The primary method that a trader can profit off of the market is to take advantage of the opportunities available. In the case cryptocurrencies, these opportunities appear in the form of entirely new markets.
With the inception of Bitcoin in 2009, cryptocurrencies have been a subject of discussion for many years because it has seen great improvement over these past few years.
Many investors are hesitant about investing in cryptocurrencies because it is essential to have proper understanding on how to profit from the market. For an average trader, you need to do an extensive amount of research before you start trading these two currencies. Together with the large profit factor in this market, there are also high risks.
In the article, we will give you an overview of knowledge of the cryptocurrencies market and how you can trade better.
What is a cryptocurrency?
It is the future of foreign exchange trading. You may have heard different things about cryptocurrency, but coming to an absolute definition is difficult. Simply put it, cryptocurrency is money available on software platforms.
The companies that create cryptocurrencies create not only a new currency but also a new software platform. Several software platforms that people commonly used are Windows, Dropbox, and Fedwire.
Where you use these platforms, you need to pay in US dollars or your local currency to obtain a license for the software. Essentially, cryptocurrencies functions as a regular currency which you use to purchase this software. The underlying technology behind cryptocurrencies is the blockchain technology.
Is cryptocurrency the same like the regular currency?
While there are many similarities between a cryptocurrency and a regular currency, the main goal of the cryptocurrencies to improve an existing system or network. Popular platforms such as PayPal have limitations on what its user can and cannot do.
PayPal also blocks transactions from certain countries. With the use of cryptocurrencies such as Bitcoin, financial transaction is more accessible to everyone around the world.
Is cryptocurrency real money?
Yes. While cryptocurrency is still relatively new to the market, it is real money. Bitcoin has been an instrumental cryptocurrency, which paved the way for this new technology.
It will take some time before this method of payment is widely accepted around the world.
What is a blockchain?
Blockchain functions as a database. When you think of a traditional database, it usually sits on one computer and is set in one location.
Companies that maintain a traditional database spend billions of dollars annually to protect these data which are usually backed up in several locations globally.
With the blockchain technology, data can be backed up by thousands of computers globally. Furthermore, the cost of doing this is much lower compared to doing it with a traditional database.
The encryption available on blockchain files makes it highly secure. In the case of hacking, only a small portion of the file will be exposed as the file is often broken up into different pieces.
When dealing with a large amount of money, the blockchain technology ensures that hacking cannot do much damage to anyone within the system.
What are the different types of cryptocurrencies?
By now, you would probably already have heard of Bitcoin. Among the other popular cryptocurrencies include:
- Stellar Lumens
What are the cryptocurrencies exchange platform?
Now that we are getting into trading, there are several exchanges that you can use to trade cryptocurrencies.
Keep in mind that each of these exchange platforms has its pros and cons. Click here to get access to a guide which will provide you with in-depth analysis on which exchange is the best for cryptocurrency trading.
How can you store cryptocurrencies?
With regular currencies such as the US dollar or British pound, you can easily store them in the bank or your wallet. However, with digital currencies, the storage works differently.
Using cryptocurrencies, you keep your money in a wallet. With this wallet, you will be given a public and private address.
When you want people to send funds to you, you will reveal your public address. Meanwhile, your private address is the login credentials that you need to access your funds. Never expose your private key to anyone unless you want your money to be taken away.
What are the different types of cryptocurrency wallet?
Now that you have a basic understanding about cryptocurrency wallets, here are several options that you can consider for your wallet.
This method is one of the most convenient ways for you to store your money. However, it is also known to be the least secure.
If a great short-term storage, but does not work well in the long term. If you want to use this wallet to buy things and funding your trading accounts, this wallet will suit you.
Mobile apps such as Mycelium can help you to store your spending money. This is a more secure solution compared to the use of an online wallet.
However, in the case of hacking, everything in your mobile wallet will be wiped off. There is no possibility for you to regain what you lost.
This is similar to a mobile wallet, but it is built for desktop computers.
Hardware device wallet
There are hardware devices that you can use to store your cryptocurrency keys. They are safer than the options listed above but are vulnerable to elements that can damage electronic devices.
This is the most inconvenient way for you to store your private key. However, this can ensure that no one can easily have access to your private key. Keep this paper in a safety deposit box.
Wrapping it up
Cryptocurrency makes an exciting asset for us to invest in the 21st century. For you to enhance your understanding and reach a level where you can be confident in cryptocurrency trading, check out this guide created by someone who has had years in trading cryptocurrency.
You will learn how to profit off the cryptocurrency market using this comprehensive guide.