Trade Cryptocurrency, here are 10 Simple Tips to Get Started – Even if you are already armed with information about the crypto world, discovering it is extremely intimidating, especially since you are dealing with a subject matter that is naturally complex.
When we are trading cryptocurrencies, what comes to mind first is how to decide which cryptocurrency is viable for doing so. Unlike stocks, performing fundamental analysis for cryptocurrencies is radically different since there are no financial statements. Thus, it is even more important for us to engage in research to assess the potential of the coins. The second thing that needs consideration is which crypto exchange account to use.
A decent comprehension of a coin’s basics enables you to frame your own particular feelings and have your own particular stand, an important facet of any prospective investment.
- Information Sources
White Paper: The coin’s white paper is a detailed proposal by the development team which outlines the underlying purpose and operating mechanics of the coin. This remains the main source of evaluating the fundamentals of the coin. Target based time limit for the development of the coin is a good indicator of the development team’s commitment. The given timeline should be straightforward and realistic.
Coin’s Official Blog: This is the official and main channel of communication from the coin’s development team. Here you can view the interaction of the development team with the community and can also interact with them.
Community Forums (Reddit/ Steemit / Bitcointalk): Forums are a great way to understand the coin, as well as the sentiments surrounding it in simple and effective language.
2. Overall Concept Assessment
The problem that Coin Aims to Solve: The problem that a particular coin aims to solve, either for real-world financial problems or regarding the complexity of the crypto world, is vital to understanding the practicality of the solution the coin offers.
Investors Funding the Project: A Project that is funded by prominent investors adds a seal of credibility to the coin.
3. Mechanism Coin uses for Validating Transactions: Consensus Mechanism (Proof-of-Work, Proof-of-Stake or others) is the method by which crypto transactions are validated and is a great way of understanding how the coins work. Again, take time to do your own research.
4. Total Supply of Coin in the Market: A coin’s total supply quantity in the market will partially determine the price. Three factors which can affect the total supply are the Founder’s Coins, the Mining Rate, and the Company Lockup.
Founder’s Coins are coins that the team behind an ICO is keeping for themselves (approximately 5% to 30%). The lower this percentage, the better. An ICO in which founder coins are locked up for approximately four years can be considered good. These coins are released based on a smart automatic distributed system and as per contract, prevent the dumping of their coins on the market.
By definition, the Mining Rate is the speed at which new cryptocurrency is created. Faster mining implies more cryptocurrency in the market resulting in lower price.
Like the Founder’s Coins, the Company Lockup is the number of coins deliberately kept off the market by the organization.
5. Coin Circulating Supply: Circulating supply is the number of coins available to be purchased in the market at this moment. These details are available at https://coinmarketcap.com/
6. Market Capitalization of Coin: The market cap is vital because it determines how much potential Return on Investment you can achieve. When market capitalization is high, gain rate for coin price goes down. A smaller market cap is a basis to predict that a coin might be capable of more growth.
7. Any Significant Legal Barriers: This could compromise the resources and timeline of the project.
8. Scam Warning Relating to Coin: Perform a Google search on whether the Coin has been labeled a scam. Also, check on Twitter and other public forums to see what the public has to say.
9. Opening an Exchange Account: Now it’s time for you to finally purchase the coins that you’re confident in. If you want to buy coins, you need to an exchange account that supports the coins you want to invest in. If new to cryptocurrencies, the first step is to find an exchange that allows you to deposit money.
Here are six things to consider while picking a digital currency exchange, irrespective of your involvement or knowledge in crypto trading:
The genuineness of Crypto Exchange. It is essential to do research and guarantee that you are selecting a legitimate and secure platform. For example, the most recent hacking of Mt. Gox and Coincheck serve as serious warnings to prospective cryptocurrency investors. Validate the exchange’s security protocol. Exchanges are liable for preventing this kind of fraud.
Method of Purchase. The method of purchasing cryptocurrency varies between platforms. For few exchanges, you need to deposit money by bank transfer. Some use PayPal, some accept credit and debit cards, and others solely allow cryptocurrency for purchases. It is fundamental that you pick a platform that fits your conditions. Also, platforms’ process transaction times vary; some transactions are nearly instant while others can take days or weeks.
Supported Cryptocurrencies by Exchange. There is a major variation across different crypto exchanges of supported cryptocurrencies. For example, platforms like Binance support trade of a long list of altcoins (cryptocurrencies), while Coinbase trades only four major cryptocurrencies. Ensure you pick an exchange or exchanges that support trading of all of the cryptocurrencies that you need to buy.
Fee Structure. Each exchange follows its own fee structure which is different compared to other platforms. Hence, it is crucial to summarize your needs for a cryptocurrency exchange.
User Interface and User Experience: For the average investor, one of the most important aspects is the user interface and functionality. Interactive experience on the crypto exchange should be user-friendly and informative so that it efficiently supports user actions on the exchange.
Selecting Trading Platform. Cryptocurrency exchanges are of three main types, so you need to know what they are before choosing a cryptocurrency exchange.
Binance and Coinbase are examples of the most common trading platforms. They provide vital marketplaces where users can place buy or sell orders for cryptocurrency. Every user can interact only with the platform. Moreover, there is a fee levied for each transaction by exchange.
Peer to peer exchanges, like Cointal, connect buyers and sellers to interact directly. Here both parties agree with each other for given transactions. Cointal’s CEO explains, “Dealing on a peer to peer basis helps alleviate any issues and problems that can arise from traditional exchanges.”
AvaTrade is cryptocurrency broker, which operate in a manner similar to Forex brokers. Here on these platforms, the prices are set by the brokers and buyers for their cryptocurrencies.
10. Overall, be knowledgeable of all options and think about how to spot the exchange that will be safe now and in the long-run. Finally, give up your fear. If you have done sufficient research and are confident in your prospective coin, go for it. Sign up for the appropriate exchange that supports that coin.
Register with a local cryptocurrency exchange in your country; verify your account as per requirement of exchange (by submitting identity proof). These exchanges require KYC as they interact with the traditional financial and FIAT currency such as USD,
Start buying coins as per requirement after depositing funds from your bank account into your crypto exchange account. Purchase Bitcoin if exchange allows you to buy only Bitcoin.
Open another account with a crypto exchange that offers a trading for multiple other coins (altcoins). These exchanges allow trading against Bitcoin and do not accept fiat currencies.
After account verification, start buying other coins with Bitcoin after transferring the Bitcoin previously purchased from your local exchange to your new crypto exchange.
Cryptocurrency trading is a complex matter from selecting your desired coins to invest in, to signing up for the appropriate crypto exchanges. Effective research on various altcoins and legitimate, secure exchange platforms form a basis for loss-free crypto trading.
About the author:
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