Cryptocurrencies are a class of assets that is still relatively new to the financial and trading markets. Yet, their novelty hasn’t impacted their popularity. In spite of their volatility and fluctuations, digital coins have attracted large numbers of investors who are eager to add these holdings to their portfolios to diversify their list of assets and ensure they maintain their revenue in case of recession. Out of all cryptocurrencies, Bitcoin is the one with the most substantial growth. Despite being the first, it was never dethroned by the altcoins that succeeded it, even though they brought a lot of new functionality to the market in the form of products like DeFi, DApps and smart contracts.
The Bitcoin price has created a reputation of reliability for itself, as Bitcoin has become known as a store of value that can provide investors with a relatively stable source of income. Over the years, hodling has become the preferred strategy for the majority, as it allows users to make the most out of the asset by holding on to it in order to see its value grow. But getting started can be intimidating if you’re a newcomer to this trading environment. That’s mainly because Bitcoin and cryptocurrencies, in general, are closely tied to technological development, and if you don’t keep up with the latest developments in this field, making sense of what’s going on might be a challenge.
With that in mind, here are some of the things you need to know when you want to start trading.
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Do your research
Bitcoin is a large and diverse marketplace, and there are many concepts you should know about in order to enjoy a smooth trading experience. This doesn’t mean that you need to become an expert in the workings of the blockchain or get a degree in computer science, but learning about cryptocurrencies will definitely enable you to make better choices as part of your trading career. The simplest way to get started is by becoming familiar with some key concepts. Market capitalization is one of them. This metric reflects the size of an asset, providing insights into the level of risk associated with a particular investment. Checking a crypto coin’s market cap before investing lets you know how reliable an asset is and how much capital you should feel safe putting in.
Bitcoin has the highest market cap out of all cryptocurrencies, being far above even those coming in the second and third places. The trading volume is another crucial factor to research. A higher trading volume indicates that buying and selling a digital asset will be easier, while a low trading volume shows that you might encounter difficulties when trading. That’s because lower volumes are a sign of a lack of liquidity. The digital currencies with excessively low trading volumes could indicate that the cryptocurrency is either ailing or an altogether dead project. This means that the digital assets were abandoned, turned out to be scams or have insufficient funding and can, therefore, not function accordingly.
The wallets
Storing digital currencies is a crucial part of being a successful investor. Since Bitcoin is extremely valuable and exists only in digital format, it is highly prized among cybercriminals. All coins are part of blockchains, networks that are fully decentralized. While this doubtlessly increases the anonymity investors enjoy, it also makes it easier for hackers to extract coins and leave no trace behind. Most of the time, the lost assets are never recovered. This is what makes hacker attacks in the crypto world particularly damaging, as users can end up with capital losses amounting to hundreds of thousands, if not millions, worth of cryptocurrencies. As such, you must ensure that you take every precaution to keep your BTC safe.
There are two main types of wallets that can store Bitcoin: hardware and software. The latter option is more accessible, essentially being an app you can enter from your smartphone, iPad or laptop. The hardware version, though, is recognized as being more reliable. The investors dealing with large sums of money would definitely be better off choosing a hardware wallet. Then, you need to make sure that your passwords remain secret. Sharing them with anyone is a potential safety hazard, even if you believe that individual to be trustworthy. Make sure you don’t forget the passcodes, otherwise you won’t be able to access your wallet either.
Reliable strategy
Having a reliable trading strategy allows you to ensure that your profits will remain more consistent than your losses. It’s impossible to always be on the winning side when trading, regardless of the asset you choose, but it is imperative to remain realistic when dealing with cryptocurrencies, as they tend to be far more volatile than your average holding. Designing a game plan isn’t the only thing you should do, though. It’s crucial to abide by it as well and do so consistently. This may sound obvious and easy, but it is actually quite difficult due to the fundamental nature of the cryptocurrency market. The fluctuations and price changes can increase your sense of FOMO, leading you to start risky undertakings.
Using a stop-loss can also keep you safe. This concept refers to conditional trade orders that are used to either exit or enter specific, predetermined positions in order to keep downsides at a minimum. The conditions are obviously related to the asset’s price movements. The stop-loss limit specifies the lowest value at which the exchange can activate the buy or sell order. Ideally, the stop-loss should be placed somewhere around 2 to 4% below the purchase price. Nonetheless, you must also be aware of the concepts of stop runs and stop hunts, which are relatively common and refer to larger investors forcing those with smaller amounts of capital out of their positions.
Being new to the cryptocurrency space can be intimidating, as there are so many new things you need to learn. The assets are still quite new, and investors must tread carefully due to the common fluctuations and price changes in this trading landscape. By doing this, you guarantee that earnings rather than losses will remain the predominant tendency for you.
