Crypto trading is seen as the banks of the future. More and more retailers are starting to accept bitcoin and altcoins as payment for items in their online shops. It is said that in a few years the crypto trading market is going to boom and that it will be much more popular than it is now and more accepted by banks and businesses everywhere.
Bitcoin, first released as open-source software in 2009, is generally considered to be the first decentralized cryptocurrency. Since the release of Bitcoin, over 4,000 altcoins have been created. Bitcoin is one of the largest coins that people use for crypto trading.
A lot of professionals in the crypto trading scene are saying that even though the cryptocurrency of 2018 had a huge fall that within two years we will see the cryptocurrency bubble “pop” and that the cryptocurrency market is going to explode and grow bigger and better than ever before.
Types of Cryptocurrency
The one and only, the first and most famous cryptocurrency. Bitcoin serves as a digital gold standard in the whole cryptocurrency-industry, is used as a global means of payment and is the de facto currency of cyber-crime like darknet markets or ransomware. After seven years in existence, Bitcoin‘s price has increased from zero to over $650 and its transaction volume reached more than 200,000 daily transactions.
There is not much more to say: Bitcoin is here to stay.
The term altcoin refers to a digital currency other than Bitcoin. An altcoin can be any other digital currency out there. As of 2018, there are over 4000 different types of altcoins available for trading with many more being added every month. Altcoins are used for crypto trading right alongside Bitcoin.
If you choose to use altcoins to do your crypto trading remember to be very careful and do your research. There are some groups out there that aren’t running a legitimate altcoin service and instead are using the crypto trading of altcoins to scam people.
The brainchild of young crypto-genius Vitalik Buterin has ascended to the second place in the hierarchy of cryptocurrencies. Other than Bitcoin, its blockchain does not only validate a set of accounts and balances but of so-called states. This means that Ethereum can not only process transactions but complex contracts and programs.
This flexibility makes Ethereum the perfect instrument for blockchain-application. But it comes at a cost. After the Hack of the DAO, an Ethereum based smart contract, the developers decided to do some hard fork without consensus, which resulted in the emerge of Ethereum Classic. Besides this, there are several clones of Ethereum, and Ethereum itself is a host of several Tokens like DigixDAO and Augur. This makes Ethereum more a family of cryptocurrencies than a single currency.
If you’re going to invest in just a few bitcoin currencies, then Bitcoin and Ethereum should be the ones you start your crypto trading investments with. They are sure to earn you a good bit of money.
Perhaps the less popular or most hated project in the cryptocurrency community is Ripple. While Ripple has a native cryptocurrency called XRP, it is more about a network to process IOUs than the cryptocurrency itself. XRP, the currency, doesn‘t serve as a medium to store and exchange value, but more as a token to protect the network against spam.
Ripple Labs created every XRP-token, the company running the Ripple network, and is distributed by them. Ripple is often called pre-mined in the community and dissed as not being real cryptocurrency, and XRP is not considered as a good store of value. Banks, however, seem to like Ripple. At least they adopt the system with an increasing pace.
Litecoin was one of the first cryptocurrencies after Bitcoin and tagged as the silver to the digital gold bitcoin. Faster than bitcoin, with a larger amount of tokens and a new mining algorithm, Litecoin was a real innovation, perfectly tailored to be the smaller brother of bitcoin.
While Litecoin failed to find a real use case and lost its second place after bitcoin, it is still actively developing and traded. Feathercoin is hoarded as a backup if Bitcoin fails. Feathercoin might be a good altcoin to put some of your crypto trading funds into for the future.
Monero is the most prominent example of the cryptonite algorithm. This algorithm was invented to add the privacy features Bitcoin is missing. If you use Bitcoin, every transaction is documented in the blockchain and the trail of transactions can be followed. With the introduction of a concept called ring-signatures, the cryptonite algorithm was able to cut through that trail.
The first implementation of cryptonite, Bytecoin, was heavily premined and thus rejected by the community. Monero was the first non-premined clone of bytecoin and raised a lot of awareness. There are several other incarnations of cryptonote with their own little improvements, but none of it did ever achieve the same popularity as Monero.
Monero‘s popularity peaked in summer 2016 when some darknet markets accepted it as a currency. This resulted in a steady increase in the price while the actual usage of Monero seems to remain disappointingly small.
Besides those, there are hundreds of cryptocurrencies of several families. Most of them are nothing more than attempts to reach investors and quickly make money, but a lot of them promise playgrounds to test innovations in cryptocurrency-technology.
How Is It Traded?
The first rule of investing should always be the preservation of capital. Can you trust the development team with your money? Are you about to leave your money with founders who have been involved in previous scams? If you see these telling signs, back off immediately. The coin’s price might grow, but it is just not worth it to put your capital at risk.
Does My Coin of Interest Have A Long-Term Plan?
If you cannot understand their yellow paper, at least read their white paper. What are the team trying to achieve? Do they have the means, or have they already worked towards their goals? What are the timelines and milestones?
Does My Coin of Interest Seem Like a Well-Marketed Plan with No Backup?
Lots of ICOs these days just have a pretty webpage, and then they’re shipped out to sell. Watch out for these: are they able to deliver?
How Long Should I Stay in This? Do I Have an Exit Plan?
There will be coins where you do not want to hold forever, but wish to flip for some short-term gains. In this case, be sure to set a timeframe, or an exit price, to reduce to effect of emotions on your trades. Stick to your plan and watch your emotions.
Some coins seem to keep increasing in value simply due to supply-demand factors. This trend might not be sustainable. For a coin to have long termed supported value, it must have a real-world use and it must be able to earn you money in the future. Look out for coins that look too much like a get-rich-quick scheme.
Short-Term Trading with Margin
Once you get familiarized with crypto trading, you may want to trade on hopes of increasing it. For the experienced traders, this is nothing new. But for the new crypto investor, you may want to do some research on how to make a leveraged trade.
Short-term trading takes advantages of incoming news to make a quick buck. If you read about good news from an upcoming release of a coin, you may want to invest in that coin and see how it goes. Remember, buy the rumor, sell the news; act fast and be daring if you wish to make a profit with short-term trading.
For those who are more comfortable with a predictable form of reward, mining is the way. Mining involves setting up of a rig, consisting of GPUs or CPUs and an investment in the electricity. Mining is only possible on cryptocurrencies that follow the Proof of Work protocol. It takes some effort to set up and gets things running, but it is attractive as a long-term passive income as long as you front-load the work.
Staking is the Proof of Stake version of ‘mining.’ Think of this as making dividends on your stock. The reward rate and staking method differ greatly among Proof of Stake coins, but in general, it takes less effort as compared to mining.
As you get a hand in multiple exchanges, you may wish to buy from one exchange and sell on another to make ‘arbitrage’ gains when you spot an arbitraging opportunity. Take note of two things if you wish to do so: remember to factor in fees, and remember that the price could change when you are transferring your coin between exchanges, especially during volatile times. USD (United States Dollar) tends to be liquid, so this happens less for it, but for other currencies such as CAD (Canadian dollar) and SGD (Singapore dollar), there may exist more arbitraging opportunities to exploit.
What You Need to Know about Crypto Trading
A cryptocurrency exchange is a platform that allows you to buy and sell cryptocurrencies. However, there are some distinct differences between some cryptocurrency exchanges that you will need to know.
A cryptocurrency exchange that allows you to deposit and withdraw fiat straight from your bank account is known as a fiat gateway. Fiat simply means currencies such as USD, GBP, and EUR. In essence, fiat is what you use every day to buy your groceries or pay the bills. Fiat gateways are important because they provide the means for you to actually get your money to a point that enables you to buy and sell cryptocurrencies. Popular fiat gateways include:
Fiat gateways can often be limited in the number of cryptocurrencies that you can trade with. For example, Coinbase only supports 4 cryptocurrencies: Bitcoin, Ethereum, Litecoin and Bitcoin Cash. Therefore, it is often necessary to use other exchanges that support a wider range of cryptocurrencies. These exchanges include:
One downside of needing to move money between multiple exchanges are the fees. It therefore becomes important that you only move your cryptocurrency between exchanges when you need to. Excessive movement of money can easily result in fees eating into a large chunk of your profits.
However, this is not to say that you can use any cryptocurrency as a medium for exchange between cryptocurrency exchanges. It is important that the exchange supports the relevant trading pair. For example, if you wanted to buy NEO using ether, you would need to make sure that Bittrex supports the NEO/ETH trading pair, or else you would be unable to purchase NEO using your ether coins.
Social media is a powerful tool for staying up-to-date with your investments, and for finding new ones. The cryptocurrency market is still so small that even a tweet by an influential player can add a few percentage points to a cryptocurrency.
The three key social media platforms we would recommend include:
Similar to WhatsApp, Telegram is a private messaging service that allows you to create and join group chats with thousands of people. A lot of cryptocurrencies within the space have their own Telegram channel you can join to stay up-to-date with the latest developments. In addition, Telegram is useful for learning from people who are more experienced. Even if all you do is lurk and never comment, you can still learn some valuable information.
A breeding ground for cryptocurrency maximalists, Reddit is a necessary evil if you want to make sure you’re not missing out on any important news stories. If you only care about one cryptocurrency e.g. Bitcoin, then you can only follow the Bitcoin-related subreddits. However, be careful of the herd-like mentality exhibited by some of these subreddits, take some of the information you come across with a wise mind and remember that people often panic first and then think rationally.
A tweet by an influential figure can move a cryptocurrency to green or to the red. Therefore, it becomes important to make sure you are following the right people within the cryptocurrency space, and the official Twitter account of the cryptocurrencies themselves.
Keeping Your Cryptocurrency Safe
Once an investor has successfully begun cryptocurrency trading, it is not unusual for them to simply leave the cryptocurrency on an exchange in hopes that their investment will turn a profit. However, this is a dangerous practice to engage in as cryptocurrency exchanges are prone to hacks that could see investors lose all of their funds. Notable hacking of cryptocurrency exchanges includes MtGox and Bitfinex.
Despite this, there is a secure method that you can use in order to keep your cryptocurrency safe. One of the most effective ways of securing your cryptocurrency is the use of a hardware wallet. A hardware wallet is a physical device that secures your cryptocurrency by securing the private keys used to access them. Popular hardware wallets include:
- TREZOR Wallet
- Ledger Nano S Wallet
- KeepKey Wallet
Hardware wallets are a great way of storing your cryptocurrency if you intend to hold it long term. However, if you want to trade a bit more actively than that, then it is usually recommended keeping some of your cryptocurrency on an exchange, but a majority offline.
Crypto trading can be a great way to make some extra money if you are well prepared and have done your research to take advantage of the volatility that currently exists within the market. You should approach crypto trading with an open mind and only invest what you can afford to lose.
Crypto trading can be a lot of fun to research and learn. It’s a great way to make yourself a nice little nest egg for the future if you pay attention and do your homework. People of all ages are getting into crypto trading from teenagers to the elderly. Some people have made quite the earnings for themselves. You can be one of those people as well if you work hard.
This article is meant to give advice and information on cryptocurrencies and crypto trading. It is not meant as absolute truth and makes no guarantees. Anyone can earn extra money investing, whether it be stocks, crypto trading or 401K’s. But no matter what you are investing in, it takes time, research, and hard work. Remember to be very aware of any crypto coin that sells itself as a get rich quick coin. That just does not exist.