Cryptocurrency is an asset designed digitally as a medium of exchange; it merely is money on software platforms. Through the use of strong cryptography, the following can be done; verification of transferred assets, new unit creation, and securing of financial transactions. It is maintained through decentralization by making assets valuable to speculators and investors by creating scarcity.
Although there are many forms of cryptocurrency, the most common one is Bitcoin. Any other type of cryptocurrency is referred to as Altcoin, which means alternative coins. To transact via bitcoin or any other altcoin, one has to have access to the exchange websites that facilitate the process.
The cryptocurrency is stored in a wallet. The wallet has a public key that enables the currency to be received and a private key that allows the money in the portfolio to be spent. The validity of the coins is determined by a blockchain which maintains all the transactions records between parties continuously. The blockchain contains a ledger that has to timestamp to prove the validity of the transactions.
When to trade and the trading platforms.
As a cryptocurrency trader, market opportunities should be identified and taken advantage of. Knowledge of the competitors is crucial and know how of ways they can influence the market in for of pricing. Through the technical chart analysis, a trader can know the signals to buy and sell. Market capitalization is to be considered instead of face value pricing; there are websites such as crypto compare that calculate cryptocurrencies by their market capitalization and rank them.
As a trader, you have to understand that some technologies will fail so to mitigate these risks, there have to be risk management strategies put in place. This involves knowing how to protect your trading capital from more significant losses that can be avoided. Some investments are more prone to facing risks, so its best to understand your niche and if it is exposed to these risks if capital is stocked up. A trader in marijuana or venture capital face these risks the most as they are exposed to the high-risk markets. Information on the scam coins should be kept in mind, learn how to distinguish the two then use proper mitigation ways to place your bets.
Secure the cryptocurrencies through the hard wallet, storing them offline, use of password manager and Google authenticator.
Tips to enable you to stay informed and in the game.
- Learn how to be technical savvy if you are not one already. This system is purely based on technological, and if there is a lack of knowledge in this area, money loss is at a higher risk. Finding someone trustworthy who is tech savvy can be an alternative option.
- Use trading guides to learn from other people’s mistakes. Understand how and why new traders lose so much money before getting it right so that you do not fall in the same predicament.
- Keep a trading diary and a useful guide. This will show the progress at a glance and the new developments being made in the transactions. The guides would help give information about data protection by providing the needed measures to secure your money.
- If at one point, a trader decides to use brokers, the money should not be left floating for a long time. It should be moved to the wallet as soon as possible to avoid technological and broker risks. It is best to prevent brokers and manage your portfolio by yourself as the system provides enough support system to facilitate complete control.
Cryptocurrency allocation in your portfolio
As there are many forms of bitcoins, it is best not to put all your eggs in one basket. The best way is to invest in the currency with the risks the coin carries. Since Bitcoins is the most used form of money, half of your account can be capitalized by this currency. It takes the lowest risks, so it is almost considered a safe investment in the market cap. The alternative coins carry more chances, but there are high risk and low-risk altcoins. The low-risk altcoins should be second to the bitcoins and then followed by the high-risk altcoins. The gambling coins should come last at a very minimum percentage as the carry the highest risk with a chance of high reward.
Cryptocurrencies trading are considered taxable assets as they can be bought and sold at a higher price. It is advisable to consult a tax professional to guide you on the burdens that come with trading cryptocurrencies before kick starting your journey. In most cases, long term asset accrues fewer tax rates so it’s better to hold cryptocurrencies for longer to save on taxes if that can be favorable.
Government policies on cryptocurrency
In some countries, the cryptocurrency is not allowed free trade. If this is the case, the value can be significantly affected. The miners can be forced to operate underground hiking the prices or opt to mine other valuables instead. It is best for a trader to be on the lookout for any government regulations that might arise or that are already in place.
How can cryptocurrencies be bought?
There are exchange platforms that sell these currencies, and they include Coinbase, CEX, Bitfinex, Localbitcoins, Binance, to mention a few. The platform allows the link of a bank account or credit card to buy. To avoid being hacked, it is best not to store the coins at the exchange websites. Altcoins can be purchased by transacting them with bitcoins through sites such as Coinmarketcap.
Once bought the coins can be stored in either the desktop wallet, on-line wallet, hardware wallet paper wallet or mobile wallet depending on the transactions the coins are supposed to do.
Aside from buying and selling a cryptocurrency, there are other ways of trading this is through mining, staking, arbitrage and ICO (Initial Coin Offering)
Cryptocurrencies, especially bitcoins, are considered an excellent investment only if the trader knows the odds. Losing money is one of them. Investing only what you can is the other odd, out money that you can afford to lose. That is why bitcoin is suitable for young people as they would not put all their savings in the investment, unlike older people. Get used to paper trading and journal keeping because as much as this currency is money, it is in paper form.