The last few years have seen a surge of interest in cryptocurrencies, and people want to know how best to gain from this market financially.
Some people like to invest and are prepared to hold onto their assets for the long haul. Others wish to play it differently by trading and hopefully getting in and out of the market quickly and efficiently, with a modest or hopefully more significant profit.
Crypto is not just restricted to individuals involved in the business; people from all walks of life have been trying their hand at trading cryptocurrency. It’s important to be careful in this line of trading, as while there are numerous stories of fortunes being made, it’s just as easy to lose your money. Many people take time to research and learn more before getting involved.
What is a crypto exchange?
A crypto exchange is a platform available on which, quite simply, cryptocurrency can be bought, sold, and traded. There are many sites to choose from these days, as the crypto market had grown massively since the original early days when people appeared to be wary of getting involved with cryptocurrencies in general.
These exchanges can be used in different ways, such as trading one cryptocurrency for another, for example. Cryptocurrencies can be bought with fiat currencies, such as the US dollar. Cryptocurrency can also be changed back to regular currency, held in your trading account for reinvesting at a later stage, or in your standard bank account.
How to choose a crypto exchange?
Good security is vital as you will be making transactions online. The ease of accessibility to these sites can be an issue depending on location or regulations, so you must be aware of this. China, for example, has blocked access to cryptocurrency exchanges. It’s also important to know if you can legally operate as a company in this sphere as well, with companies like Starlegal providing compliance assistance.
Depending on the size of your investments or desire to get involved, the liquidity available at some exchanges may not be ideal for what you aim to do. Fees are another thing to be considered, and different exchanges have different methods of charging for their services.
With so many cryptocurrencies available, you may find only the most popular ones on the common exchanges. So if you are looking for altcoins, you may have to do a bit of searching around for an exchange that suits you.
While many people recommend sticking to established cryptocurrencies like Bitcoin or Ethereum, numerous alternatives, such as Dogecoin, may be worth looking at.
When is the time to buy or sell?
As the saying goes, “Buy low, sell high.” While this may sound relatively straightforward, unfortunately, sometimes markets can be hard to predict. The emotions of traders and the psychology surrounding the markets can play a big part in this.
Cryptoholics is one of many online resources for crypto traders, and they can give some advice on getting involved with crypto trading and using tools such as trading bots.
The cheaper currencies tempt many people on offer in the hope they will increase in price in the future. However, it’s hard to know if this will occur, and the cryptocurrency markets are pretty volatile.
Currencies like Bitcoin or Ethereum have been known to experience surges in value when touted by celebrities or vocal businessmen like Elon Musk. While this may work to your advantage, it could also work totally against you.
How do you know if an exchange is safe?
Everyone wants to feel confident that the exchange they choose to use is legitimate and indeed safe. The FCA in the UK has now established a temporary registration scheme for crypto exchanges and other businesses.
The knowledge that funds are secure is of utmost importance to the customer as the stress of trading itself can be immense without having to worry about other issues.
If a crypto exchange is hacked there is the risk that you may lose your portfolio, whereas if a bank is robbed, your account will still be intact.
Some exchanges offer incentives to experts in what is known as the bug bounty program. These experts attempt to find weaknesses in their system and are rewarded for doing so. This results in higher levels of security for traders such as you.
Exchanges also use what is known as “cold storage,” in which most of their assets are held offline, making them very difficult to access and therefore steal. These measures can be used to reassure the customer they have made the right choice in using their exchange.
If you want to get into crypto trading, then take your time to find the proper exchange, and choose the currency or currencies that fit your trading strategy.
If you are an emotional trader, consider using one of the automated crypto trading bots. The role of bots in crypto trading is varied, and they can take advantage of discrepancies across exchanges. They can also make trades while you are unavailable to be on the platform yourself, and they react quicker than humans do.
However, if you decide to get into crypto trading, set your budget sensibly, and stick to it. If your chosen tokens drop in value, you can simply wait it out without being desperate to cash in then.