Trading Cryptocurrencies? Here’s what you Should Know
Cryptocurrencies are encrypted decentralised digital currencies that can be transferred from one individual to another. They are not tangible and because they are digital assets, they remain as data. With cryptocurrencies, people can send money electronically with lower transaction times compared to using a bank. Also, cryptocurrencies can be traded which draws the attention of both novice and seasoned traders and even online gamblers.
Although Bitcoin is not the only cryptocurrency available, it is the most popular one. The technology behind cryptocurrency holds a big part of its value because it identifies the security of a transaction and how funds are transferred.
Originally, cryptocurrencies can be traded by setting up a bitcoin wallet, purchasing some bitcoins with tangible currency, and exchanging them on an exchange to the chosen coins. However, this approach requires traders to securely maintain at least one digital wallet for storing and exchanging the coins they bought. Also, exchange websites are prone to cyber theft and hacker attacks. Fortunately, many digital trading platforms and applications like the Crypto Genius allow crypto traders to trade. These platforms are SSL secured which guarantees trading security. This is the reason many traders trade now with the app.
Reasons for Trading Cryptocurrencies
Here are the main reasons people trade digital currencies:
- Volatility. The crypto market experienced significant volatility because of big amounts of short-term speculative interest. Its volatility is part of what it’s so exciting. With rapid intraday price movements, traders can have a range of opportunities to go long and short, although this comes with increased risk.
- Market hours. The market is often available to trade round-the-clock due to the lack of centralized governance. Crypto transactions occur directly between individuals, on exchanges across the globe. But, downtimes are expected if the market is adjusting to infrastructure updates.
- Liquidity. Liquidity measures how quickly and easily a digital currency can be converted into cash, without affecting the market price. It brings about better pricing, increased technical analysis accuracy, and faster transaction times.
- Ability to go long or short. A cryptocurrency purchase means buying the asset upfront with the hope that it increases in value. However, when trading on a cryptocurrency’s price, traders can take advantage of markets that are declining and rising in price. In trading, this is called going short. Meanwhile, going long means getting a trading profit when the value of your chosen currency fell against the U.S dollar. If the value increases against the U.S. dollar, your position will make a loss.
Things to Consider When Trading Cryptocurrencies
Because of the rapid changes in the crypto market, new cryptocurrencies are born while others disappear. People are drawn to this market because of protection against the devaluation of the national currency. More and more stores are accepting Bitcoin and other digital currencies as a form of payment. In fact, some governments are officially approaching the currency. The price of cryptocurrencies is influenced by many factors. Higher demand will mean a higher price. Also, as trades buy the coin based on speculation can impact the demand, and thus, the price.