What are cryptocurrencies and trading?

What are cryptocurrencies and trading?

Cryptocurrencies means decentralized real money, significance they live not under the supervision of monetary organizations or administrations. You can also capitalize or market in cryptocurrencies like any different money. There are numerous cryptocurrencies and each of it has its own traits. Those with significant market capitalization are: bitcoin , bitcoin cash, ether , litecoin and stellar. Cryptocurrencies are known to be an alternative to traditional currencies, even though they were actually created with the intent of functioning as a payment method. In fact, they are accepted by several shops in lieu to Cardano bridge.

Cryptocurrencies have much more similarities to commodities, such as gold, than forex. Indeed:

The trend of cryptocurrencies is not tied to the performance of the economy of a particular country. Interest rates and monetary policies do not have an impact on the value of crypto currencies. Investors prefer to own cryptocurrencies waiting for them to increase in value, and then convert them to traditional currencies

What is cryptocurrency trading?

Trading with cryptocurrencies consists of operating on the price movements of cryptocurrencies with a trading account with CFDs, or by buying and selling the underlying currencies on an exchange.

Trading on cryptocurrencies with CFDs

CFDs are derivative financial instruments, which allow you to invest in the price trend of cryptocurrencies without having to own the real value of the underlying. You can decide to open a long position (‘buy’), if you think the value of the cryptocurrency will increase, or open a short position (‘sell’), if you think the value will go down. CFDs are leveraged products, so you only need to deposit a small amount of money, the margin, to get maximum exposure in the underlying market. Based on the total size of the open position, your profits or losses could be amplified due to the leverage effect.

Buying and selling cryptocurrencies via exchanges

When you buy cryptocurrencies through an exchange, you are buying the asset. You will need to open an exchange account, cover the total value of the asset to open a position and deposit the cryptocurrency tokens in a digital wallet (or ‘wallet’), where you can keep them until you decide to sell them. Exchange accounts have a steep learning curve, which allows you both to understand the criticalities of the technologies involved and to analyze the data in the best possible way. Exchange accounts have a maximum deposit limit and can have high maintenance costs.

How do cryptocurrencies work?

The cryptocurrency markets are decentralized, which means that currencies are not issued and are not protected by a central body such as a government or central bank. Cryptocurrencies, on the other hand, are managed by a network of private computers and servers. However, cryptocurrencies can be bought or sold in an exchange account and held in ‘wallets’, or cryptocurrency wallets.