The market cap of cryptocurrency, although fluctuating, has been its greatest for the past years. That is why more and more people are rushing to buy in and invest in some way. Anyone that’s purchased crypto before has performed a cryptocurrency trade. But that is barely scratching the surface of the market and the number of options out there. And that’s precisely the reason why we are providing you this guide. To help you get started quickly while preventing the same mistakes people make. Make sure to stick until the end so you will learn how to start trading cryptocurrency.
Some Reminders About Cryptocurrency Trading
Before we start, here are some reminders about the cryptocurrency industry.
- The cryptocurrency exchange is not part of the stock exchange.
- Beginners may opt and prefer to trade cryptocurrency stocks.
- Cryptocurrency trading is a 24-hour market.
- The market is incredibly volatile.
- Only invest the money that you afford to lose.
The Essentials in Trading Cryptocurrency
To start trading, make sure to have the following:
- Any cryptocurrency wallet – paper, mobile, hardware, or software wallets
- Access to an ‘exchange’ that lets you buy, sell, or trade crypto
Making Your First Trade
The first trade almost every beginner makes is a fiat-crypto trade. This is where you buy your first cryptocurrency coin in an Exchange. Exchanges act as an on-ramp for users into the crypto space. Depending on your location and jurisdiction concerns, exchanges sell cryptocurrency for a variety of different fiat currencies. So, make sure that you did your research regarding the most reputable exchanges available in your area.
Things You Should Keep in Mind
As a beginner, some essential things you must keep in mind are the exchanges reputation, fee structures and their security. Essentially, make sure that you know any little fees the exchange will take from your transactions. Also, you must be knowledgeable about how they will keep your funds secure.
We highly suggest working with exchanges that offer two-factor authentication. Generally, you don’t want your password being the only protection you have from losing your funds. Note that exchanges in most jurisdictions require verifying your identity and performing certain ‘know your customer’ and anti-money laundering checks.
So, be aware that you might have to send the exchange proof that shows you are who you say you are. Once you’re on the platform and they’ve accepted your funding, you can make your trade for whatever coins the exchange offers. Congratulations! You have now made your first trade!
Behind the scenes, the exchange will have created a wallet for you where your funds are stored. It’s now up to you whether you want to keep trusting the platform with those funds or move them elsewhere.
Hot Wallet Vs. Cold Storage
We won’t go into depth on all the different wallets as we also have another article for that. But what you should know right off the top is the difference between a hot wallet and cold storage. Once you see the difference, you can watch our wallet guide and decide where you want to keep your funds.
A hot wallet is like the wallet you carry around with you day-to-day. It isn’t incredibly safe, but it’s convenient and gives you easy access to your money. Cold storage is a lot more like a savings account. The money isn’t on you at all times, so it’s more secure but impractical to use everyday.
An example of a hot wallet is your cryptocurrency exchange. It’s a software wallet that’s always online and requires password input to access. This makes it vulnerable to attack but very easy to reach your funds. The cold storage wallet would look like a piece of hardware that’s separate from your computer. It is always offline except for when you plug it in to access it. This means that while it is offline, it is totally safe from attackers.
Again we go much deeper into different types of wallets in our other videos. But you should decide whether you’ll be using your crypto frequently or locking it away. Then you can choose a hot wallet or cold storage solution that’s appropriate for you.
Public and Private Key
Whatever wallet you choose, the platform will provide you with a public key and a private key.
The Public Key
The public key is the electronic address that you will always use to receive funds. When you withdraw from an exchange, and they ask for an address, it’s your public key that is required. You’re free to share it and use it however you like.
Your Private Key
Your private key should never, under any circumstances, be shared. If your private key is leaked or discovered, your funds can be stolen and used without your permission. You will lose your funds, and you won’t be able to get them back. So write it down, keep it somewhere safe and secure, and do not share it. Once you have your crypto stored in an appropriate place, you are ready to engage with crypto to crypto trades.
Another Look at Cryptocurrency Trading
These work very similarly as Fiats a crypto trades, but you’re working within blockchain ecosystems. This means that you would take whatever currency you purchased with your fiat, let’s say Bitcoin, and trade it directly for another coin like Ether. Many exchanges offer these services. Many are centralized, but some are not. The same concepts, as noted earlier, are essential here.
Make sure you look into the exchange’s history and security to ensure that you’re comfortable with who you’re dealing with. With these two types of trades, combined with some practice and researching for reputable service providers, you’re all set up to purchase and trade for any coin you like. Click here to know more about trading cryptocurrency!
And that’s it – that is how to start trading cryptocurrency today. It is a straightforward yet sophisticated process. Again, what’s important is for you to get started to understand the inner workings of cryptocurrencies finally. Good luck with your future trades!