CRYPTOCURRENCY TRADING AND INVESTING TIPS
Cryptocurrencies have been a topic of intense discussion and debate over the past year, especially since social media giant Facebook announced the launch of its digital currency Libra. The debates and hearings on the nature of Bitcoin and cryptocurrencies have graced the news cycle and more people are beginning to wake up to cryptocurrency. This beginner’s guide will explore cryptocurrency trading for novice investors.
Why Should You Invest in Cryptocurrencies?
Cryptocurrencies are a relatively new asset class with more volatility than the rest of the market. Investors turn to cryptocurrencies to hedge their net-worth against the fall of fiat currencies. Fiat currencies have promoted a culture of centralization in the economy and this subsequently promoted inflation. Cryptocurrencies were created with the vision of decentralized and peer-to-peer electronic cash for the whole world. Unfortunately, many people have fallen victim to the hype surrounding the pump and dump cycles and consider cryptocurrency investments a bad idea. Let’s push back on that and see why investing in crypto is a good idea.
While early stage investors churned millions in profits from cryptocurrency trading and investment, some people may argue that the space has matured with the markets moving with less volatility and more stability. The volatility of cryptocurrencies exceeds that of any other investment class and this makes them distinct. If an investor doesn’t have enough appetite for risk, this probably isn’t the investment class for them.
Three Main Steps in Investing & Trading Cryptocurrencies
Buy at an Exchange
Before even consider making money off crypto, you first need to learn how to actually buy cryptocurrencies. You do this at exchanges. If you live in the U.S. we suggest using Coinbase as a first try.
Store & Protect
If you're planning on long-term holding your crypto, you must get a hardware wallet. We suggest buying one from Ledger. Ledger ensures safety which in this space is not something to be taken for granted.
Below you will find our most recent posts about blockchain technology.
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Tips and Advices for Investing and Trading Cryptocurrencies
Cryptocurrencies Have Amazing ROI
When Bitcoin was launched it was the only dominant cryptocurrency and it still is. Of note, its share of the whole crypto-market rapidly fell from 90% to around 40%, currently sitting around 65.5% as of press time. There are several reasons behind Bitcoin’s dominance despite lack of features and utilities as compared to altcoins. The block-size issue, in particular, was a huge bone of contention in the community, which ultimately led to the fork and creation of Bitcoin Cash and the ensuing split of the community. So, yes, there are several potential investment opportunities in altcoins.
Picking the Right Cryptocurrencies for Your Portfolio
As an investor, there are a few things to look for when reading a whitepaper.
The Project’s Value Proposition
Check the whitepaper for any real utility it brings into the ecosystem. The perfect example of this is Ethereum. There is a reason why it received wide acceptance in the dev community; its sheer value addition. For the first time, developers around the world had a platform which they could use to build their own DApps on a blockchain. A good way to pick projects for investing is to find the projects which are specifically working on solving challenging problems.
Here are some of the projects that are looking to solve big problems:
Privacy: Monero, Zcash, Dash
Scalability: OmiseGo, Cardano
Utility of Tokens
Ask the following questions to ascertain the utility of the token:
- Does this project need to be on the blockchain?
- Does this project need tokens or have the right application for it?
Tokens create an internal economic system within the confines of the project and help buyers and sellers trade value within the ecosystem. This helps people gain rewards on completing a set of tasks and this is an important feature of the token.
The token can also enable the holders to experience better UI/UX inside the confines of the particular environment. For examplw, in the Brave browser, BAT token holders get the rights to enrich customer experience by using their tokens to add advertisements or other attention based services on the Brave platform.
This helps in an equitable distribution of profits or other related financial benefits among investors in a particular project.
How to Buy Cryptocurrencies
Crypto-to-crypto exchanges allow crypto exchanges between paired crypto like BTC, ETH, and BCH. Binance, OKEx and Bitmex are examples of crypto-to-crypto exchanges. While they do offer a great service, the problem is that they are all centralized, which makes them vulnerable.
This is an extremely risky proposition when you consider the sheer amount of money that these exchanges deal with each and every single day. That’s the reason why wallet services are so popular among traders.
Steps in the process:
- Sign up for a new account on the exchange
- Verify identity (KYC)
- Deposit funds (fiat or crypto)
Best Time to Buy Cryptocurrencies
Perception and market entry plays games with the best of us. Certainly, in 2010, no one thought Bitcoin was going anywhere so when it hit $100, there was still not a lot of investors. But fast-forward to today with Bitcoin hovering north of the $8,000 mark, new investors might be thinking it’s too late! Is it? Not when the historic price nearly reached the $20K mark! It’s all in perception and hedging on price patterns.
How to Store Cryptocurrencies
Choosing between a hot wallet and a cold wallet may be tricky. Let’s go through the basics of both. Hot wallets are connected to the internet. Cold wallets are similar to cold storage. These wallets are offline at all times. Keep this distinction in mind when making a choice.
Basically, if you are frequently using your crypto then hot wallets are more convenient. But if you’re a HODLer or an occasional trader, cold wallets may be the best option.
Examples of Hot wallets: Exchange wallets, desktop clients, and mobile wallets
Examples of Cold/Hardware wallets: Ledger Nano S, Trezor, Keepkey, Paper wallets
What is a Cryptocurrency Paper Wallet?
How to Pay Taxes on Cryptocurrencies
To round this all up, if you are new to cryptocurrency and trading, it is going to feel like there’s a huge learning curve. We’d be lying if we said that wasn’t true. The point is not to become discouraged. Crypto Trader News has a lot of articles and resources and there are plenty of crypto communities that will help guide you through the cryptosphere. Just be cautious, do your research, and never, ever share your private keys with anyone.
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Content provided by CryptoTraderNews is for informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. All information is of a general nature. As always, there is risk with any investment. In exchange for using our products and services, you agree not to hold CryptoTraderNews Pro, its affiliates, or any third party service provider liable for any possible claim for damages arising from decisions you make based on information made available to you through our services.