Cryptocurrency might intimidate a lot of beginner investors, but getting into it isn’t that hard. Here’s your guide on how to trade cryptocurrency like a pro.
Last August, Bitcoin broke the $4,000 USD mark for the first time ever.
And people noticed.
The huge influx of new users led to a massive bull run that sent almost every cryptocurrency skyrocketing. Bitcoin, in particular, broke $19,000 before dropping back down and leveling around $6,000.
The bull run might be over, but there are still a lot of reasons in learning how to trade cryptocurrency. Experts suggest that crypto is still just getting started.
If you’re looking to get in on the action, read on to find how you can grab some crypto for yourself.
What Is Cryptocurrency, and What Is It Not?
Before you break down the door to a cryptocurrency broker, it’s important to understand what crypto actually is.
In simplest terms, cryptocurrency is a completely digital form of currency. While most banking is done online these days, crypto is a bit different than sending someone $5 on PayPal.
Most standard currencies fall into what economists call “fiat money.” Fiat money is produced and regulated by a government entity. This includes dollars, yen, euros, rupees, and whatever other official currency you might think of.
On the other hand, cryptocurrency is entirely unregulated and decentralized. It also has no physical representation of its value.
Instead, cryptocurrency is “encrypted” and shared in something called the blockchain, which is a public ledger that verifies all cryptocurrency transactions.
Most of the media attention surrounding Bitcoin and other cryptos have focused on early-adopters who have gotten very wealthy very quickly. A handful of people have become multi-millionaires after an investment of under a thousand dollars.
Some even retired early.
This has led many people to treat cryptocurrency like a get-rich-quick scheme. And many of these people have lost thousands of dollars on cryptocurrency.
While cryptocurrency does have the potential for explosive growth, the market is quite volatile.
That said, there are still a number of reasons why you should be investing in cryptocurrencies.
Why Should I Invest In Cryptocurrency Then?
If you’ve been paying attention to the news the last few years, you’ve probably noticed that there’s a lot of instability in the world.
It seems like the news cycle is constantly being dominated by regime changes, global terrorism, and civil wars.
And what happens when the government that decides what your money is worth falls apart?
We’ve already seen how political instability can cause massive economic collapse. Venezuela has been suffering through a process called hyperinflation, where its currency suddenly loses almost all of its value.
But with cryptocurrency, your money’s value isn’t dependent on your government. This is why cryptocurrency has gained a lot of popularity in places where politics are a little more unstable.
In fact, most analysts seem to believe that Bitcoin’s bull run last year was related to international tensions between North Korea and the United States.
How To Trade Cryptocurrency
So now that we’ve got that out of the way: how do you actually trade cryptocurrency? It’s not exactly as simple as just going to an ATM and exchanging your fiat money for Bitcoin.
But there are some simple ways that you can get started trading cryptocurrency today.
The easiest way to get into crypto is through a cryptocurrency exchange.
These exchanges are marketplaces where cryptocurrency brokers buy and sell crypto for users.
Before you choose an exchange, look at what kind of cryptos they trade. Most will allow you to trade Bitcoin, Etherium, Litecoin, and some other major cryptos. But if you want to get into “altcoins,” you’ll need to use an exchange that trades in those.
Generally, these exchanges allow you to buy cryptocurrency at no extra cost. But if you want to send crypto to someone else or transfer it back to your fiat currency, you have to pay a fee.
These fees are different between each exchange. And because your broker has to find a buyer for your crypto, it might take a while for your withdrawal to go through.
Even with these fees, crypto exchanges are a great way to get started trading cryptocurrency. They don’t require any expert computer knowledge. You just need to create a login, verify your identity, connect a payment method, and get trading.
Some of these exchanges are compatible with automated Bitcoin trading bot software. These bots make automatic trades throughout the day to make sure that you make a profit.
In order to store cryptocurrency, you need to have a wallet. Most exchanges will provide you with a wallet. But at the end of the day, the exchange still regulates your access to your wallet. If the exchange shuts down, you lose all of your crypto.
Many people choose to manage their own wallet instead. You can send crypto between wallets without going through an exchange, which bypasses exchange fees.
You can also purchase crypto directly from other users and have it deposited to your wallet. You send them fiat currency through a bank transfer and your wallet address. They then deposit your crypto directly into your wallet.
Crypto Trading Tips
If you’ve decided to start trading cryptocurrency, here are a few tips.
Know What You Want
Before you start trading crypto, it’s important that you set your expectations.
Are you trying to make a short-term profit, or are you more interested in the long-term? Are you more interested in freeing yourself from fiat money?
Knowing what you want out of crypto can help you from making foolish decisions.
Only Use Trusted Exchanges
Like any disruptive technology, cryptocurrency has attracted its fair share of scammers. Many of them try to take advantage of new users by appearing legitimate.
For example, even Bitcoin.com is an illegitimate website.
Before you make any sort of monetary transaction, make sure you do plenty of research into the exchange.
As we said before: cryptocurrency is a volatile market. It fluctuates hard and fast. It might go up $15 one day, then down $20, then up $50.
Don’t panic! Panic always leads to poor financial decisions.
There’s a saying in the crypto industry: HODL. It stands for Hold On for Dear Life.
The price chart might look like a rollercoaster, but jumping off usually only hurts more. Wait for the market to stabilize before you make a big decision.
Want More Life Tips?
Now that you know how to trade cryptocurrency, take a look at this post on how to save on monthly expenses.
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