One of the main reasons that drive the popularity and in some cases, the infamy of cryptocurrencies, is their capacity to bring in a huge profit or a catastrophic loss to traders.
This is no free for all party, you do need the right skills and a little bit of luck if you are going to – well, get lucky.
Unfortunately, understanding the nature of cryptocurrencies and how they operate is far from the simplest thing in the world. But give yourself enough time you will get the hang of it, and eventually the confidence, to start trading.
How to Trade and Invest Cryptocurrencies
The first thing to know about cryptocurrencies is that they carry a lot more value compared to their fiat counterparts. For example, the price of a single Bitcoin currently hovers well over $8000, and that value keeps changing unpredictably.
It is important to make a clear distinction between investing in cryptocurrencies and trading them. Investing simply refers to the purchase of a particular cryptocurrency, holding onto it, and then selling it when the price goes up.
Trading cryptocurrencies, on the other hand, is a lot similar to your typical forex trade. It involves trading one cryptocurrency in exchange for another or fiat currency via a cryptocurrency exchange. It is common for traders to swap cryptocurrencies in order to maintain the highest market value.
Is It Real Money?
Being a fairly recent arrival to online trading, cryptocurrencies are not quite a widely accepted means for trade although their industry is already so profitable. The forerunners like Bitcoin are introducing the concept to more and more people which may eventually normalize day-to-day trading with virtual funds. Bitcoin is by far the most prominent cryptocurrency in existence but since its launch back in 2009, it has seen the rise of hundreds of competitors desperate to knock it off the top spot.
The rest of these cryptocurrencies are known collectively as altcoins and a few of them like Ethereum represent a very real threat to Bitcoin’s position on the charts, especially given that they offer some unique features that are not available to Bitcoin users.
Government Regulation
Cryptocurrency networks like Bitcoin are essentially decentralized meaning they do not answer to a central authority like a bank or government.
Predictably, this does not sit well with the administrations of some nations. In a country where mining Bitcoin is illegal, miners tend to continue their work underground and mine other cryptocurrencies if they prove to be safer and more profitable.
There is also a lot riding on the decisions made by the NFA or SEC. The value of some cryptocurrencies could change dramatically based on such decisions. As a general rule, you would be better off trading a cryptocurrency that is not likely to be blacklisted by your local government. To do that, you would have to keep in touch with the political atmosphere of the government.
Is Trading Cryptocurrencies Worth Your While?
Maybe. Maybe not. It really is your own determination that will help you make it as a trader. It certainly carries the prospect of a very good payday but is also accompanied by risks that are just not justifiable to some traders. Some even say that cryptocurrencies will be all but irrelevant in the new future but for now, no one can really know for sure.
Whatever you think about trading cryptocurrencies, never lose sight of the golden rule, ‘Do not invest more than you can afford to lose.
That way, if things do go terribly wrong, you will have sustained a loss but more importantly, you would still remain afloat financially and be ready to play a second hand. As unpredictable as these cryptocurrencies are, there is certainly a lot to learn that could help your chances. And no one is a veteran here. It has not even been 10 years since the first ever cryptocurrency network, Bitcoin, arrived on the scene.
Conclusion
Trading and investing in cryptocurrencies is a growing trend in online markets today. While they do represent certain considerable risks, they have also proven to churn out worthy profits for those traders that have gambled on them.