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50% of Bitcoin investors made their first investment in 2021. So it goes to show that the Cryptocurrency market is still attracting a lot of new investment. So with that in mind, let’s take a closer look at How to Trade Crypto for Beginners.
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Over the last couple of years, cryptocurrencies such as Ethereum and Bitcoin have garnered much attention from would-be investors. Many people have shown interest in jumping into the crypto space. That’s mainly because of the volatility of crypto assets. There have been hundreds if not thousands of stories of overnight millionaires thanks to the unprecedented price increases and ever expanding uses of cryptocurrencies and associated technology.
For more on Cryptocurrency technology uses, don’t miss What Are NFTs And How Do They Work?
If you know just how to time the market right, crypto trading can give you much higher returns than many other traditional investments. While this seems quite lucrative, it would be unwise to jump into the deep end on the next crypto wave blindly.
It’s crucial that you first understand exactly what you’re investing in, the opportunities ahead, and the pitfalls. This article will discuss just that and a comprehensive beginner’s guide for trading cryptocurrencies.
Without further ado, let’s get into How to Trade Crypto for Beginners.
What Are Cryptocurrencies?
Before we proceed any further, do you even know what crypto is? If not, this section is for you. Essentially, cryptocurrencies are digital currencies with zero correlation to any government or country.
For that reason, the records of those who own specific cryptocurrencies are held on computerized databases that are heavily secured by the strong cryptography of blockchain technology. Cryptocurrencies have a wide range of use cases. While they can be used to buy everyday items at stores, they are also traded as digital assets to incur investment profits.
These profits are made mainly by buying and selling cryptos on exchange platforms like Coinbase and Binance. All the same, you need to keep in mind that crypto prices can be very volatile. Therefore, if not careful, you could lose a lot too.
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For more explanation on crypto, don’t miss our related post What are Cryptocurrencies?
Why is Crypto A Good Asset To Trade?
If there’s one thing that could make you filthy rich overnight is crypto. But at the same time, you run the risk of losing a lot of money if you aren’t sure what it is that you are getting into. So, while investing in crypto is risky, it can potentially be highly profitable. That’s what makes it so attractive.
And despite all the inherent risks that come with cryptocurrencies, the blockchain industry is consistently growing. It’s a much-needed financial infrastructure that allows investors to access institutional-grade custody services. Even better, individual and professional investors are getting the necessary tools to safeguard and manage their cryptos.
The best part is that we are still in the early stages of cryptocurrency adoption. What does that mean? While it may seem like a very lucrative field as it is, this is just the beginning. We still have many crypto use cases that have not yet been implemented. For instance, the NFT market and Metaverse is just getting started.
In fact, according to a 2021 report by Morgan Stanley on the metaverse, the luxury fashion NFTs alone is expected to rise to $25 Billion of the total $300 billion NFT market by 2030.
With that in mind, let’s explore other reasons that make crypto an excellent asset to trade.
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Crypto Volatility
Even though the cryptocurrency market is still relatively new, it has seen a lot of volatility. That’s mainly because of a lot of short-term speculative interest. A good example would be the case of Bitcoin’s price. It surged to a high of $19,378 in 2017 October, only to dump to a low of $5 851 in 2018 October.
While other cryptocurrencies have been deemed more stable than Bitcoin, one thing’s for sure; emerging technologies are prone to speculative interest. But this volatility is part of the reason why the market is very intriguing.
Rapid intraday price changes offer cryptocurrency traders various opportunities to either go long or short. However, this also means the traders could carry a higher risk. Before diving into the crypto industry head first, it’s vital that you first do your homework and devise a risk management strategy.
Crypto Market Hours
Unlike forex and stock markets, cryptocurrency markets are open 24/7 throughout the year. That gives traders the ability to buy and sell their assets without limitations as the market doesn’t close. And the best thing about this is that you have the luxury of trading when it suits you rather than the market dictating when you can trade.
Long and Short Positions
When you acquire a cryptocurrency, you invest in the asset, hoping that its value will rise over time. When trading on the price of a cryptocurrency, on the other hand, you can profit from both rising and falling markets. Going short is the term for this.
As an example, suppose you’ve decided to open a short trade on the price of Ether because you anticipate the market will collapse. Your trade would profit if you were correct, and the value of Ether declined against the US dollar. If Ether’s value surged against the US dollar, however, your stake would lose money.
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Is Now a Good Time to Start Trading Crypto For Beginners?
Certainly, the cryptocurrency markets have dropped dramatically in 2022. This means we now have a massive opportunity to invest in some promising cryptocurrencies at historically low prices. It may seem like there’s a dark cloud looming over the market right now, but there’s still so much growth yet to be witnessed. Alike, there are many use cases to be explored.
With the recent emergence of NFTs there has been a strengthened case for the implementation and use cases of both Ethereum (ETH) and Polygon (Matic).
Because there are so many factors that play into the price of a coin, timing a cryptocurrency purchase can be tricky, if not impossible. People only have so much risk tolerance, and the worry of missing out on a short-term return by selling a crypto position is a seductive siren song.
Your best option with crypto, like any other investment, will always be to hold on for the long run and buy a little at a time. While it’s not incredibly sexy and doesn’t deliver any of the Vegas-like pleasure for investors looking for a quick winner, this technique will yield the best results.
Which Crypto Should I Start With?
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Some of the most well-known cryptocurrencies include Bitcoin, Ether, and Matic. However, there are thousands to pick from now. But if you are after a bit more volatility, you can look at Dogecoin, Shiba Inu, and Solana.
While we want to settle for the most solid crypto, there are several variables to consider while selecting the best cryptocurrency for you. The fundamental analysis assesses an asset’s intrinsic value, which is more challenging with crypto. You must also consider risk management.
Some currencies, whose manufacture necessitates a lot of computational power, may cause you to be concerned about their environmental impact. If that’s the case, you could prefer an environmentally friendly alternative.
Alternatively, you might be interested in using a specialized coin exchange or broker that exclusively works with a restricted number of currencies, limiting your options. This prevents the confusion that occurs with having too many options.
Don’t miss our related post on 4 Cryptocurrency Price Prediction 2022.
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Where Can I Buy Crypto?
Nowadays it has never been easier to open an account with a rage of Brokers and Exchanges and start trading cryptocurrency as a beginner. Some of the best places to start are brokers such as the leading social trading platform eToro or Crypto Exchanges such as Binance.US, Coinbase, Crypto.com, Kraken and Gemini.
