Cryptocurrency Trading

In recent years, the term ‘cryptocurrency’ (or ‘crypto’) can be found mentioned all over the media. And one type in particular – bitcoin – has made its fair share of headlines. Cryptocurrency trading has soared in popularity as an alternative to trading other currencies in recent years and is not likely to disappear any time soon. They’re disliked by many banks and governments, but they have yet to be understood by the vast majority of people as to what they really are. Read on to find out more about them.

 

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What is a Cryptocurrency?

A cryptocurrency is a new type of currency unlike the ones that we’ve known and used for thousands of years in that it is digital (or virtual). With regular currencies, we can define them as an exchange medium between buyers and sellers when purchasing goods or services. Cryptocurrencies serve the same purpose; we just can’t hold them in our hands the same way that we can hold notes or coins. They exist electronically and are powered by cryptography.

 

The Start of Cryptocurrencies

It all began back in the 90’s after several failed attempts to create Trusted Third Party based systems of digital money. Then in 2009, Satoshi Nakamoto (an anonymous programmer, or perhaps a group of them under the same name) brought Bitcoin in to our lives. It was described as a peer-to-peer electronic cash system, a concept reminiscent of peer-to-peer networks used in sharing files online. The bitcoin was created as a decentralised alternative to other currencies, with no central authority of control.

 

 

Why Are Decentralised Currencies Important?

A decentralised system can be advantageous because it can operate regardless of holidays/bank holidays and does not depend on a single entity (bank or government) to control it. A single entity which can make a mistake or possibly become corrupt. It’s important to remember that decentralisation involves transparency since every person in the network is connected to every other person. If one of them disappears, the value of the cryptocurrency is unaffected.

 

How Do We Trade Cryptocurrencies?

They can be traded in many brokers in much the same way as other currencies. You can find out about the Cryptocurrency Trading Types here that brokers’ offer clients. There are however a few things you should keep in mind before starting:

 

The Cryptos Market is volatile.

For the time being, the value of cryptocurrencies can change rapidly and drastically. This means you have both the opportunity to make a great profit quickly, OR lose your investment quickly. If you’re used to trading during times of news when volatility is typically high, then this could be your thing. If not, then Cryptocurrency trading might not be the best choice. It is always a risk no matter what time you choose to trade of course, but proper research and planning can minimise the risks involved in trading, and this applies to everything, not just cryptos. You should however keep in mind that the volatility of this market is expected to decrease in future.

 

Cryptocurrency value is not dictated by geopolitical issues or economic performance as with other currencies.

Instead, it is driven by things such as the media, the fact that there is limited supply of it as with Bitcoin, the growing lack of confidence in centralized currency systems, and the perception of the general public about its value.

 

Leverage availability is typically lower with cryptocurrencies.

But does depend on the individual broker. This is because of the current high volatility associated with cryptos these days that can be a risk in margin trading. If the market volatility decreases in future then the availability of leverage options should increase.

 

To learn more about trading take a look at our Education section here.