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Cryptocurrency Trading

Cryptocurrency Trading

09.09.2020

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Trade leading cryptocurrencies

Definition of cryptocurrencies

Cryptocurrency is called virtual money that is exchanged on the Internet; Thus, cryptocurrencies exist exclusively in the form of data, without physical form: bitcoin or ether cannot be touched or put in a safe. Owning bitcoin means the existence of some collective agreement confirming that the given amount of bitcoin was created by a legitimate miner and currently belongs to you.

Cryptocurrency miners

Cryptocurrencies function just like regular money, but they must be mined (“mined”) like gold. In fact, mining is the process of verifying a cryptocurrency transaction. In the world, operations are constantly being carried out to transfer digital currencies from one wallet to another, and miners are engaged in checking these operations using computer resources.

When a cryptocurrency is launched, its developers announce how many “coins” can be mined, and when this quota is reached, new units of currency are no longer produced. The world’s first cryptocurrency was bitcoin, which is still the benchmark for all other virtual currencies.

Blockchain is the backbone of cryptocurrencies

Unlike ordinary foreign exchange transactions, cryptocurrency transactions are not regulated by banks or other financial institutions but are recorded in a special electronic journal called a blockchain.

After a new block is created, it is sent to all network users who verify it before adding it to the blockchain.

Why cryptocurrencies are attractive in trading

The cost of cryptocurrencies depends mainly on supply and demand, and therefore they are an excellent way to diversify your asset portfolio; at the same time, cryptocurrencies are weakly correlated with the real economy and political situation. Immediately after the cost of bitcoin exceeded the price of gold (in 2017), two exchange-traded contracts for bitcoin appeared on the US market, as a result of which more and more institutional funds are invested in the cryptocurrency. In the same 2017, Indian Prime Minister Narendra Modi announced a gradual transition from paper money to electronic money, and in 2018 the Marshall Islands decided to create a cryptocurrency to replace the American dollar. Many central banks are already considering the possibility of introducing blockchain technologies. In general, cryptocurrencies are likely to stay with us for a long time,

  • The ability to diversify the investment portfolio (cryptocurrencies depend on market sentiment, demand, supply, and nothing else).
  • Large selection of various leading cryptocurrencies.
  • Digital currencies provide new instruments with high volatility.
  • 24/7 trading (even on weekends).

 How to trade cryptocurrency?

  • The most famous way to trade cryptocurrency is to register a Bitcoin wallet, buy a cryptocurrency for regular currency, and then exchange Bitcoin for altcoins on a specialized exchange.
  • So a trader can invest his funds in various digital assets while being secured against digital data theft and hacker attacks.

Factors affecting the value of cryptocurrencies

Events in the cryptocurrency market are developing rapidly, new currencies constantly appear and old ones disappear. The cryptocurrency market attracts users with the opportunity to protect themselves from the devaluation of the currency of the country in which they live. Currently, more and more stores are accepting Bitcoin and other cryptocurrencies as payment methods, and in some countries (for example, in Japan) they began to be used almost regularly due to concessions from the state.

Initially, Bitcoin was accepted exclusively on shadow sites, but gradually it became a full-fledged currency, which is accepted both online and in ordinary retail outlets. As a result, banks and state financial authorities are beginning to understand that such a revolutionary method of mutual settlements can change the entire financial world, and partially weaken the control of cryptocurrency turnover.

There are a number of factors that can affect the rise or fall of a cryptocurrency. To begin with, growth can be driven by strong demand, while speculative buying of cryptocurrencies affects supply.

The fall of the cryptocurrency can be caused by negative news background and statements or actions of government agencies. So, in 2013, the Chinese government recommended that financial institutions not conduct an operation in bitcoins, in connection with which the main cryptocurrency of the world immediately fell by $ 300. A year later, there was another sharp drop due to the fact that Bitcoin exchanges stopped receiving funds from banks, and in 2017 there was a rumor that China was supposedly going to restrict the work of the most active bitcoin exchanges.

Another example: in 2014, there was a hacker attack, as a result of which Bitcoin exchanges stopped working for a while. The exchanges were restored to work quickly enough, but Bitcoin managed to lose 23% of its value. There are many other reasons that can significantly change the course of the cryptocurrency.

Currently, the cryptocurrency market has reached its all-time high in terms of capitalization of $ 60 billion. This happened also because users are beginning to consider cryptocurrency as an investment tool.

General tips for trading cryptocurrency

The buy-low-sell-high rule, which applies to the financial market in general, also works for cryptocurrencies.

Regardless of the amount of capital, a trader can find a suitable cryptocurrency and purchase it, relying on its growth in the future. When trading cryptocurrency, it is very important to follow the news of both the market in general and a specific digital asset.

As with trading other assets, it is important to be guided by two types of analysis: fundamental and technical.

Technical analysis is not much different from the analysis of Forex charts. The fundamental one must take into account certain facts about cryptocurrencies, including the fact that their prices can be manipulated by large market players.

If you decide to trade cryptocurrency, remember that besides Bitcoin, there are many other digital “coins”: Ether, Ripple, Dash, Litecoin, etc. However, it should be noted that the collapse of the crypto market is also possible, as is the case with any real market. There is also talk about the regulation of cryptocurrencies, which may also affect the price. Long-term forecasts are very difficult to give but most likely, cryptocurrencies will become an integral part of the market.

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