What is Cryptocurrency and what is Crypto trading?
Cryptocurrency trading has become a popular subject thanks to the buzz generated by digital currencies like Bitcoin, Ripple, and Terra. What does trading these currencies involve and what tips do you need to know about crypto?
Cryptocurrencies are a digital form of money, and they exist as tokens held on the blockchain. This is a secure type of online ledger where all transactions are recorded and held in the archives. These tokens are typically used to send money or to make purchases, but some cryptocurrencies have specialised functions in an online ecosystem. The crypto price tends to vary widely, which is why cryptocurrency trading has become a popular method of trying to earn profits.
You can trade cryptocurrencies by buying and selling them on a crypto exchange, meaning that you own the tokens. Another option is to pair them with fiat currencies like dollars or euros and attempt to profit by predicting which will rise and which will fall, through instruments like cryptocurrency contracts for difference (CFDs) with Skilling.
Key elements that affect the price of crypto
Bitcoin and other digital currencies are well-known for their widely fluctuating prices that can see traders earn or lose money in very little time. As with most markets, supply and demand are important factors that cause the price to rise and fall. However, with Bitcoin and other forms of crypto, their finite amount adds an extra issue to bear in mind.
With the number of cryptocurrencies growing all the time, we also need to consider the competition aspect, as one coin may drop in value if another becomes more attractive to users. Since new coins are mined online using powerful computers, any variance in the cost of doing this can also lead to crypto price swings.
The latest news stories about these currencies also have an effect on the crypto price, as information on possible new regulations or technology updates can cause changes to the value of cryptocurrencies.
How to Trade Crypto?
The first step is to decide how you want to trade crypto. If you’re keen to trade a digital currency against a fiat currency, then this can be done by first of all researching the different pairs available. Look for a cryptocurrency that you think will either rise or fall against a regular currency.
The first currency listed is known as the base currency, which is the one being bought. The second is known as the quote currency and is the one being sold. Confirm the transaction on a cryptocurrency trading platform once you see the bid and ask prices, which refer to the buying and selling price, respectively. Bear in mind that some currency pairs offer more liquidity than others, which will allow you to exit your cryptocurrency trading at a suitable time.
Cryptocurrency CFDs are instruments that you can use to trade crypto pairs that include a crypto and a regular currency. This can be done without buying any of the digital tokens or even registering on an exchange, as the complete transaction can be carried out on an investing platform without the need to purchase any cryptocurrency.
One of the benefits of cryptocurrency trading with CFDs is that you can use them to speculate on price increases or decreases. This means that it’s possible to try and take advantage of any type of market condition that you discover. But you must be aware of the risks involved, before you start trading cryptocurrencies CFD. The option for buying and selling cryptocurrencies directly is something that can be done on a crypto exchange. Since the prices tend to be volatile, it’s important to have a strategy in place to buy and then sell the tokens.
Therefore it would be desirable to do in-depth research beforehand to make sure you have a well-informed base to take a position in this fluctuating market.
Cryptocurrencies that you should know about
There are some well-established cryptocurrencies that you can trade in CFDs with some of the biggest fiat currencies.
- BTCUSD is a combination of Bitcoin and the US dollar. As the biggest and best-known cryptocurrency together with the world’s most traded currency, this is the most popular and liquid pair. The pros and cons of trading BTC can be explored here.
- XRPEUR sees Ripple and euros paired together. Ripple is one of the biggest digital currencies and is largely used for speedy, low-cost international money transfers.
- ETHEUR includes Ether, which is the native token of the massive Ethereum network and it’s the second-biggest crypto by market capitalisation. Here, it’s traded against the Euro.
- LUNAUSD features the Luna token that has entered the list of the top ten biggest cryptocurrencies in the last year and it’s paired with the US dollar in this combination.
- ENJUSD has the Enjin token on one side, which is a token used on the ecosystem of the same name that produces non-fungible tokens (NFTs) on the Ethereum network. The pair in this case is with the US dollar.
- NEOUSD covers the US dollar against the Neo token. This is the currency that powers the Neo blockchain and is used for a variety of things like sending or staking money.
- SHIBUSD is a pair involving the dollar and the Shiba Inu, which is a meme token used by an online community that has shown some spectacular price fluctuations in the past.
What are the risks in trading crypto?
It’s no secret that a lot of people are wary of getting involved in crypto trading, as they worry about various issues. Perhaps the biggest worry is the lack of regulation in the crypto scene. This is why trading on a regulated and reputable platform makes sense.
The fact that these currencies are so volatile may put people off the idea of trading them. However, we need to remember that cryptocurrency trading isn’t about selling the tokens. Since we’re looking at trading, a high level of volatility is good news if you make the most of it to get in and out of the transaction at the right time. But bear in mind that iits volatile nature means that prices can go down as quickly as they go up.
Therefore, the best way to manage risk is through research and finding reliable tips. There is a wealth of information available about all of these tokens and what the market could hold in store for them. By understanding the industry, you can make informed decisions.
The more information you have when you start cryptocurrency trading, the better prepared you’ll be. Take a look at the following pages that might be of interest to you to get ready to start trading cryptocurrencies.
Not investment advice. Past performance is not indicative of future results. Trading cryptocurrency may not be available depending on your country of residence.
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