Cryptocurrencies are virtual or digital currencies that individuals can use to invest in, trade, or make online purchases.
Since the inception of bitcoin in 2009, cryptocurrencies have endured a lot of both controversies and hype.
While they had its share of ups and downs, cryptocurrency trading is gaining ground among investors without showing any signs of slowing down. Like gold, it is slowly becoming one of the most favored tradeable assets.
Digital currencies are building its reputation in becoming one of the better trading options.
Here are the reasons why:
1. Cryptocurrency trading is secure.
Cryptocurrencies are virtual currencies that are not backed by real assets or tangible securities. They're traded between parties, with the exchange tracked on digital ledgers. These digital currencies use decentralized networks relying on blockchain technology — a distributed ledger enforced by a diversified computer network.
Its root word "crypto" is short for cryptography, which refers to the art of solving or writing codes. As such, cryptocurrencies are hard to duplicate, break into, or double spend. It's practically immune to government intervention and manipulation.
2. Cryptocurrency trading is accessible to anyone.
Regulations vary from country to country, but most cryptocurrencies are open to individuals who have access to the Internet.
A cryptocurrency enthusiast must sign up for a cryptocurrency exchange platform that facilitates buying, selling, and keeping cryptocurrency. With cryptocurrency trading, you only need a minimum amount in order to start trading. On the contrary, opening an account for stock trading requires an investor to shell out a good amount of cash.
3. Cryptocurrency trading may provide better liquidity.
Liquidity, or the ability for an asset to be converted to cash within an expected period, is important in any tradeable asset. In general, experts consider the cryptocurrency market as illiquid because transactions are dispersed across numerous exchanges, and these trades create an impact on market prices.
However, various digital platforms and marketplace allow for the buying and selling of cryptocurrencies, such as the services that this company offers. These platforms help control cryptocurrency flows, leading to greater overall trading volume. This results in a more liquid exchange. That said, these digital assets generate better prices and faster transactions.
4. Cryptocurrencies allow for faster account opening.
Before buying any type of virtual currency, you'll need to buy and sell via an exchange or platform, which requires you to create an account and store the currency in your digital wallet.
5. Cryptocurrencies are volatile but may offer high returns.
While this may concern some investors looking for stable revenues, some with high appetite risk may find this exciting. According to Investopedia, a known cryptocurrency was priced at about $20,000 per coin in 2018, the highest in the history of virtual currencies. A year later, however, the value dropped to $4,000 for each coin.
There's very little knowledge as to what exactly impacts the value of cryptocurrencies, but industry players point at inflation and the exponential increase in short-term speculative interest as two of the main reasons. The good news is that other types of virtual currencies have become more stable.
6. Cryptocurrency offers CFD trading.
A contract for difference (CFD) trading allows cryptocurrency market enthusiasts to trade and invest in an asset by engaging the services of a broker instead of opening an account in the market exchange.
In this way, an individual can speculate on cryptocurrency price movements with minimal investment or deposit. With a minimal amount, a trader can go long or buy if indications suggest that a cryptocurrency will rise in value or sell if he or she thinks the value will decline. However, this set-up doesn't shield you from losses because the profit or loss is calculated according to the full size of your position.
The good thing is that, once your projection is right, you'll have the opportunity to earn exponentially from a minimal investment.
How to start trading cryptocurrencies
According to CoinMarketCap.com, there are at least 6,500 different cryptocurrencies being publicly traded in the digital market.
The same website further pegged that the total value of digital currencies to more than $897 billion as of January 27, 2021.
To start trading, you will need to open an account with a crypto exchange.
There are a lot of exchanges out there, and an investor should choose the best one according to location (in your area), reputation, safety, and exchange rates.
Exchanges that follow strict know-your-customer (KYC) guidelines are making your transaction secure.
Most exchanges have very low minimum deposit requirements for fiat currencies (government-issued currencies, like the US dollar) and cryptocurrencies.
The Takeaway
The financial sector is quite divided in its assessment of the cryptocurrency trading market. Although anecdotal claims indicate there are individuals who've experienced high returns from a small amount of investment, there are a lot of skeptics who view it as an extremely risky undertaking.
Before embarking on cryptocurrency market trading, make sure that you have done your research and have a suitable risk management strategy in place. Start by learning more about these strategies for cryptocurrency beginners.