Cryptocurrency is buzzing as more and more people are looking to invest in and trade crypto. If you are interested in learning about cryptocurrencies and crypto trading, sit tight! There is an overwhelming amount of information around, including niche terminology, that makes it difficult for total beginners to understand crypto investing and trading. To help you confidently jump into the world of crypto, we’ve put together this guide that will introduce you to the basics of cryptocurrency trading.
An Introduction To Cryptocurrency
Cryptocurrencies are digital assets that are not controlled by a single entity and exist on a blockchain platform that records and processes transactions. They can be used to purchase goods/services and exchanged and stored for investment. You can also cash out funds invested in crypto to a fiat currency. Currently there are thousands of cryptocurrencies and tokens that users can acquire and trade across different blockchain networks. Bitcoin is the first popular cryptocurrency and is currently leading the market, closely followed by Ethereum.
Is Cryptocurrency Trading For You?
Cryptocurrency trading is a high-risk game, but it can definitely lead to great rewards.
Crypto assets are characterized by their high-volatility, meaning that their value can dramatically rise and drop in a short period of time. This can be discouraging to risk-averse investors that aren’t willing to take the chance of losing their money in a potentially successful crypto trade. However, due to their volatility, trading crypto can also lead to much higher-returns, even in the short term.
You should also take into consideration that cryptocurrency trading is fairly new, meaning that trading regulations and rules have not been implemented into the market as one might see in the stock market. Trading volume, though rising, is still not as large as in the stock market.
If you are willing to handle risk and are looking to win big, crypto trading will be a great option for you. You also have the option of investing in a cryptocurrency of your choice and holding your assets for an extended period of time and see positive results in the long term.
How To Trade Crypto
One of the greatest aspects about cryptocurrencies is its wide accessibility. Trading crypto is a possibility for nearly anyone, with a low entry barrier and a market that is open to investors 24/7. The only requirements are funds for trading and opening an account on a crypto exchange.
Eager to start trading crypto? Follow these steps:
1. Choose a Trading Platform
The first step to trading cryptocurrencies is to select a crypto exchange, or the platform that allows you to buy, sell and trade these assets. Crypto traders have two main options when it comes to selecting an exchange: centralised vs decentralised.
Centralised cryptocurrency exchanges act as a middle-man facilitating exchanges between the buyer and the seller. Generally, centralized exchange platforms deliver a very user-friendly trading experience. However, they can charge considerable fees for the services they provide.
On the other hand, we have decentralised crypto exchanges, where there are no third-parties involved in trades and users can directly exchange one crypto asset for another through peer-to-peer transactions.
No matter what kind of exchange you prefer for trading, we have you covered. Below, you’ll find our top recommendations for centralised and decentralised crypto exchanges.
2. Selecting Crypto To Trade
Crypto enthusiasts have thousands of assets to choose from to invest and trade, with Bitcoin being the most popular and recognized currency in the market. Other big players include Ethereum, Solana, Litecoin, Polkadot, Tether, Tezos and Cardano, with decentralized finance cryptos especially gaining momentum.
There are countless options with a small market cap around, however these are a lot riskier and less friendly for beginner investors. Generally, it is recommended to go for solid cryptos that are well established and supported.
Regardless, when choosing a crypto to invest or trade it is vital to do your own research and be well informed. This will help you understand how each asset works, get a grasp of its community and determine whether it is a good option for you.
3. Define your trading strategy
There are many approaches and strategies investors can take to trading with crypto. A lot of beginnners start off trading using a HODL (hold on for dear life) strategy, which involves buying crypto and holding on to the purchased assets no matter how its price fluctuates on the market. This approach is typically used by traders when they are confident in the future growth of a specific currency.
Day trading is another type of crypto trading. This approach involves buying, selling and exchanging crypto assets within the same day with the sole purpose of taking advantage of price changes that take place in a short period of time.
Other investors also trade assets based on predicted trends, acquiring assets that are predicted to increase their value and selling assets when their price falls. This strategy can require some research, since success depends on accurately identifying trends.
More complex trading strategies, such as hedging, can be utilized by more experienced traders. In this case, investors attempt to minimize the risks of crypto trading using different methods like portfolio diversification, short-selling, and futures.
Best Centralized Exchanges To Trade Crypto
If you have decided that trading crypto is the right choice for you, you’ll find multiple crypto exchange options to help you move forward. There are several factors to consider when selecting an exchange such as their transaction fees, security features, supported digital assets and user-friendliness.
Coinbase (Recommended for people getting started)
Coinbase is a popular option for buying, selling and trading crypto especially suitable for beginners. Born in 2012, Coinbase has been around for a considerable amount of time and continued to grow over time until now, reaching 73 million verified users and over 100 countries. It is available on a browser through their website and also through a mobile app and supports over 60 different assets.
Coinbase doesn’t allow its users to directly trade with their peers and instead acts as a broker service that sells, buys and converts crypto assets for their users. As a result, interactions are very simple on the user’s end, making it an ideal option for those that are just dipping their toes in the world of crypto. All you have to do is register an account and link it to your bank account to get started. Coinbase also offers a crypto wallet, which you can use if you prefer to store your private keys outside of the exchange.
KuCoin, founded in 2017, is one of the top cryptocurrency exchanges having 10 million investors reported worldwide. Users enjoy a wide range of investing and trading options with over 500 coins to choose from and more than 1,000 trading pairs. It also allows you to start investing with as little as $1 dollar. From a technical standpoint, KuCoin is also pretty efficient, supporting up to 1 million transactions per second.
KuCoin’s trading interface can be accessed directly from your web browser, without any additional software required. Despite being jam-packed with trading tools, KuCoin maintains a simple, easy to navigate design that will also appeal to beginners.
Users can easily purchase crypto assets using their bank cards, Apple Pay and bank transfers. Plus, the KuCoin app (iOS and Android) provides users the convenience of trading anywhere, anytime.
Another useful feature at KuCoin is you can withdraw up to 2 BTC worth of assets without the need for KYC (know your customer) data.
Kraken is a cryptocurrency exchange, launched in 2013, that was initially created for Bitcoin but now supports over 50 different cryptocurrencies. Users can start buying crypto on Kraken with as little as $10 dollars. It currently supports several trading types including spot, futures, margin and over-the-counter trading.
Kraken implements strong security measures to protect their exchange and its users by storing 95% of all deposits offline, in cold storage and encrypting all sensitive account data. It also supports 2FA, timed account lock-outs and sends email confirmations for withdrawals.
In terms of fees, Kraken has an elaborate and competitive fee structure designed to reward the most active traders. It’s interface is clean and easy to use making it a great option for beginners and advanced traders alike.
Bybit is a cryptocurrency exchange established in 2018 offering a professional experience for derivatives and futures traders looking for leverage trading options. Unfortunately, Bybit is not available to US customers unless using a VPN network. We recommend trying NordVPN. We’ve had great success with their product.
The security measures at Bybit exchange are stringent, spending 20% of its annual budget on platform security. That’s a 5% spend increase over the industry standard. Like many other exchanges deposits are stored offline in cold wallets and assets only get moved to active hot wallets only when requested by the user for trading.
To activate all features, accounts are required to use two-factor authentication and to help users in need they offer impressive 24/7 customer support via phone and chat in multiple languages.
Withdrawal fees are reasonable at only 0.05% and users are allowed to withdraw up to 2 BTC of assets without the need for KYC. If you’re looking for a platform with advanced trading technologies Bybit is an excellent choice.
Best DeFi Exchanges to Trade Crypto
Pancake swap is a DEX on the Binance Smart Chain that can be used to trade crypto and earn through a linked crypto wallet. The platform offers its users a wide range of features including token trading, yield farming, syrup pools and liquidity pools that enable you to potentially grow your crypto investment. It also offers lottery tickets that allow users to win prizes. All you need to start trading on Pancake Swap is a Binance Smart Chain compatible wallet and BEP20 tokens to trade.
Since Pancake Swap uses open-source software, requires no registrations and keeps your assets directly in your custody using your own crypto wallet, it is considered a relatively safe platform for trading.
Uniswap is a decentralized exchange built on the Ethereum blockchain that is managed by its community of UNI token holders and delegates. It allows its users to easily exchange any ERC20 tokens.
In order to provide liquidity or trade on the Uniswap Interface, you’ll need to set-up and connect a Web3 wallet to the protocol. For each trade, Uniswap charges users a 0.3% fee. Liquidity providers receive a part of these fees in proportion to their contribution to Uniswap’s liquidity pool.
In terms of safety, Uniswap’s decentralized, open-source nature gives user’s a certain level of safety. Since assets are kept in your custody, their safety ultimately depends on the safety of your linked wallet.
Bisq is another popular DEX for peer-to-peer trading consisting of open source software that can be installed on your desktop. In order to trade on Bisq, users are required to hold some Bitcoin. Trading also implies transaction fees that are calculated as a percentage of trade size (0.1% for makers and 0.7% for takers ) in BTC.
One of Bisq’s main advantages is its support for a variety of payment methods, allowing you to buy and sell Bitcoin using both fiat and cryptocurrencies. It is also very secure since all data is transferred over Bisq’s own secure peer-to-peer network and crypto is kept in 2-of-2 multisignature addresses controlled solely by the user.
Like other decentralized exchanges, Bisq doesn’t require registration which provides users with anonymity when trading.
SushiSwap is a popular decentralized exchange built on the Ethereum blockchain originally founded by two anonymous developers. Users that become liquidity providers to SushiSwap earn SUSHI (an ERC20 token). Currently Sushi Swap allows its users to exchange ERC-20 tokens, as well as participate in liquidity pools, staking, lending, borrowing and yield farming. Trading fees for exchanges on this DEX are 0.3%.
Now that you’ve gotten familiar with the basics of cryptocurrency trading, you are ready to take the first step and put your knowledge to practice. Remember that not only will you need a reliable trading platform, but also to continue developing your crypto knowledge and trading strategy. It is important that you develop a plan as to how you select which currencies you want to invest and trade with and how you want to proceed with your trades, considering the impact of all risks.