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It is clear to all the interest in cryptocurrencies has skyrocketed in the recent years. This can only mean one thing – cryptos might be worth exploring. Although they have existed for many years now, cryptocurrencies are still a new for many to explore.
Crypto trading “101”
What do you need to pay attention to when trading cryptos? This can be a puzzling question, particularly for those who are only now making their first steps into the financial markets. Here are a few ways to navigate the crypto market.
Keeping an eye on the news is vital for trading success in general, and crypto trading is no exception. You never know when a certain government expresses support for a certain crypto, or even launch one. The crypto market is still pristine, so even the smallest release can have a big impact on one digital currency or another.
Additionally, bear in mind that traders are also watching the news and the markets are driven by their sentiment and actions. But it’s vital not to act on the spur of the moment. If you believe that some news you read may not be entirely accurate or not solid enough to drive market action, don’t just buy or sell because everybody else does. Take a step back. Think. Strategise. Block out the FOMO (fear of missing out).
Remember that everything that goes around and comes around the crypto market is driven by the sentiment of the general public. Don’t forget that the traction that cryptocurrencies have gained in recent years is primarily because of traders and investors’ confidence in cryptos’ unique ability to rise above inflation due to their scarcity.
Whether mined or minted, cryptocurrencies are available in limited supply. This is what helps them retain their value. For example, Bitcoin soared above $40,000 lately, because its supply stood still – 21 million units since the first Bitcoin has entered the crypto space, and it will never exceed that number. That’s all the Bitcoin there is. Regret not getting some? You can still trade it. All good, no need to fuss about it. Trading is as good an opportunity to buy or sell Bitcoin as any, while practicing your market research skills.
However, as long as they are pegged to fiat currency, they will likely remain volatile and easily moved by market sentiment. Basically, you get the idea, if positive opinions about one or another cryptocurrency hits the wires, you can be sure it will soar. This is why it is vital to be on top of the news. Knowing what spins the cryptosphere keeps you afloat.
Crypto market safety continues to hold the headlines. Without it, investors have a lot to worry about, especially as there is little to support the value of these digital assets. Therefore, it’s advisable that you keep an eye on how safe cryptos are, their main features, wallets – if they come along with a proprietary wallet and whether these wallets were targeted by cyber attacks. Major cyber attacks could doom a cryptocurrency, killing the confidence in its safety and causing its value to drop sharply in a matter of hours only. So, keep a weather eye on crypto safety.
But, let us not fall on the dramatic side. Cryptos have been around for over a decade now and hacks have always been targeting crypto wallets, but this did not chase off crypto enthusiasts. Cryptos are here to stay.
Speaking of staying, did you know, there are more than 2,000 cryptocurrencies apart from Bitcoin? That’s right and, guess what, this number is on the rise. Fair enough, but what makes these cryptos worthy of your consideration?
Like any financial instrument that has a prospectus, cryptocurrencies have a white paper. This is an extensive document stating the specifications of the cryptocurrency, such as supply, market cap, what type of smart contract it is based on, what purposes it is meant to serve – whether it is a utility token, a security token, or a coin – and lastly, where you can acquire it from and where you can store it (which types of wallets it is compatible with). This offers you plenty of valuable information about a cryptocurrency, its potential value and safety/stability.
Although a white paper may contain a lot of valuable insights on a certain cryptocurrency yet it cannot capture everything. Forums and crypto blogs are also fresh sources of inspiration and knowledge about digital currencies and how to trade them. The wisdom of the crowd always helps when you’re unsure about whether the latest news you’ve read or rumour you heard is actually true or just media hype.
The strategies used to trade cryptocurrencies are pretty similar to those used on any other financial instrument. For example, if you are looking for near-term opportunities, scalping may be an option. Or, if you are leaning towards longer-term positions, you might opt for day or even range trading. Of course there are more sophisticated strategies such as swing trading that enables both your technical and fundamental knowledge.
Cryptocurrencies are perhaps one of the most exciting asset classes the markets have ever seen. As the market is still young and regulators have yet to figure out a way to bring these digital assets to the regulated mainstream. However, one thing is clear – cryptocurrencies have managed in just a few years to create and “educate their audience” excellently well and even making a few crypto millionaires along the way.
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