Cryptocurrencies, also known as crypto for short, are digital currencies that can be utilized to purchase goods and services. However, they use online ledgers with reputable cryptography for securing online transactions. Most interests in cryptocurrencies are for trading, with investors and speculators driving prices upward.
Undoubtedly, cryptocurrency is an exciting venture for both new and current investors. However, success doesn’t happen right then and there. In all honesty, cryptocurrency trading may be a risky endeavor. Although some people create a huge amount of wealth out of cryptocurrency trading, some people have also lost lots of money.
So, you’re ready to start a career or a new hobby in cryptocurrency trading. Hence, you’re probably wondering how to trade cryptocurrency. In this guide, we’re going to describe every must-know regarding the basics of cryptocurrencies trading and its essential components.
Definition of Cryptocurrency
As mentioned, cryptocurrency is a new mode of payment that can be used online for paying for goods and services. Many businesses or companies have implemented their own currencies, or often described as “tokens”, and they can be used as a form of payment for the purchase of products and services that the company offers. In simple terms, the resemblance of these cryptocurrency tokens is casino chips or arcade tokens. Do you remember the days where you’ve bought arcade tokens using your money for operating a video game or carousel? The scenario is similar to cryptocurrencies. That said, users must exchange real currency for the cryptocurrency to buy products and avail the described services.
Cryptocurrencies are developed using blockchain technology. Speaking of blockchain, it’s a decentralized technology spread across different computer networks, managing and processing transactions. The primary highlight of blockchain is its data security, and confidentiality.
What are the Popular Cryptocurrencies?
Although there are about 6,700 different cryptocurrencies traded publicly, we’ve only listed down the top ten cryptocurrencies according to market capitalization as a starting point. Market capitalization is defined as the total market value of a specific cryptocurrency’s circulating supply. In addition, cryptocurrencies have continued proliferating and earning money through ICOs (Initial Coin Offerings). According to CointMarketCap, the sum of all cryptocurrencies in December 2020 was over $645.7 billion. Specifically, the total value of the world’s most popular cryptocurrency, Bitcoin, was pegged at approximately $421.7B.
Here are some of the popular cryptocurrencies with higher Market Cap:
|Bitcoin (BTC)||$687.8 billion|
|Ethereum (ETH)||$160 billion|
|Tether (USDT)||$24.3 billion|
|Polkadot (DOT)||$15.4 billion|
|XRP (XRP)||$13.8 billion|
|Cardano (ADA)||$11.6 billion|
|Litecoin (LTC)||$10.6 billion|
|Bitcoin Cash (BCH)||$9.7 billion|
|Chainlink (LINK)||$8.6 billion|
|Stellar (XLM)||$6.8 billion|
* Data as of January 19, 2021, via CoinMarketCap
Essentials for Cryptocurrency Trading
Cryptocurrency trading is becoming more and more popular than ever. As such, there’s a significant increase of individuals who switch to digital assets daily to earn more wealth. In the beginning stages of cryptocurrency, there were only very few cryptocurrency trading platforms. However, times have indeed changed and there’s a great number of exchange platforms worldwide.
Before anything else, cryptocurrency traders should have a verified account in one of the numerous cryptocurrency exchange services available. If you’re a newbie, you should know that the majority of trading platforms require their users to verify their accounts so they can withdraw fiat currencies. Aside from that, many businesses require users to verify their identity for withdrawing large sums of digital currencies. For example, you can start with Bitcoin as a stepping stone for your cryptocurrency trading ventures.
Are you a newbie in cryptocurrency trading? If yes, then you should research a diverse range of exchange platforms that let residents from your country exchange digital assets. After that, most traders like to maintain a non-custodial wallet for keeping coins for long-term investments. As a rule of thumb in cryptocurrency, always keep in mind: If you don’t keep your own private keys, then you don’t have any cryptocurrency at all.
Markets, Orders, and Wallets
After account verification, the next step is securing funds to begin trading. Once done, you can start trading cryptocurrencies on the chosen platform. If you already have a cryptocurrency i.e. Bitcoin/Ethereum/Bitcoin Cash, you can deposit money into the “Wallet” section of your exchange account.
Some exchange platforms let individuals purchase cryptocurrencies and sell tokens/coins using fiat currencies on the platform itself. Hence, it’s an excellent method to get familiarized with an exchange account. Also, new cryptocurrency traders must activate the two-factor authentication on their account for security purposes.
In most trading platform’s main dashboard, the following sections can be accessed:
- Markets – Displays all cryptocurrencies and fiat currencies pairings that are open to trade on the exchange.
- Profile/Settings – Users can adjust their settings, such as email, user information, 2FA, and other important details associated with their account.
- Wallets – Shows all the available wallets on the platform. It’s also the page where users can store, withdraw, and deposit all digital assets supported by the platform.
- Orders – Regardless if you’re buying or selling, placing an order on a cryptocurrency exchange is pretty self-explanatory.
For example, if you’re selling 10 ETH on the platform for USD, it usually displays a limit order type.
Charts, Indicators, and Tools
After getting accustomed to your exchange platforms and making simple trades, you can learn in-depth knowledge regarding cryptocurrency trading through charting tools and technical indicators. For instance, the RSI (Relative Strength Index) calculates both strength and the speed of the volatility of the market price. Through RSI, traders gain some insight into whether the market is overbought or oversold. If you want to go through some more technical indicators, you can read more about Fibonacci ratios, medians, fractals, ATR bands, Aroon oscillators, and Bollinger Bands from a cryptocurrency trading point of view.
If you’re a newbie to cryptocurrency trading, we’ve highlighted everything you need to get started from the basics. Aside from learning how to withdraw and deposit funds, you should have a non-custodial wallet for long-term storage of your funds. As such, cryptocurrency traders are in control of their private keys. If you’re selling some assets, all you have to do is deposit the funds into the exchange platform anytime.
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The basics of cryptocurrency trading can become overwhelming, especially for beginners. However, with few instances of self-learning and messing around, you’re probably more knowledgeable in due time. In a nutshell, experiencing the look and feel of using cryptocurrencies and creating simple trades is an excellent way to get started in cryptocurrency trading.