Crypto trading is becoming more and more popular. You therefore hear more often and more often success stories from people who do crypto trading. However, it can also go wrong. To give you some more information, we would like to explain to you what crypto trading is and how you could start with it yourself.
What is Crypto Trading?
You probably know the stock market. This is the market where people buy and sell stocks. When you buy a stock, you are essentially buying a small portion of the company. You can compare crypto trading a bit with this market. However, you are not buying part of a company.
With crypto trading you buy and sell cryptocurrencies, also called crypto coins. These crypto coins are therefore a currency of the cryptocurrency. The most famous cryptocurrency at the moment is Bitcoin .
By doing crypto trading you can earn a lot of money . But you can also lose a lot of money. It’s about selling a cryptocurrency for a higher amount than what you bought it for yourself. This is how you make a profit.
There is also another way to make money from crypto trading. You can also go long and short . You are in fact betting on what the price will do. When you get it right, you get a reward.
When you go long, you expect the price to rise. Is the price rising? Then you get money. If you think the price will fall, you can go short. You earn money when the price actually falls. So you always have winners and losses on both sides.
Often you can also choose to use leverage. With leverage you can increase your wagered amount without actually wagering extra money. However, if you get it wrong, you will lose this amount. In fact, with the leverage you borrow the money from the broker.
There are plenty of cryptocurrencies. As mentioned, cryptocurrencies are a currency. In this case it is a digital currency as no physical money of the cryptocurrencies exists. These cryptocurrencies run on a blockchain . All transactions that are made are stored on this blockchain.
Past transactions cannot be modified. The blockchain also ensures that fraud is almost impossible. That is why cryptocurrencies are seen as a very safe means of payment.
For example, when you buy a Bitcoin, this transaction is validated by the blockchain, after which the transaction is stored in the blockchain. When this is done, the transaction will be official.
A cryptocurrency therefore has no physical money. What then? It’s a digital code. When you buy a crypto coin, you are in fact buying a piece of code from this coin. Then you save this in your personal wallet . A wallet is a storage place for crypto coins.
The price of crypto
To see whether the value of crypto is rising or falling, you can use an application that shows the price for you. The most used application is Coinmarketcap . Here you can see exactly what the price of the different cryptocurrencies is. In fact, almost every currency is on this website. Think of Ethereum, Bitcoin, NEO and Dash, but also CyberVein, ICON and Terra .
The price of a cryptocurrency is determined by supply and demand. When there is a high demand for a certain crypto coin, the value of the coin will increase. This allows you to sell the coin for a higher amount. However, it can also work the other way around. The moment no one wants the crypto coin, the value will drop and you can buy the coin for a lower amount.
Is crypto trading profitable?
Crypto trading can be very profitable. You have probably heard many stories yourself about people who have become very rich through crypto trading. This is because the value of cryptocurrencies can rise and fall. For example, you could once buy Bitcoin for 100 dollars each. Now (December 2020) a Bitcoin costs at least 24,500 dollars.
So if you bought 100 Bitcoins for $100 each, and you sold them now, you would have made a profit of $2.44 million. However, it is not the case that everyone who starts with crypto trading will become rich. These are often just a few stories, and sometimes they are not even realistic.
There are also many stories of people who have lost a lot of money with crypto trading. These people invested a lot of money in crypto, after which their expectations did not come true. They then sold their cryptocurrencies at a loss, thus losing their money. These are also the realistic stories that crypto trading knows. However, it is important to know that you can also lose a lot of money when you start trading crypto.
Do you want to start crypto trading?
Maybe you want to start with crypto trading. Fortunately, it is not difficult to get started with this. There are also little to no entry fees.
However, it is wise to always gain enough knowledge before you start investing in crypto. Knowledge is very important to be able to make good choices. For example, you can do an analysis about a cryptocurrency to determine whether you expect the price to rise or fall. In this way you reduce the risk of making a loss on your investment. Also in the stock world it is always important to make analyzes first. This is no different with crypto.
There are several crypto exchanges where you can sell and buy crypto. In short, a crypto exchange is a website that offers you the opportunity to trade in crypto. We also call this a broker.
It’s not hard to get started with this. You will first need to create an account on the exchange you want to use. These are the most popular crypto exchanges:
- Anycoin Direct
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com