Trading for some goods
with something valuable has always been a way to trade. In the olden days,
people used barter systems while trading, and it won't be long before cryptocurrency trading platform becomes a norm.
We have come a long way
while trading, right from the barter system to the use of currencies made up of
gold, silver, and even bronze. Today these currencies are replaced and minted
with copper-nickel mixed coins and paper currencies. Some countries also use
plastic material while minting currencies, replacing paper ones.
Although many paper
currencies were previously backed with gold standards, in the late 1950s,
replacing these minted currencies with plastic cards or credit and debit cards
came into existence. Under President Richard Nixon's reign, from the early
1970s, currencies were no longer backed by gold standards but continued to be
minted by the sole authority of the U.S. government. These currencies are also
called "Fiat currencies."
In 2009, Satoshi Nakamoto
launched the first cryptocurrency called Bitcoin. It used a unique feature that
allowed the users to transfer funds from one country to another while
maintaining and tracking down money in the most democratic way.
Bitcoin uses blockchain
technology, where each block maintains trade of it like a ledger. The
transaction and the account user's name are recorded in an encrypted method on
a blockchain block. These blocks are linked to form a chain, thus blockchain
technology.
Thus, a user can remain
anonymous while several blockchain miners authenticate the trade. Blockchain
miners mine or mint a Bitcoin whose job is to verify the transaction's
authenticity and are rewarded in Bitcoins for their work. This system is called
decentralized finance or DeFi. Thus it is virtually impossible to duplicate a
trade since there are several nodes where the transaction is recorded.
Bitcoin has
revolutionized our world since many developers have been inspired and developed
their version of Bitcoins, generally known as altcoins. However, for an average
person, Bitcoin and other cryptocurrencies are the same.
Cryptocurrencies are the
way into the future; it won't be long before they replace fiat currencies.
Governments across the globe recognize the viability and utility of cryptocurrency
trading; traditional stock traders can trade Bitcoin and Ethereum without
owning these cryptos through crypto options and futures. Governments across the
globe are keen and are in the process of creating their digital or
cryptocurrency.
Huge financial institutes
have also shown a keen interest in cryptocurrencies. Although a colossal market
needs to explore its full potential in the crypto world, we have only scratched
the tip of the iceberg.
Since the United States
disclosed its intention to launch its Digital Dollar, many countries have
followed its lead. India has created its Digital Rupee and is in the process of
testing it. However, it gave authority to trade between banks actively. It has
yet to open for retail investors.
Digital Yen will begin
its testing in the early spring of 2023, and many more are yet to join the
bandwagon of government-issued cryptocurrencies.
2022 has been a
rollercoaster ride for the crypto industries. There has been plenty of good
news besides scams and exchanges going bankrupt. The latest is FTX, a crypto
exchange that used nefarious means to swindle billions of dollars from poor
hapless victims who may only find justice by watching the board members of the
FTX exchange behind bars.
Cryptos are popular with
the citizens of Mexico; since the Peso is becoming weaker, many Mexicans have
started cryptocurrency trading and investing to hedge against inflation.
Not far behind is El
Salvador, a Central American country. President Nayib Bukele has announced that
he intends to create the world's first "Bitcoin City," Bitcoin has
become a legal tender in El Salvador.
Legalizing Bitcoin allows
citizens to trade in it; even the municipal taxes are being planned to be
collected in Bitcoins too. However, a lot of energy is being wasted and creates
heat which is detrimental to the climate of the earth while mining Bitcoins and
other cryptocurrencies. Hence, President Nayib Bukele announced that Bitcoin
would be mined using eco-friendly alternatives. For example, there are active
volcanoes nearby, and the energy released by them would be used as energy for
mining bitcoins and other cryptos.
During the initial months
of 2023, the Russians started invading Ukraine; the conflict can be termed a
mighty elephant trying to trample feeble ants. However, these ants got
financial support all around the globe in the form of cryptos. Thus, again
showing the usefulness of sending huge funds quickly through borderless
transfer.
During the pandemic, many
found refuge in crypto and invested heavily in it, thus the bullish market when
the rest of the traditional financial markets crashed. However, there has been
a steady increase in the adoption of cryptocurrencies which baffled many since
many believe that only whales (a term for investors hodling more than 1000
Bitcoins) with loads of cash ever venture into cryptocurrency trading
for short-term and investing for long-term.
As per the report,
shrimps, a term coined for people hodling less than one Bitcoin and crabs
hodling less than 10 Bitcoins, the rate of crypto adoption has steadily
increased since many have seen the potential of cryptocurrencies and honestly
believe that the only way to hedge the inflation is through trading in
cryptocurrencies.
With so much potential
and some more untapped, it is no wonder many are excited to adopt cryptos,
trade, invest, and treat them as a passive or alternate source of income.
But what about the ongoing scams and crypto exchanges going bust?
Like any other business,
there is a certain level of risk involved. Agreed, there is a dime a dozen
scammers impersonating celebrities and many social influencers misguide the
masses.
You cannot even deny many
social influencers rug-pull specific cryptos. Yes, such devious-minded selfish
people cannot be counted on the tip of your fingertips; the only way out is to
self-educate and ask questions to those influences. If they happen to downplay
your queries or get angry, rest assured these so-called influences are out
there to profit from you. If someone is genuinely trying to help you with your
finances, then they won't get offended by your questions which are genuinely
linked to the topic. However, if the question is outrageously dumb and stupid,
then be assured that they won't spare you.
As an aspiring crypto
enthusiast or a trader, I recommend reading and exploring online articles
related to cryptos. It would also help you out if you joined some crypto
communities. These crypto communities are focused on cryptos and will help you
better understand the concept of cryptocurrencies.
Before you go on the
rampant speed of cryptocurrency trading, you need to understand the
fundamental differences and how they will help future implementation.
Generally, there are two
critical challenges that a cryptocurrency faces, how quickly will the
transaction take place? And how secure is the cryptocurrency against a cyber
threat?
A quicker transaction
means paying fewer transaction fees or the "gas fees," while a
secured cryptocurrency means it is difficult to steal it. But, of course, there
is always a trade-off between the two.
Since cryptocurrency is a
digital currency, it is based on complicated codes. Therefore, a secured
cryptocurrency will be heavy. More secure the cryptocurrency is, the heavier
the file.
Consider you want to
download an image on your electronic device. The file will get downloaded very
fast if the file is small. On the other hand, if the file is enormous, it will
take more time to download, no matter how fast your internet speed is.
Similarly, when a
transaction takes place on an exchange, the most secure crypto will take a lot
of time since each verified transaction requires a lot of time. Thus you end up
paying a good amount of cryptos in the form of gas fees.
Thus if the crypto is
relatively less secure, it trades at a faster speed requiring fewer gas fees.
Thus, each crypto
developer has to face an ongoing struggle while creating a new crypto or update
in the form of a "hard fork." These developers are on a constant
quest to create a perfect crypto that has the right balance of security and
requires fewer gas fees.
Thus, it would serve you
best to explore the "white paper" of each cryptocurrency you are
interested in. A white paper is a short description of the cryptocurrency that
showcases who it will help and shape the future. It also describes the total
number of cryptos the developers intend to create. If you find it challenging
to understand the white paper, then feel free to discuss it in a cryptocurrency
community, and they will answer all your questions.
Unlike the Feds, who have
the authority to print unlimited fiat money, in the crypto world, cryptos have
a limit to how much they can come into existence. Furthermore, unlike the Forex
or foregin exchange market, which relies on economic indicators to trade
currencies, the crypto market depends on the demand and supply of the crypto.
Therefore, the cryptocurrency indicators are different from the Forex market,
although there are a few factors that do affect the cryptos.
Before you start cryptocurrency
trading, remember that it will help you if you were to select a trusted and
reliable online crypto broker and brokerage firm. Choosing a good one is
crucial as you won't be scammed and will be in charge of your cryptos.
Since these online crypto
brokers or brokerage firms make money by charging commissions every time you
trade. At times there are a few who also levy hidden charges. Thus, it would
serve you best if you understood the terms and conditions and got them in writing.
If you find understanding these terms and conditions challenging, get
professional help like a lawyer or financial advisor. Ensure that you do not
use contact that is recommended by the online crypto broker or brokerage firm
but rather those in your nearby vicinity. Ensure you take this step before
signing the papers and paying them money.
Besides offering a
secured trading platform, these online crypto brokers or brokerage firms also
offer crypto trading courses that will help you immensely. They will teach you
how to conduct research based on the tell-tale signs of the currency market
indicators to help you make a substantial profit.
Are exchanges safe after all a few of them went bust?
Well, there is a way to
avoid all the mental stress and hardship one might face while storing on a
crypto wallet of an exchange, the threat of cyber attack or exchange going
bust. You can either keep your cryptos in a printed format or buy crypto wallet
hardware to store them.
Although the physical
crypto wallet might be expensive, it helps you secure your cryptos safely; you
can be assured that your cryptocurrency trading will not be affected if
one exchange goes bust. In addition, these physical crypto wallets will ensure
you remain in control of your cryptos. These physical crypto wallets have a
password that will allow those to access the wallet who knows the password.
So is it wise to invest in cryptos?
With inflation, you need
some cushion to save you from those blows. At the time of writing this article,
Bitcoin, the undisputed king of the cryptos, is trending between $18,000 and
$16,000. There is no significant price fluctuation, but the crypto is moving
sideways.
Bitcoin can soar again in
the future, as we saw its potential during the pandemic. Although, as per the
experts, it won't surge as high as it did during the pandemic season, it will
increase to a reasonable price.
How does one continue to invest in cryptos in today's scenarios?
The entire economy has
slowed down, so naturally, people do not wave a surplus amount to invest in.
However, as per the experts, conditions are bound to change in the next six
months; till then, you need to stretch it out.
While cryptocurrency
trading, day trading, and swing trading are popular with some crypto
enthusiasts for short-term trading and long-term Dollar-Cost-Averaging, you can
use other strategies.
While day trading, you
open up your position as per your research and close the position before the
day ends. Refrain from being taken aback by price fluctuation; stick to your
exit plan, and everything will work in your favor.
While in day trading, you
hold a position open till the end of the day, in swing trading, you keep an
open position based on your research for a few days to weeks before closing it.
You invest 10% to 20% of
your annual income after tax. And out of that saved amount, invest 1% to 2% per
trade.
Dollar-Cost-Averaging is
quite popular with most crypto traders. This is because you never invest the
entire amount in one go. But instead, invest little by little over a while. For
example, suppose with the above calculation, your 20% is equal to $700, and you
want to invest in the next six months, then you invest roughly $116 per month
in buying cryptos.
Final thoughts
Like any other financial
investment, you should only allow yourself to invest money you would not regret
losing.
As per the experts, now
is the correct time to invest in cryptos, as the price of these cryptos is
reasonable.
