Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, cryptocurrency has exploded in popularity, with new coins and tokens being created on a regular basis. As of January 2018, there were over 1,400 cryptocurrencies in circulation, with a total market capitalization of over $500 billion. This is due in part to the impressive returns that many cryptocurrencies have generated for investors. Because they make such a lucrative investment, more and more people are getting interested in trading crypto. However, before you start trading, there are a few things you should know in order to really set yourself up for success.
1. A Short Guide To Choosing A Platform
When choosing a platform for cryptocurrency trading, there are several things to take into consideration. Before purchasing your first bitcoin or altcoin, you should always learn about which platform is the most popular in your current location. Whether you live in Australia, the USA, or China, there might be different restrictions and benefits in place when it comes to choosing certain platforms. Sometimes, the restrictions stem from government policies, and other times it’s simply about the platform not offering its full content in every location. Secondly, think about what kind of return you want. Investors who want the highest returns should consider an exchange that offers altcoins, while those who prefer more established currencies will be happy with the stability of something that mostly deals with the most valued coins. Next, take into account what fees the platform charges. The last thing you want is to be nickel and dimed every time you make a trade. Finally, think about user experience. How easy is it to navigate the platform? Is customer service available in case you have any problems? If you’re completely new to trading, you might want to consider a platform that’s beginner-friendly and easy to understand before heading to deeper waters.
2. Mining Crypto
When it comes to mining cryptocurrency, there is a huge amount of options available. Mining bitcoin is no longer feasible for most people because the process requires extremely powerful hardware and consumes large amounts of electricity. Many cryptocurrencies can still be mined with CPUs or GPUs though, which means they’re easier to obtain in the first place. There are important advantages and disadvantages to mining crypto that you should consider, even if you have the basic means to do so. Think about how much it costs to get started, and whether or not you’ll make that money back. While the returns are smaller than they used to be, there is still a chance that your initial investment could pay off if you mine enough coins early on. After all, even one bitcoin would have made for an excellent return at its peak value.
3. Coin Selection
There are over 1,400 crypto coins in circulation, and while that can seem like a lot of options to choose from, it might still not be enough. If you’re the kind of person who believes in diversification, you should consider investing in several different kinds of coins rather than just one. This will ensure that your return doesn’t hinge on a single coin succeeding, which might not happen. That said if you have enough starting capital to really play it safe, investing in one of the highest valued coins could be the way to go. That way, even if the price starts to drop, you’ll still be able to sell fast enough to at least come out of it even. When you’re ready to start diversifying your portfolio, think about the kinds of coins that interest you and check for a list of popular cryptocurrency coins. You could even create a spreadsheet with all the cryptocurrencies you want to invest in and compare their features side by side, or use an online crypto portfolio tool.
4. Using A Digital Wallet
A digital wallet is a must-have for anyone who wants to start trading crypto. This is because it’s the only way to store your coins securely, which is obviously important. You can either use a software wallet that installs on your computer, or you can use a web or mobile wallet. Whichever option you choose, make sure you select a reputable and reliable provider. When you’re choosing a wallet, think about the security features it provides. For example, does it have two-factor authentication? Is there an option for multiple passwords? How often is the database backed up? These are all important questions to ask when you’re looking for a digital wallet. If you’re serious about getting into this kind of trading, it would even be worth it to pay for a wallet that offers extra security features.
5. Tax Regulations
This is something that many people don’t consider, but it’s important to pay attention. Make sure you’re aware of the tax regulations surrounding cryptocurrency in your country and plan ahead because if you’re caught off guard, it could wind up costing you a lot of money (in addition to creating problems with the government). Since each country has different laws, it’s important to do your own research on the matter and contact an accountant or lawyer if you have any questions. Talking with a lawyer is especially important if you’re looking to start a business in the crypto world. However, a good place to start would be to go to online legal sites that offer general information on cryptocurrency regulations in your country.
6. Trading Crypto
This is the part of trading where you actually make your money. Basically, you buy a coin when its price is low and sell it when the price is high. Sounds simple enough, right? Unfortunately, predicting the right time to buy and sell can be extremely difficult, even for experienced traders. There are a few things you can do to make it easier, however. First, familiarize yourself with the different technical indicators and chart patterns. Second, use limit orders rather than market orders. And third, always set a stop-loss order in order to protect yourself from losing too much money. Of course, as with any other kind of trading, making sure you are aware of the market trends is also important.
Trading cryptocurrency can be a profitable investment, but it’s important to remember that it’s also a high-risk investment. Before starting, make sure you educate yourself on the basics of trading crypto and consult with a financial advisor to see if this is the right investment for you. By following these tips, you’ll set yourself up for success and avoid making some of the common mistakes made by new traders.