Cryptocurrency vs. Forex
The foreign exchange is also known as the Forex. This is where all the world’s foreign currencies are traded on a decentralized global market. Both the Forex and cryptocurrency markets are influenced by supply and demand. The cryptocurrency market is structured to work identically like stock market trading with extreme price swings, stop-loss protections, profit objective orders and volatility that comes with currency speculation in the Forex. There are few differences between cryptocurrency trading and Forex trading. The biggest difference that sets these two markets apart is most cryptocurrencies have a limited supply. New supply is added at a predetermined and decreasing rate. Another difference is the size of the markets. Forex is estimated at 5 trillion while the cryptocurrency market is younger and smaller at 3 billion. A crypto coin’s value is heavily influenced by the cryptocurrency eco-system while the Forex is influenced by the economics of the individual countries that are being traded. Finally, cryptocurrency can be traded all day, every day while the Forex is only open all day for five days. See The Future of Blockchain & Cryptocurrencies
How to Buy & Sell Cryptocurrencies
Now that you have a better understanding of the structure of the cryptocurrency market, it is time to review the general process to buying and selling cryptocurrencies.
Should You Buy Bitcoins or Altcoins
Bitcoins are a popular option for starting out in cryptocurrency investing and trading. Although at this stage while they are high priced, they are also the most stable cryptocurrency. Bitcoins are available on most if not all the crypto exchanges operating today. In Europe, you can use Bitcoin.de and Kraken. In the USA, Coinbase is a popular choice, in Africa there is Luno, and in Asian, there is OKCoin and BitFlyer. These are only some of the options you have available to you. Altcoins are defined as any cryptocurrency that is not Bitcoin. There are hundreds and hundreds of altcoins. They are considered riskier, but there are a few options that have risen in the market. These are more stable and are still at a lower price per unit than Bitcoin making them an ideal entry coin for traders. If you would like to trade in an altcoin, there are plenty of exchanges that offer alternative coins to Bitcoin. Some strictly will sell a specific altcoin, some will trade a few, and a few of the bigger ones will trade them all. There are literally hundreds of altcoins in the market so you may have to search for the best exchange that trades in the coins you want. During that search, consider where you live as that will play a role in which exchange you can use. In the USA, there is a limited number of exchanges that are allowed for example. It is better to try and select an exchange that is as close to your geographic location as possible. If that isn’t an option, choose an exchange based in a country with a strong legal system. This practice increases your chances of being able to retrieve your money if you fall victim to illegal trading activities. The size of the exchange also will have an impact. The larger the exchange, the easier it will be to acquire the coins you want in the amounts you want. Smaller exchanges will have limited supplies, and it may take longer to reach your trading goals. Many of the altcoins exchanges are smaller and aren’t regulated or poorly regulated so do your research on the reputation a particular altcoin exchange before you decide to use it. Some exchanges have gone bankrupt with little notice, leaving investors in the cold. Read Cryptocurrency :The New Normal
Buying Now or Later?
Cryptocurrency markets are volatile; this can’t be repeated enough. While it can make for stressful trades, this is a good characteristic for traders trying to get into the market. The market is prone to bubbles that can come and go rapidly. The worst time to buy in would be at the peak of a bubble and the best time would be when the price is stable and at a lower level. As a rule, you shouldn’t compare cryptocurrency bubbles to that of traditional market bubbles. Remember there is more volatility with cryptocurrencies. A small percentage may mean a bubble in the Forex, but that is considered general daily volatility in the crypto market. A bubble at 1,000% is more common with cryptocurrencies, but again, there is no guarantee it won’t continue to grow. Figuring out if a bubble is at its peak or the crash is at its lowest is the challenge. Watch the coins you have chosen for a while to learn their patterns. Just like the Forex, the cryptocurrency market will show trends and patterns. In a later chapter, we cover fundamental and technical analysis techniques that can help you decide when to buy and sell.
Simple Steps to Trading
Any exchange you choose should have step by step instructions to guide you through their interface. The bigger exchanges many even offer instructional screenshots or videos. To get the overall idea, in this section we will cover the general steps to buying and selling Bitcoins. These are also the same steps you would follow for all cryptocurrencies.
Step 1: Choose Your Wallet
If it hasn’t been made clear yet, let’s repeat another important lesson – never leave a third party in charge of your coins. Specifically, this means getting your own wallet and managing your keys. Crypto coins require two kinds of keys or addresses to be\ stored and traded. These are your public keys and your private keys. A public key is used for incoming deposits and sales. It is a unique set of numbers or a QR code that you show people for them to send you cryptocurrency. A private key is used for outgoing withdrawals and payments. This is the most important key because it shows the entire blockchain what you have in your wallet. It also provides access to everything in your wallet. If someone, get access to this key they can withdraw whatever they want. The safest route is to store your keys and most of your coins you aren’t using on a daily basis in an offline or cold storage wallet. A paper wallet is an example of this. You can transfer what you want to trade to an online wallet when you need it.
Step 2: Buy Your First Coin
To start trading, first, you need coins. Starting with Bitcoins is the easiest option then you can trade your Bitcoins for other cryptocurrencies on the exchange. You can also purchase popular cryptocurrencies directly on some of the major exchanges with fiat money as they also act as brokers. Coinbase is a very straightforward and popular exchange and broker to buy coins with
Step 3: Picking Your Exchange
The exchange or broker you use to buy your first coins with the fiat currency of your choice doesn’t have to be the one you trade on. In a previous section, we covered several exchange options that you can start your cryptocurrency trading journey with. You will need to set up an account, and this may require ID verification. This step helps ensure fraud or other illegal activities are kept to a minimum and that there is a greater chance of legal repercussions. While ID verification might make some of you uncomfortable because you want to retain your privacy, this measure is in use to help protect you. If you still aren’t comfortable with this process, you still have the option of using a platform that allows for direct trading with other users. Each side sets their price, and the price isn’t based on the underlying market. However, if you decide to use an exchange, the verification process can take a couple of days. Once this is complete, you will send some of your Bitcoins to the exchange so that you can use them to purchase your altcoins. These will be stored in an exchange wallet and are ready to be used in trading. The exchange will keep track of your balances, and they provide charts and other analysis tools you can use to make smarter trades. Please remember not to keep the bulk of your coins in these hot wallets. Exchange wallets are considered the easiest for hackers to break into.
Step 4: Entering Your Bid
Entering your bid is the same as buying coins. It is a simple process. You will find the exchanges order book and what the current asking price is for your chosen coin. If you set your bid (buy order) for a higher price than the seller’s price (lowest ask), your order will be filled quickly. If this isn’t the case, you will need to wait longer for your order. Once someone accepts your bid, the order is filled, and your chosen coin will be transferred to your exchange wallet.
Step 5: Sell Your Coin
Selling your coin is also referred to as ‘setting an ask. There are three scenarios where you will typically want to sell your coin. If your coin has gone up in price to where you wanted to sell it, it’s fallen in price, and you want out before it goes lower, or you want to cash out and convert your coins into fiat currency. To do any of these three, you need to set an ask. Here, you set a price, which you would like your trade to happen at. You can sell one coin at a time, or you can do what most do, sell a batch. When a buyer accepts your ask price, the trade will be completed, and again your coins will end up in your exchange wallet. The actual process of buying and selling is that simple. Also read The future Of Cryptocurrency And The Nigerian Economy