Cryptocurrencies are digital or virtual currencies that use encryption techniques to regulate transactions and generate new units. A cryptocurrency is difficult to counterfeit because of this process of “mining” for coins. Cryptocurrencies typically have a limited supply so they cannot be printed infinitely, which means the value of a single coin will usually rise over time as demand increases. There are thousands of cryptocurrencies on the market today with varying degrees of popularity and utility including Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), and many more. Cryptocurrencies are easy to acquire, trade, and transact with relative anonymity, which makes them the perfect investment vehicle for those looking to build a portfolio of assets that can be purchased on an exchange. In this guide, we’ll discuss some of the most popular crypto-trading methods as well as what you need to start trading cryptocurrencies today.
Buying a digital asset
When it comes to understanding how to buy cryptocurrency, the easiest way to do so is on an exchange. An exchange acts as a liaison between buyers and sellers of currency, accepting currency in return for trading it at market prices. To be able to learn how to arbitrage bitcoin, users must first find a cryptocurrency exchange. To do so, conduct a Google search for “ [insert your country] cryptocurrency exchanges” to bring up a list of all available options in your geographical region.
How does it work?
To get started trading on an exchange, users will need to register an account and verify their bank details. This process usually only takes a few minutes but it is important to remember your username, password, and two-factor authentication (2FA) code for security purposes. Remember that 2FA is something you need to do with all of your online accounts. This adds another layer of security to keep your account safe from unauthorized access in the event someone else gets a hold of your login credentials.
What would I need to start trading?
To take the next step and start trading cryptocurrency, you will need to find a suitable exchange. For example, Coinbase is an option that offers users the ability to buy BTC using their credit card as well as trade Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH). If you already have BTC or ETH, transferring those coins to your new account is pretty straightforward. Not only does Coinbase allow for users, but they also offer so-called ‘wallet’ services which can be used to store your digital currencies safely. If necessary, go to websites that can give you some helpful resources as guides in your trading journey.
Types of cryptocurrencies and what they’re used for
Though it’s not the only cryptocurrency to exist, Bitcoin is by far the most popular and one of the easiest to purchase. It also happens to be a great choice for those looking to simply trade. To understand how to trade bitcoin, you have to first know what it is used for. BTC has become a currency that anyone can transact with no need for banks or middlemen. While this currency is becoming more widely accepted as payment across many online retailers, there are still some limitations on it due to use – namely that governments around the world are still figuring out how exactly they want to regulate it.
Developed in 2015, Ethereum was created specifically so developers could create decentralized apps using Smart Contracts. Ether is the cryptocurrency used for transactions on the Ethereum network so investors should pay attention to how it performs. As of this writing, Ether has grown over 4,000% in value since the beginning of 2017 which makes it an attractive investment vehicle!
Another popular option, Litecoin, was created by former Google employee Charlie Lee in 2011. It was built using Bitcoin’s core code with a few key differences including speed and almost zero transaction fees. When you trade bitcoin, keep in mind that LTC trades at about $30/per coin at the time of publication which means you need to be willing to spend a bit more than 0.1 BTC if you want to buy 1 LTC.
There are many different crypto values and purposes. Ripple (XRP), for example, is designed to be used by banks and other institutions to facilitate quick transfers across international borders. Ethereum Classic (ETC) was the original blockchain that supported smart contracts but after a split in 2016 following the DAO hack, ETC has shown promising growth since! In mastering blockchain you must start off by learning the basics of Blockchain and cryptocurrency.
Committing your coins safely
For those who understand how to trade bitcoin well, this next step may seem obvious – you need to store it somewhere safe! Most people do this using an offline wallet which can be downloaded onto any computer with an internet connection. However, if you’re someone who would like more protection than that, consider pairing up your ledger wallet with an external hard drive. This gives you both added storage capacity and a way to encrypt your data so you only have access to it. If you happen to know someone who has done this before, ask them how they did it and what precautions they took when storing their digital currencies.
The benefits of using cryptocurrencies as an investment vehicle
Unlike traditional assets, cryptocurrency isn’t taxed – yet. While this will likely change as more governments figure out how to regulate it, investors looking to buy now can avoid paying capital gains tax until they sell at a later date. Another benefit is that no one controls the supply of cryptocurrencies. With fiat currencies like dollars and euros, central banks are responsible for creating new units of currency but with BTC and ETH, the only way you’ll get your hands on more coins is by purchasing them.
One last benefit worth mentioning is that not all exchange sites are created equal which means less competition in some cases. This could very well lead to greater profits for those who understand how to trade bitcoin! What any investor should know is that nothing in this world is guaranteed – including crypto value. It’s fun for many people because it feels like you can make money for free but it’s important to remember that the markets are still volatile and there are many risks involved when you buy bitcoins.