The idea of trading cryptocurrencies may seem daunting at first, but there are plenty of resources to help get you started. In this beginner’s guide to trading Bitcoin and other cryptocurrencies, we’ll cover the basics of what you need to know to start trading.
What are cryptocurrencies?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units, and each unit represents a certain amount of ‘real money’. Crypto is not subject to government or financial institution control. Bitcoin is the most well-known crypto and was created in 2009, and other popular ones include Ethereum and Litecoin. Cryptocurrencies are often traded on decentralised exchanges and can also be used to purchase goods and services.
Find a reputable exchange
Your first step before blindly buying crypto must be to find a reputable exchange where you can buy and sell cryptocurrencies. Take your time and properly research such providers before funding your account. There are several exchanges, so it’s essential to do your research before settling on one.
Create an account
Once you’ve found an exchange that you feel comfortable with, you’ll need to create an account and deposit some funds. Once you funded your account, you can buy and sell cryptocurrencies. When you place an order, the exchange will match you with someone selling the same cryptocurrency that you’re buying. For example, if you want to purchase Bitcoin, you’ll need to find someone willing to sell their Bitcoin.
If you’re starting, it’s a good idea to stick to the more popular cryptocurrencies like Bitcoin, Ethereum, and Litecoin. These currencies are generally more stable and more accessible to trade than some lesser-known ones.
Understand the risks
Before trading cryptocurrencies, it’s essential to understand the risks involved. Cryptocurrencies are a volatile market, and prices can fluctuate wildly from one day, which means that you could make a lot of money if you invest wisely. Still, you could also lose everything just as quickly.
Another risk to be aware of is the possibility of hacks and theft. Exchanges have been hacked in the past, and users have had their funds stolen, and this is why it’s essential only to keep as much money in an exchange as you need to for trading purposes and to store the rest in a safe offline wallet.
Start trading
Once you’ve done your homework and thorough research and know the risks involved, you can start trading cryptocurrencies. As we mentioned before, it’s a good idea to start with the more popular currencies that have higher liquidity.
When you place a crypto order, you’ll need to specify the amount of currency you want to buy or sell and the price you’re willing to pay. The exchange will then match you with someone selling or buying at a similar price, and the exchange will execute the trade.
It’s also important to keep an eye on the fees charged by the exchange. Some exchanges charge a flat fee for all trades, while others charge different fees depending on the traded currency. These fees eventually add up, so it’s important to factor them into your trading strategy.
Benefits of trading cryptocurrencies
Cryptocurrencies offer investors several potential benefits, including:
High potential returns
Crypto has seen massive growth over the past few years, with many tokens increasing in value by 1,000% or more.
Decentralisation
Cryptocurrencies are decentralised, not subject to government or financial institution control, which offers investors a high degree of freedom, flexibility, and most importantly, anonymity.
Greater security
Cryptocurrencies use blockchain technology, which is highly secure and resistant to fraud.
What are the risks of trading in cryptocurrencies?
Investing in cryptocurrencies involves high risk, as prices are highly volatile and subject to rapid changes. Some of the critical risks associated with investing in cryptocurrencies include volatility. Cryptocurrency prices are highly volatile, meaning they can fluctuate wildly in price, making them a risky investment option.
Bottom line
As you get more experience with crypto trading, you can start branching out into other less popular coins. Remember to do your research and understand the risks involved before investing any money.
