Crypto has ushered in a wave of new-age decentralization of finance since its inception. It has grown to be so successful that every day billions of dollars are traded in crypto. With this rate of success, you might wonder if it is too late to trade crypto. Well, the answer is no! It is never too late to learn about digital assets. This article will take you on a journey through crypto trading and how it works.
What is cryptocurrency?
Cryptocurrency is digital assets where transactions are direct between parties and secured through a technology called Blockchain. The whole idea behind crypto is rooted in the elimination of third parties for transactions.
In essence, there does not have to be an intermediary when transactions are carried out. This feature of crypto allows for more transparency and a more seamless transfer of money or other types of ownership through various geographical locations.
To truly get involved in crypto, you need to understand crypto wallets. A cryptocurrency wallet is a service responsible for the storage of private keys. These keys give you access to your Blockchain address where the actual money lives.
We will use bank transactions to explain how these keys work. Suppose you want to transfer money electronically to Sally via your bank. You will need her bank account number or a certain address where the money will stay to follow through with the transaction. In crypto, this is called a public address. This can be referred to as the location your crypto stays in. As the name implies, it can be made public as it is a requirement to send and receive crypto.
This is not the same for private keys. Suppose Sally wants to withdraw the money you sent her in the bank account. She would require her pin or the other security measures implied by the bank. That pin is just like your crypto private key. If you wish to withdraw money from your crypto wallet for example and transfer it to another wallet, you need your private keys. It’s very important that your private keys must be kept safe and secret at all times to avoid your wallet from being compromised. Anyone with access to the private keys has access to that blockchain address that the keys protect.
What is blockchain technology?
Blockchain is a decentralized technology that stores and verifies transactions making it difficult to manipulate. As the name implies, blockchain comprises a chain of blocks. Each block contains a series of transactions. A block is only added to the blockchain after an operation is executed. This process is repeated for each block on the blockchain to check, verify, and record transactions.
The existence of blockchain technology has allowed records to be open and transparent for everyone. This is possible due to its decentralized feature.
What exactly do we mean by decentralized? In traditional financial institutions, for example, there has to be a third party for transactions to occur. One of these third parties includes the central bank. This body will check, verify, record, and provide receipts for every transaction. In the case of blockchain, there is no central authority. Instead, the technology runs over a distributed network that sees to these functions. This provides trust and transparency.
Transactions with banks sometimes take a while because of this intermediary. In this case, manipulation could occur. Blockchain takes away these problems as records are visible to everyone.
What is crypto trading?
Crypto trading involves the buying and selling of crypto assets for profit. Crypto has not only served as a medium of exchange but also as a form of trading.
Cryptocurrency trading thrives in the fact that crypto is very volatile. Volatility entails the drastic and sporadic changes in the price movements of a coin. Hence, crypto trading could cause losses or yield great returns.
Many traders in the market have used different tools and strategies to get ahead in the market. These tools help with market predictions and signals to buy or sell.
What is leverage in crypto trading?
Leverage, otherwise known as on-margin trading, is the use of borrowed money to invest in a cryptocurrency. Leveraging can be of help when you see potential profits in an investment but don’t have enough money to invest in it.
Suppose you have $1,000 you intend to use in trading a coin. You can leverage the coin for up to 5X. Hence, the amount leveraged would be $5,000. Note that this does not mean you will own $5,000. It only means that you will gain from just the profit of the amount leveraged. So you can get up to 5X the profit of your original bid.
Pros and cons of crypto trading
- Safe and secure: Crypto keeps your money and details as safe as possible due to its technology. Things like identity theft are not an issue when trading crypto.
- Geographically limitless: Crypto makes money transfer easy to and from any possible geographical location. This is opposed to some third-party methods where transactions are restricted to certain areas. It also allows anyone no matter where they are located to trade easily and without intermediaries any asset available on the blockchain.
- Low transaction fees: Unlike fiat currencies, crypto transactions are followed by very low transaction fees in most cases.
- Illegal operations risk: Crypto can serve as a hub for illegal transactions because of its decentralization.
- Volatility: The crypto market is extremely volatile. While it might work in your favor in some cases, you could also bear severe losses.
- Lack of regulation: Although the decentralization of crypto has been put to good use, its lack of regulation has also posed a great risk. The lack of compliance protocols in crypto gives an increased risk for crypto investment.
How to buy crypto
Here are some requirements to buy crypto:
- Crypto exchange account: This is a personal account where transactions will take place.
- Valid means of identification: This is only required in some cases especially if you use a platform that needs KYC (a process that needs to identify the person buying assets; Know Your Customer). You might be asked for this on your crypto exchange account.
- Suitable payment methods: You can make use of your credit or debit card to deposit real money to buy crypto. Or you can buy it with a bank transfer.
When you have successfully followed through with the things listed above, you can now follow these steps.
- Deposit real money in your crypto account: This step can be done by linking your cryptocurrency account to your bank account. You can also make use of your debit or credit cards to deposit your desired amount.
- Purchase your desired cryptocurrency: Now that you have funds in your crypto account, you can purchase any cryptocurrency of your choice. Assume you want to buy bitcoin. All you need to do is insert the exchange ticker symbol (BTC). This will be followed by the amount of desired coins you wish to buy. In most cases, this is already simplified as a process and it only takes seconds.
How to trade crypto
Now that you are ready to start trading, here are the steps to follow:
- Open a crypto exchange account
This is an online space for traders where crypto is traded. This process involves exchanging crypto for a valid form of payment, usually fiat currencies or other cryptocurrencies. As you embark on your journey through crypto trading, you might be puzzled about which type of crypto exchange to pick. Primarily, we have centralized and decentralized crypto exchanges. Here are the differences between centralized and decentralized exchange to help you make a decision:
Centralized exchange: Centralized exchange services serve as intermediaries during crypto transactions. They are very similar to traditional financial institutions because trades are often regulated and less direct. Instead of a transaction to be between two parties, the exchange platform jumps in the middle to oversee the operation. Unlike the decentralized exchange, blockchain is not as involved in a centralized exchange. Instead, you will be required to provide some personal information that will enable you to be verified. The centralized exchange also comes with ease of regulation. Although there are favorable benefits, it is important to note that centralized exchanges are managed by a company rather than a community or technical protocol as code like it happens for decentralized exchanges.
Decentralized exchange: Decentralized exchange services enable transactions to take place without any intermediary. They are usually more direct and implement blockchain in their operations. Due to the heavy role of blockchain in this exchange, the user has more power in operations rather than the exchange service. This leaves room for high security with a very low risk of manipulation. Although there are bots that explore vulnerabilities and inefficiencies in the DEX space also. Another plus to centralized exchanges is that low fees are charged usually and there is no need for KYC. On the other hand, there is no regulation and the speed is fairly slow when compared with centralized exchanges.
- Put money in your crypto account
Just like in physical terms, you need some assets to trade. One of the steps to start trading in crypto is to deposit real money in your crypto account. You can do this with either your debit or credit cards. Once your bank card is connected to your crypto account, you can transfer your desired amount anytime you want.
- Now that you have some initial assets, you can pick suitable trading strategies:
Finding your way around the crypto market and profiting off of it can be very daunting. To successfully yield returns, most traders follow one trading strategy or the other. These strategies give them buy or sell signals, analyze previous trends, and predict future price movements. The strategies can be implemented manually by the traders or they can be automated with advanced technology and algorithms.
- Choose a crypto trading platform:
Crypto trading platforms like Vestinda can be of great help especially for beginners finding their way in crypto. They aid in finding the right strategies to yield the best results but also in automating all or part of the work needed.
- Choose suitable storage:
When you continuously trade on your exchange account, you would eventually have to store your crypto. This can be done by using a crypto wallet.
Crypto wallets come in different forms. Most popularly, there are hardware and software wallets.
- Hardware wallets: These wallets store necessary crypto information on a device. Storage is offline which gives room for less manipulation. But the downside is that if the device is lost, your coins are lost too unless you keep your methods of restoring the wallet in a different place (eg: a long secret phrase).
- Software wallets: These are programs that store your necessary crypto information. An advantage it has over hardware wallets is accessibility. You only need an internet connection to use this wallet. Although, they are more susceptible to hacking and manipulation.
How to trade inside Vestinda?
Vestinda is an automated trading platform that makes investing easy for both beginners and experts alike. Our goal is to allow anyone to build and automate a fully diversified portfolio in just a few minutes.
Now we’re offering ready-made trading strategies with proven historical returns that can be used by anyone in the Crypto markets.
There are 3 simple steps you need to make to start automating:
Step 1: Connect your Exchange account in Vestinda using your API keys. This is a secure way to allow automation. Vestinda uses the most advanced infrastructure to secure your account access. Also, it doesn’t need access to move funds so your assets stay with your Exchange.
Step 2: Simply select some of the available strategies from our platform. Ready-made highly vetted investment strategies are listed for people to use. You can choose based on historical returns or tap into the more advanced statistics.
Step 3: Start the strategies in your account with a preferred amount and enjoy your time while we do the heavy work for you.
That’s all you need to benefit from advanced algorithms.
If you’re an advanced trader who wants to publish strategies that others can use, please contact us.
Diana is the CTO of Vestinda.
She’s an engineer with extensive experience in the payments space, passionate about mathematics and artificial intelligence.