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It’s been a wild year for cryptocurrency. Bitcoin, the original and most well-known cryptocurrency, has soared from a market cap of about $20 billion to over $200 billion in less than 12 months. That kind of explosive growth has sparked interest—and concern—from investors, pundits, and regulators around the world. There are now more than 900 different digital coins listed on CoinMarketCap that can be purchased with one of several online currencies like bitcoin or ethereum. But with so many options available, how do you decide which ones are worth your investment? And what about the risk of getting hacked? There are many considerations when it comes to buying and trading these digital assets. Fortunately, we’re here to help! Keep reading to learn everything you need to know about trading cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a digital asset that can be used as a form of payment. It uses encryption technology to create and track a new type of money that can be used to buy goods and services without government-backed banks. One of the unique features of cryptocurrency is that it’s decentralized, meaning it’s outside the control of any one country or financial institution. There are two primary types of cryptocurrency: - “Altcoins” - This term is short for alternative coins, and it refers to any digital token that isn’t bitcoin. - Bitcoin “coins”. This is the first and most widely used form of cryptocurrency. - Bitcoin itself is often referred to as “digital gold”. - It’s become a popular investment and store of value, like gold. - It’s only created through a process called “mining”, which uses computing power to solve complex mathematical equations. - Bitcoin miners use this computing power to confirm and add new transactions to the blockchain network.
How to Buy and Store Your First Bits of Bitcoin
The first step towards trading crypto is buying some bitcoin. If you’re new to the world of crypto, this might sound like a strange first step. But it’s important to understand that crypto trading works on a different set of rules than traditional stock trading. Every other asset, from stocks to commodities like gold, is bought and sold through a centralized exchange. That means you use a broker to purchase and sell stocks, and you keep those assets in a brokerage account. When you buy bitcoin, you’re actually purchasing a part of the blockchain network. You’re not keeping your coins in a traditional brokerage account; they’re stored in a digital wallet that’s kept on your computer or smartphone. If you want to buy other coins like Ripple or Ethereum, you’ll need to purchase bitcoin with your traditional currency and then exchange it for another coin.
7 Tips for Safer Crypto Trading
Keep in mind that while cryptocurrency trading has a lot of potential to be profitable, it’s also associated with high risk. Here are some tips to help you mitigate that risk and protect your profits: - Use a Margin Trading Account: Trading with a leveraged margin account can help you profit from a falling market. This can be a great way to hedge bets for any traders who think that the market may be experiencing a correction soon. However, it’s important to remember that a leveraged account also magnifies any losses if the market ends up rising instead. - Practice Sound Money Management: Trading is an excellent way to make money, but it should also be used to grow a portfolio that is financially secure. This means that you should never use funds that you can’t afford to lose in the hopes of earning a quick buck. These are called “risky funds”, and they should never be used for trading. - Avoid Pump and Dump Groups: Pump and dump groups promise quick and easy profits, but they often result in quick and easy losses instead. These groups are usually operated through messaging apps and are designed to manipulate the price of a certain coin. Members are told to buy a specific coin and then talk positively about it. This causes the price to increase and then the members sell their shares as quickly as possible. - Diversify Your Portfolio: It’s not a good idea to put all of your eggs in one basket, and this is true for cryptocurrency trading as well. Experts recommend that new traders put between 15-25% of their total portfolio in cryptocurrencies. It’s also a good idea to diversify your portfolio by investing in different types of cryptocurrencies. This spreads your risk and lowers the overall volatility in your portfolio. - Stay Calm and Stay Calm: No matter how much money you’ve made or lost in the past, it’s important to keep a level head. Cryptocurrency trading can be very exciting and profitable, but it can also be very stressful. Take a break every once in a while and remember to keep your emotions in check.
Should You Trade Crypto?
Yes. Crypto trading can be very profitable for traders who know what they’re doing. However, it’s important to remember that crypto trading is not for everyone. Before you decide to open an account and start trading, it’s important to ask yourself a few questions first. - Are you prepared for a high amount of risk? Remember, trading cryptocurrencies is very speculative. There is no guarantee that you’ll make a profit, and you can lose money very quickly if you don’t know what you’re doing. - Are you comfortable with technology? The modern crypto trader must be comfortable with trading via computers and smartphones. Most trading platforms operate online, which means that you’ll need access to a computer or smartphone at all times. - Are you prepared to do research? Unlike with traditional stock trading, crypto traders must do their own research and make investment decisions on a daily basis. If you’re not willing to put in the time and energy to stay informed, then crypto trading probably isn’t right for you.
3 Ways to Profit as a Cryptocurrency Trader
There are a number of different ways to profit as a cryptocurrency trader. Some traders buy low and sell high in hopes of a rising market. Other traders attempt to “short” the market by selling high and buying low in hopes of a falling market. Of course, there are many other ways to profit from the market. These are just a few of the more popular strategies: - Buy low and sell high. This is the most common strategy among traders. If you believe that a certain coin will rise in value, you can buy as much as you can afford. Then you can sell it at a higher price whenever you want. However, there
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