Trading Cryptocurrency might seem very difficult till the time you don’t understand the importance, complexities, and different terms associated with Cryptocurrency trading. There are many types of Cryptocurrencies available in the market you should learn about before trading them online. This post will guide you on how to trade Cryptocurrency in the best possible way and all the essential information about the various types of Cryptocurrencies available.
Types of Cryptocurrencies
Cryptocurrencies are collectively known as altcoins. Currently, there are over more than a thousand different types of Cryptocurrencies in existence. This includes the granddaddy of today’s Cryptocurrency trading market, and that is none other than bitcoin.
However, the less active and less profitable Cryptocurrencies have significantly fewer trading opportunities. Less trading opportunities for some types of Cryptocurrencies mean fewer buyers when it’s time to sell or trade them.
New to Cryptocurrency trading can consider focusing their initial trading time and days on the leading Cryptocurrencies. Doing this will help in ensuring that you are trading into the active market. Bitcoin represents 40% of the Cryptocurrency market, whereas ethereum represents 20% of the market. These two Cryptocurrencies tend to represent the bull market of the Cryptocurrency. Ethereum was launched back in 2015. The volatility of the currency indicated that how rapidly things can change in the world of Cryptocurrency trading.
Many other Cryptocurrencies are actively traded but are less commonly available at the time of exchanges. Mentioned below are the names of such Cryptocurrency names.
- Litecoin (LTC)
- Dash (DASH)
- Zcash (ZEC)
- Ripple (XRP)
- Monero (XMR)
Specialized computers generate these Cryptocurrencies through computational alchemy called mining. The relative rarity of the Cryptocurrencies due to the processing power required to produce new coins gives Cryptocurrency its higher value. Also, many Cryptocurrencies have a limit on the number of coins that can exist. Again this is called a finite supply of cash.
What is Cryptocurrency trading?
Usually, there are many ways in which Cryptocurrency trading is related to forex trading. The markets in various fiat currencies from all over the world are traded against each other. In Forex trading, the US dollars are used to purchase a position or other option in euros, Swiss francs, or in any other type of currencies. Later, the money bought is sold when the investor chooses to sell them off by either making profit or loss in the trade.
Cryptocurrency trading also allows traders to purchase Cryptocurrency with US dollars. As there is super high volatility in bitcoin and altcoin trading; therefore, the frequent use of leverage in these types of trades moves in a downward move in terms of the price. Generally, this process is called shorting. Typically, this method and style of trading aren’t recommended for less-experienced traders.
Usually, bitcoin alone is traded for thousands. It might seem like the cost is price prohibitive for most traders to take a position. Still, these bitcoins and other Cryptocurrencies can be purchased as a decimal-based fraction of a coin too.
Different ways to gain exposure to Cryptocurrency trading
Investors who seek an easier way to invest in Cryptocurrencies can now invest in funds that usually purchase bitcoins and altcoins. These funds generally carry a significant amount of premium when compared to direct trading.
One of the most popular and well-known Cryptocurrency funds is grayscale bitcoin investment trust trading, known as GBTC. The fund’s success led grayscale to launch four more Cryptocurrency funds named bitcoin cash investment trust, ethereum investment trust, litecoin investment trust, and xrp investment trust. Higher expenses with regular funds can provide other advantages, and they can also be purchased through many conventional investment accounts.
Cryptocurrency exchange and Cryptocurrency brokers
Generally, to trade in Cryptocurrency directly as opposed to investing a fund, you indeed have just two options –
- Use an exchange
- Use a forex broker
With an exchange, you are merely buying and selling bitcoins or altcoins directly. Whereas with a forex broker, you are purchasing a CFD, it does not give you ownership of the Cryptocurrency digital asset. Therefore, due to this reason and portability, many traders prefer exchanges and utilize more than one business.
How do Cryptocurrency markets work?
Cryptocurrency markets are decentralized. This means that these markets are not issued or backed by a central authority such as a government. Instead, these Cryptocurrency markets are run across computers. Hence, these can be bought and sold through exchanges and can be stored in wallets too.
Unlike other sorts of traditional currencies, Cryptocurrencies exist only in digital form. Cryptocurrencies are stored in the blockchain. When anyone across the world wants to send Cryptocurrency to someone else, they will send it in someone else’s digital wallet. The Cryptocurrency transaction is not considered final until it has been verified and added to the blockchain through the process called mining.
Important Trading Platform Features that make your cryptocurrency trading completely Safe
Mentioned below are the features that you need to consider while choosing the Cryptocurrency trading product for yourself.
- Registry lock is an essential element that adds an extra layer of security to the Cryptocurrency trading platform.
- The domain name and security extensions are the set of protocols that authenticate all the DNS queries. This secures and protects all the user’s information.
- Anti-DDoS modules, these DDoS attack involves the overflowing of a targeted server. It prevents the fake internet from merging with the real connection, making the existing Cryptocurrency trading platform highly secured.
- Web protocol security is an essential parameter that all the secured Cryptocurrency platforms should have as the websites and the media with no security protocol are highly prone to cyber-attacks.
- Cold wallet integration can protect all the assets of the Cryptocurrency even if the entire software is hacked.