Just a few years ago, most people had never even heard of cryptocurrencies. Today, it seems like it is something that everyone is talking about. When you get involved with cryptocurrency trading, you stand to make a lot more than you would with traditional investments.
The goals of crypto traders tend to be to gather more crypto or to make a profit in USD. Crypto is extremely volatile but also helps you diversify your portfolio.
But how do you actually trade it? We’re glad you asked.
We’ve done all of the research so you don’t have to. So keep on reading and we will walk you through our beginner’s guide for how to trade cryptocurrency.
What Is Cryptocurrency?
While there are different kinds of crypto, they all have one thing in common, they work on blockchain technology. This makes them decentralized.
A decentralized cryptocurrency is not run by any central bank or government. The coders build the blockchain and then let the currency work on its own.
Bitcoin is the largest and most popular cryptocurrency in the world. It is seen as “digital gold.” It was also the first mainstream cryptocurrency.
How Does Cryptocurrency Work?
A cryptocurrency is a digital asset that is run on the blockchain. Blockchain technology stores a ledger of every single transaction of the cryptocurrency on every node that is powering the blockchain.
A node is a computer that is connected to the currency’s network. These nodes mine crypto. Because of the way the system is designed, you cannot put false information in the ledger.
If you wanted to manipulate the blockchain, you would need to control more than half of the crypto network. While this is theoretically possible, it is practically impossible. There are many nodes scattered all over the world, many of them are kept in highly secured rooms.
In order to make a transaction with a cryptocurrency, you need to obtain a set of private and public keys. These keys are basically passwords that are generated by the crypto wallet.
Your public key is what allows people to send crypto to you. Your private key is what allows you to approve transactions that are sent from your digital wallet. You are the only person who should have access to the private keys.
It should be noted that most cryptocurrencies have a fixed supply. For example, there will never be more than 21 million bitcoins in existence. This helps to prevent the chances of inflation, which are all too common with fiat currencies controlled by central banks.
Make a Cryptocurrency Brokerage Account
If you don’t own any crypto yet, then you will need to make an account with a crypto broker. Many of the top crypto exchanges offer an easy user interface and different types of altcoins that you can choose from.
In order to make an account, you will have to provide your crypto exchange with personal ID information, similar to what you would need when you open an account at a stock brokerage.
Some typical information that you will have to provide when you are setting your account up includes your email address, date of birth, address, and Social Security number. This collection of this information is known as KYC or Know Your Customer. This means you will be responsible for adhering to any financial regulations—primarily, taxes. Since cryptocurrency is a fairly new concept, you will be better off filing your taxes with a CPA or some other financial professional to ensure you are submitting everything correctly.
You can learn more about crypto exchange to see which one is best for you.
Fund the Account
After you have chosen your crypto exchange, you will have to connect it to your bank account. A lot of crypto exchanges provide bank funding via wire transfers and debit cards.
Your cheapest option is likely going to be a wire transfer. And this method is free on several popular crypto exchanges.
Pick a Currency to Invest In
A lot of active crypto traders move most of their money into Ethereum and Bitcoin. These currencies move a lot more predictably than altcoins that are smaller. This means that it is easier to trade with technical indicators.
A lot of crypto traders will put a percentage of their funds into more volatile altcoins. While smaller cap cryptocurrencies are even riskier than bitcoin, they also offer users the chance for faster and bigger rewards.
For example, many young people turned into dogecoin millionaires in a matter of months.
Pick a Strategy
There are a lot of trading indicators that you can choose from. And a lot of traders like to take several factors into consideration when they are buying and selling crypto. If you are a beginner at investing, then you should think about taking a crypto trading course.
If you have a lot of experience with trading stocks, then a lot of the same methods for trading can be applied here. Of course, there are no balance sheets or fundamentals when it comes to trading crypto. So you need to focus much more on the technicals.
You also need to be monitoring social media and the general sentiment with regards to crypto.
The Importance of Using This Quick Beginner’s Guide to Cryptocurrency Trading
Hopefully, after reading our beginner’s guide to cryptocurrency trading, you now feel that you have a much better grasp on trading crypto. As we can see, there is a lot of work that you need to put in in order to be successful. But the more you know about crypto trading, the higher your chances of success will be.
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