The recent revolution in digital currencies has made investing in cryptocurrency one of the most profitable ways of investing. Be it for technological convictions or just as a portfolio diversification strategy, investors from all walks of life are showing continued interest in digital currencies. Here are some basic concepts and things to consider if you are new to the space.
How Do Cryptocurrencies Work?
Cryptocurrencies are used to make secure payments and store money without the need for a bank or centralized institution. This is possible because instead of trusting a third party, they are recorded pseudonymously as transactions on a blockchain. A blockchain is simply a ledger of public information that is distributed and maintained across a network of computers. The catch is that the data on it cannot be tampered with once it is “mined.”
Every unit of cryptocurrency is created through this process of mining. It involves using vast amounts of computer power to solve complicated math problems in order to keep the system secure.
However, average users don’t need to get involved in mining to gain access to cryptocurrencies. Traders can buy the currencies from brokers, then store and spend them using cryptographic wallets. Moreover, the value of cryptocurrency is based on the market that traders and investors create for them.
The Benefits of Trading in the Cryptocurrency Market
Ease of entry
Unlike the stock market and other trading channels, there is almost no restriction to enter the bitcoin market. All you need to do is identify a seller that you can buy from.
Bitcoin trading is possible from any part of the world. This makes the currency significant as it is not affected by the economy of a single country.
Similar to the other currencies in the foreign exchange market, Bitcoin is highly volatile. By taking advantage of the slight shift in the economy, you can make huge profits.
Bitcoin trading happens 24/7. Thus there are no trading limitations.
Step One: Choosing a Cryptocurrency
With more than 8,000 cryptocurrencies in the market, Bitcoin is the most established cryptocurrency with the largest market cap. Considering the cryptocurrency market with volatile and dynamic values, it is worth exploring crypto graphs to choose the cryptocurrency you are interested in investing in.
Cryptocurrencies are volatile, and price swings are unavoidable. Being a beginner, you should also explore different platforms like Coinmetrics or Dune Analytics that record cryptocurrency values and other important data. These will give you a clear idea of a cryptocurrency's development over time.
Step Two: Choosing a Cryptocurrency Wallet
There are many options on the market when it comes to wallets. Choosing the right one will depend on your preferences on flexibility, ease of use, and more importantly, your security needs.
Desktop software wallets
These wallets can be downloaded and installed on desktop PCs and laptops. Though accessibility is limited to computer systems in which they are installed, this particular variety offers the highest security level.
Online software wallets
These wallets run on the cloud and can be easily accessed from any computing device and any geographical location.
Mobile software wallets
Unlike the other two varieties, these wallets run on smartphones through an app. This range of wallets is usually much simpler and smaller in comparison to the normal desktop ones.
Hardware digital wallets are different from software ones in regard to storing a user's private keys. Hardware wallets offer added security by storing keys offline, and they are easily compatible with many online interfaces and can handle different currencies. With your digital currency being kept offline, the risk factor or security concern of hard wallets is also much lower.
Paper digital wallets
The term "paper wallet" simply refers to the hardcopy printout of a user's both public and private keys, and these kinds of wallets are user-friendly and ensure a high level of security.
Step Three: Choosing the Right Base Currency
Being a crypto trader, it is vital to select the correct base currency as choosing the wrong one might damage your portfolio.
Bitcoin is the most popular decentralized cryptocurrency, leading the crypto space so dominantly that the terms crypto and bitcoin are sometimes used interchangeably. However, there are other cryptocurrencies like Ethereum, BCH, and LTC that can be relied upon for making crypto investments.
Tether (USDT), a common base currency, is a blockchain-based cryptocurrency that aims to keep cryptocurrency valuations stable instead of the wide swings observed in Bitcoin. The Wall Street Journal reports that 80% of all bitcoin trading is done in Tether, and the fiat collateralized stable coins to which Tether belongs is a major source of liquidity for the cryptocurrency market. Here are some more reasons to choose Tether as your base currency.
- Stability: Forex and stocks trading is usually carried out from a stable coin. As a result, it is possible to pinpoint changes in the asset's value that are being traded. Trading in a coin that is volatile might make the TA harder to apply. Because of this, USDT and its stability can solve trade according to your strategy.
- They preserve their value during downtrends: It provides investors with additional flexibility as it serves as a dollar replacement on many popular exchanges. When bears start to take over the market, investors have a few options, one of them includes selling their holding and converting it to fiat. However, the procedure takes time and is often expensive. Tether provides a new option by offering to convert your holding to Tether and avoid the fee and volatility.
Step Four: Choosing the Exchange Cloud Service
There are several cryptocurrency exchanges that allow you to trade seamlessly. Below are five fundamental features and things to look for when choosing the right cryptocurrency exchange for you:
- Geographical location and restrictions;
- Transaction fees;
- Security, anonymity, and support;
- UI and ease of use;
- Volume and liquidity.
Wisebitcoin offers all of these necessary features and is one of the most advanced trading exchange cloud service providers anchoring over 280 cryptocurrency exchanges worldwide. With high liquidity for Bitcoin and USDT, it offers better options needed for avid crypto traders.
To get started with trading, visit Wisebitcoin.