Since cryptocurrency was introduced into the world in 2009, it has grown from a scam to a fad to a worldwide phenomenon. It has built and destroyed the fortunes of many with often-volatile trading patterns and soaring growth trends within such a short time. We here at Keep A Bit work within the blockchain and cryptocurrency sector to ensure a trading platform that maximizes revenue within a safe and well-protected environment.
Because of this, we have had the chance to go through the entire industry to find some valuable insights about cryptocurrency trading. Keep A Bit reviewed countless traders and exchanges and gathered all you need to know in one single place. So let’s talk about that.
Cryptocurrency is collectively known as Alt Coins. Now there are about 1,000 types of cryptocurrencies in circulation today, with Bitcoin’s most popular one. As an altcoin trader, you will be spoiled for choice; however, if you are trading fledgling altcoins, you may have a shortage of buyers when you are ready to sell. Bitcoin takes up the most significant market share with 38%, while Ethereum comes in as a distant second with only 18% of the market share.
Ethereum was introduced into the market back in 2015 and had been growing very fast ever since its inception. People create altcoins through specially rigged computers using a computational alchemy program called mining. The value of the coins is usually determined by how hard it is to mine for the coins. Some coins have a finite supply because of the limit on the number of coins that can ever exist. Here are some common types of cryptocurrency you will come across when trading in altcoins:
- Litecoin (LTC)
- Zcash (ZEC)
- Dash (DASH)
- Ripple (XRP)
- Monero (XMR)
The closest thing to cryptocurrency trading is FOREX trading. In FOREX, you usually use USD to buy a position against other currencies like euros, Swiss francs, ETC. Now depending on the market, you can either make a profit or a loss when trading. Like FOREX, cryptocurrency trades let you buy altcoins with USD. Then you can decide how to trade your coins.
You can either buy-and-hold the cryptocurrency or trade the daily or weekly up-and-down market volatility. Now, trading in cryptocurrency isn’t limited to only two types of strategies. There are several other strategies you can adopt. Strategies like futures contracts and binary options are widely popular, and then there are trading strategies that let you make a profit even if the coin goes down in value.
However, shorting a cryptocurrency is usually discouraged due to the high volatility of the market. Meaning you will lose money most of the time if you short altcoins like Bitcoin. With coins like Bitcoins that trade in the tens of thousands, each taking up a significant position against it isn’t usually possible. One good thing is that you can buy and trade coins in a decimal-based fraction of a coin meaning one coin’s value can be shared amongst many crypto traders.
If you take Bitcoin as an example, there are about 21 million Bitcoins out there, and 17 million are in circulation. According to experts, each Bitcoin can be split 100 million times. However, such a small value isn’t a feasible option for cryptocurrency exchanges and does not offer trades that dip that low in value. When you visit a cryptocurrency exchange online, it will usually show if the amount you put in is feasible for trading or not.
Another Way To Gain Cryptocurrency Exposure
Another easy way to gain exposure to cryptocurrency is through investment funds. You will find plenty of funds that offer investment opportunities to people looking to get into cryptocurrency. Exchanges allow you to purchase stakes in their investment plan for Bitcoin or altcoins.
However, one drawback is that you may have to pay a premium when investing in such funds, but these funds usually simplify owning cryptocurrency. These funds also allow you to gain exposure to cryptocurrency through traditional investment means, like IRAs and personal accounts. Grayscale Bitcoin Investment Trust is the most popular cryptocurrency trust fund out there, and it trades under the name GBTC. The fund has four new investment wings along with the Bitcoin investment fund.
They are Bitcoin Cash Investment Trust, Ethereum Investment Trust, Litecoin Investment Trust, and XRP Investment Trust. While trading directly in cryptocurrency often yields higher return rates, it can be hard to navigate the market. In comparison, trusts provide an outlet like other traditional investment opportunities where the risks are minimized within a highly volatile cryptocurrency market.
Exchanges & Brokers
Crypto traders usually trade altcoins in two distinct ways. They either use an exchange or use a FOREX broker to trade in crypto. With an exchange, you are directly dealing and trading in cryptocurrency. However, when using a FOREX broker, you aren’t directly trading in crypto but buying a CFD or Contract for Difference.
However, CFDs don’t give you outright ownership of the digital product. Because of this reason, crypto traders usually prefer exchanges. Once you understand the fundamental difference between exchanges and brokers, you will easily be able to decide and choose the right platform for your cryptocurrency endeavors.
How Does Cryptocurrency Broker Trades Work?
While exchanges usually have different ways they operate, they typically follow the same model as a stock market broker trades with buyers and sellers. Full-featured exchanges offer you an experience close to what you expect out of an online border. Things like a posted bid and ask prices indicate the price at which traders are willing to trade, and the quantity are some of the things you will find at a full-featured cryptocurrency exchange.
So make sure you work with the right one. We here at Keep A Bit offer precisely that and then some. Keep A Bit reviewed the entire industry to come up with the solution to end the common pains of crypto traders so you can check our services if needs be. With that being said, we arrive at the end. We will come back with something new for you soon. Until then, see ya!