By Sonali Pandey on The Capital
Cryptocurrency, also known as the digital currency is one of the most exciting aspects of the technology today. Currently, in the market, there are more than 1000 varieties of cryptocurrencies available such as Ethereum, Litecoin, Ripple, etc. Currently, cryptocurrencies are not legalized in all the countries and one of the reasons for this could be the potential disadvantages that are incurred by its usage. However, some of the companies such as Pizza Hut have slowly started accepting it.
When we hear the term cryptocurrency the first question that arises is why do we resort to digital mode of trading? What makes trading in cryptocurrency so interesting? How is it different from the existing mode of cash payments? The answer to all these questions lies in the highly secure decentralized network of the blockchain which provides a secure peer to peer mode of digital transfers by consensus and verification and hence a secure transfer system. Now, keeping in mind the secure nature of transferring digital assets, the next most important question that needs to be answered is, how to trade cryptocurrency?
Essentials to be taken care of before trading!
There are some points that must be noted about trading in cryptocurrencies before the actual trading is proceeded with.
· The cryptocurrency trading market operates on a 24/7 basis. The trading takes place at exchanges or by CFD brokers and the coins are stored in wallets, e-wallets, or hardware wallets after the trade.
· The price of cryptocurrencies deviates continuously and that can be incurred by reasons such as possible cyber-attack, social media comments, and the demand and supply trends in the market.
· Another important point that should be taken into consideration is to choose a trustworthy broker that can not only help with the trading but is also able to provide knowledge about the security, best prices available and commonly used terms such as leverage which makes the customer more enlightened about the trading system.
Let’s proceed with the trade
Once the points mentioned above are taken care of, the next step is to dive deeper into the topic of how to trade cryptocurrency. Here are some of the ways that can assist in the task of trading cryptocurrencies:
CFD stands for Contract For Difference. It is a tool that helps in leveraging the trade on specifically bitcoin. By using a CFD, the person can either be a buyer or a seller and can easily earn the profits. Using this model does not require a person to own the coins but helps him hold a contract that benefits him.
It is a process of keeping the currency in the wallet until the price seeks a considerable hike. If the investment is done for a long time, it can bring suitable interests to the owner of the coins. Though easy, it brings a disadvantage of long-term investment in some cases.
For a person who is skilled in the art of trading, day trading seems to be the best option! High profits are earned on the days of ups and downs in the fluctuating cryptocurrency market at a low cost.
In contrast to the old days of easy mining, the cryptocurrency mining these days require heavy-duty software and hardware. In addition to that, it is mostly prescribed in large storehouses where electricity is easily available. Though advantageous in fetching a high value to the investor, it faces a potential disadvantage of high investment.
Another most commonly heard term in the cryptocurrency market is “arbitrage”. It refers to the process of buying one of the currencies at one exchange and selling it on another in the seek of a higher profit. This method brings a quick profit to the investor but fetching profits through this method can be tedious.
Acquiring the knowledge about the cryptocurrency backbone, Blockchain
By learning about how a blockchain works, a person can turn the knowledge into becoming a developer of the blockchain applications that can help him with the easy trade and fetch him profits by the ads of his application. This way no doubt brings an immense amount of profit to the individual but requires good technical knowledge in terms of coding, blockchain, trading, and development.
We saw some methods that assist us in terms of how to trade cryptocurrency. However, the process of how to trade cryptocurrency is not limited to the methods suggested above. The above-suggested methods are only a few of the possibilities that can help in the process. Needless to say that cryptocurrency is revolutionizing the market in terms of trade. However, just like a coin has two sides, so does the process of how to trade in cryptocurrency. Besides the advantage of low cost and ease of transfers, the trade is affected by factors such as high fluctuation, lack of merchants, and less tendency to accept cryptocurrency. Hence, trading must be done wisely.
How to trade cryptocurrency in 2020 was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
Post fetched from this article