allow traders to own the purchased coins. You’ll need to set up a trading account with a reputable exchange and open a position using the market value of your coins and then store the assets in your wallet until your target price is attained. Some exchanges will offer you an option to store your tokens within the platform as opposed to transferring them to your own wallet.
Wallets, especially hardware ones are better placed to secure your coins. Just like carrying around a storage device with your data, hardware wallets let you store and take possession of your coins offline. Any experienced online entrepreneur will tell you to minimize the risk of storing your cash online unless when actively using it.
That aside, trading platforms will require you to invest some learning time for you to fully understand their interface and make sense of the provided resources. Take note that some exchanges will limit your deposit and withdrawals amounts while others will only allow users from selected regions.
How do cryptocurrency markets work?
It’s been a long way since the times when owning Bitcoin meant coffee shop meetings for cash payments to mining it yourself. But thanks to industry advancements, crypto trading platforms such as PrimeXBT makes it possible to trade Bitcoin without leaving your home. These platforms provide a virtual playground for buyers and sellers to conduct business. PrimeXBT grants investors a chance to not just trade Bitcoin but at least 50 other altcoins, forex commodities, and indices across 150+ countries. With PrimeXBT, everything takes place in an open market using a single account regardless of what you choose to trade.
While there are a ton of other digital assets to trade, Bitcoin tends to dominate most markets, perhaps owing to its large market share, price volatility, or high liquidity.
So, how do crypto market prices work and how did Bitcoin manage to stay at the top?
The strength of a country’s economy is determined by the value of its currency. In the crypto world, a coin’s strength is reflected by its utility, network, and market’s perception. These factors are essentially some of the pivotal drivers of a token’s market price at any given time. However, supply and demand also play a critical role in crypto markets just like in the conventional money markets. If history is anything to go by, past scarcity of Bitcoin saw record price hikes. But given the minimal knowledge of cryptocurrency, much of the prices’ fluctuations are usually triggered by uneducated market sentiment.
Cryptocurrencies are also reflected in markets based on their market caps. It is determined by multiplying the number of coins in circulation by the coin’s current market price. Just like in the case of stocks, coins in circulation are those that have entered various markets and are traded on CFD accounts or exchanges such as PrimeXBT. Coins yet to be mined or those locked by founders such as Bitcoin’s case are considered not to be in circulation.
Lastly, a cryptocurrency’s market price is normally taken to be the most recent purchase price.
If you’ve traded stocks or fiat currencies, you can identify a lot of similarities among the three with the major difference being that digital currencies represent a lesser regulated sphere of investment compared to the other two. But perhaps with greater risk, comes greater reward.