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Whether you’ve been involved in trading before, or if this is your first step into this world, it’s important to note that cryptocurrency trading isn’t entirely the same as trading in stocks and shares.
There is, in fact, a fair number of things that you’ll need to learn about the world of cryptocurrency, and it’s important to continue this journey of learning throughout your time as an investor.
Before jumping straight in, you must get at least a basic understanding of the process of trading cryptocurrencies and some knowledge on the subject.
What Is Cryptocurrency?
First of all, let’s begin at the start. The concept of cryptocurrency isn’t as new as some might think. In fact, the idea predates Bitcoin significantly, with attempts being made to create a digital currency such as B-Money and E-gold, but they never took off.
Of course, it was the creation of Bitcoin in 2009 that really started the ball rolling. Cryptocurrencies today are usually part of a blockchain, a decentralized digital ledger, making it entirely controlled by those that hold a portion of those coins and out of the hands of big banks or governments.
This ledger records every single transaction of a cryptocurrency, making them fully public and traceable. This removes the chance of any cryptocurrency getting lost and also removes the ability for anyone to create fake coins, too, as they can’t be added to the blockchain.
What Are Brokers And Exchanges?
These can both play important parts in the buying and selling of cryptocurrency. Exchanges, in particular, are the primary way for most people to invest in this area. There are many apps and platforms that allow you to buy and sell cryptocurrency as well as other things like stocks.
It’s worthwhile searching for the right option for you, as most offer different benefits and investment opportunities. On the other hand, Brokers aren’t necessary, but they can make the process much simpler.
A broker is generally better if you’re looking to become a speculative investor, attempting to make clever trades for some quick profit. In comparison, an exchange is often a better alternative for those looking at investing in the long-term instead.
Making A Deposit
Once you’ve decided on a platform that you want to use for trading, you’re going to have to make your first deposit. If you’ve never invested before, linking your bank account to an investment platform can feel somewhat nerve-wracking, so just make sure you trust your chosen platform entirely before doing so.
In some cases, the deposit will be instant, and sometimes it could even take a few days before entering your account, so be prepared for this and read the terms and conditions of the exchange or broker you’ve chosen. Bear in mind that while some will allow you to deposit money or buy cryptocurrency with a credit card, this can be much more expensive due to higher interest rates for crypto purchases.
Instead, you should look to buy BTC with a debit card at the best rates possible and avoid the added interest that a credit card company would add to these purchases.
Place Your Orders
If you’ve deposited funds into your exchange account, and it’s been processed, you’re now able to start allocating those funds into investment opportunities. When investing in cryptocurrencies, you should understand that there are many different coins to invest in, and it’s worthwhile spreading those investments around as with any other investment portfolio.
Putting money into Bitcoin, Ethereum and even things like Dogecoin can be beneficial to you. The idea of spreading your investments means that if a riskier investment goes awry, then you’ll have the safer ones to fall back on without losing all of your funds. Remember that your capital is at risk, especially with riskier investments, so be wary whenever placing orders.
An order is simply a command you give to your trading platform to buy or sell a particular stock, share, or in this case, cryptocurrency. You can even set orders to stop trading once the value reaches a certain threshold, preventing you from accidentally purchasing when prices are too high, and getting rid of your cryptocurrency when prices fall too low, which would otherwise result in you losing money.
Consider Using A Crypto Wallet
While you’ll want to leave some crypto on your exchange platform to continue trading, it can be very worthwhile to withdraw some of these coins to store safely, reducing the risk of theft. An exchange will store your crypto in a wallet that is attached to said exchange, but if you want to switch exchanges or move to a broker, for example, you’ll want a method of moving it using another wallet.
This can be an online wallet, often described as a hot wallet, which essentially stores your crypto on devices that are hooked up to the internet, including smartphones and computers, or a cold wallet like a USB or HDD. Cold wallets are generally safer, but you need a keycode to access them. This could be catastrophic if you lose the code, as you’ll lose access entirely.