Cryptocurrency, especially Bitcoin, grabs a lot of attention in the news and has certainly become a fascinating and still developing new market for investors throughout the world. Despite Bitcoin’s volatility, since 2019 has steadily increased from the $3,000 level up to its current price level around $14,000 as shown in the weekly chart above. Crypto’s first currency has proved to be extremely resilient.
If you’re interested in this innovative digital currency but are not sure how or even whether you should invest, this guide will help get you up to speed on what cryptocurrency is, how to buy and sell it, and how to make money off it.
One thing to definitely keep in mind is that cryptocurrencies like many assets have their upsides and downsides when it comes to trading so the guide will also discuss these issues and how to make the most of what crypto has to offer.
Buying and Storing Cryptocurrency
For people just getting started with cryptocurrency, the most difficult and confusing task will be actually buying and storing their new asset. While blockchain technology is amazing for its transparency, electronic movement, and a host of other innovative applications, the process of buying and storing it has a large learning curve.
A person may buy cryptocurrency in a number of ways. One of the most common ways is to create an account on a cryptocurrency exchange. Over the last couple of years many exchanges have emerged around the world where fiat currency such as dollars or Euros can be deposited in an exchange account and then traded for crypto.
These exchanges often provide access to many altcoins in addition to the most popular coins – Bitcoin, Ethereum, Ripple, and Litecoin. Buying a crypto asset is then as simple as placing a Buy order on the sites exchange that meets a Sell order of an equal amount.
After the trade, the exchange will credit your account with the appropriate amount of your new crypto asset minus a commission on the trade, which can often be significant. At this point, you can withdraw that cryptocurrency from your exchange account into a digital wallet, which is commonly referred to as a “hot wallet”.
NB – Beware of fees that may be charged by the exchange for the withdrawal of your crypto asset and be sure to account for transfer fees assessed to the blockchain movement of your new crypto.
If you choose to keep your crypto in a hot wallet, be sure to write down your account info and passwords in a safe and memorable place. In most cases, if you lose your crypto asset’s information, it will be lost to the digital netherworld and often not be retrievable without enormous efforts.
Once you have your crypto in your hot wallet, you may choose to leave it there. There are many digital wallets available online and most are free. However, the level of security for them varies so make sure you do your homework. Of course, you can also leave your crypto in your exchange account, but be aware that many exchanges have experienced breaches of their security over the last few years resulting in large losses to clients.
The safest way to store your crypto assets is in a “cold wallet”. A cold wallet is a crypto storage device that can disconnect from your computer much like a thumb/usb drive and can be carried with you or stored somewhere safe like cash. You can then plug it in and move your currency from any computer at your leisure.
Cold wallets have their drawbacks also. As many of you have probably already imagined, losing a thumb drive isn’t all that difficult, but if you treat it like valuable cash you’re likely to keep a close eye on it.
You will also need to purchase a cold wallet from a vendor usually online. Cold wallets can like the Trezor T and Ledger Nano X are great, but expensive.
Additionally, you can purchase Bitcoin or other cryptocurrencies in direct 1 to 1 transactions provided you can find a person that is willing to sell their crypto to you at a price you are willing to pay. This reduces transaction costs, but significantly increases risk since you don’t necessarily know the other party well.
- At one time, this practice was more common, but because of the value of many coins, especially Bitcoin, it rarely occurs nowadays. However, keep it in mind if you have a friend or relative that wants to buy/sell their crypto as you can trust them.
- Another thing to understand is that cryptocurrency that is in your hot or cold wallet won’t be available to you for trading. It will just sit there and either increase or decrease in value, but the amount of it won’t change.
If you’re looking to trade crypto in order to increase your holdings or cash out added value, you will need to keep some in an exchange.
As mentioned earlier, there are dozens of online exchanges throughout the world ready to help you buy and sell crypto assets in an extremely active market. Trading in crypto can indeed be extremely lucrative for even novice investors because of the tremendous volatility of the crypto markets.
The cryptocurrency market has definitely evolved into an exciting and profitable investment vehicle. However, overall capitalization is at roughly $400 billion USD (the value of all crypto assets owned by everyone in the world) and is still light years behind traditional markets.
To illustrate this point one can look at the Forex market which trades more volume and value in two hours than the value of the entire cryptocurrency market capitalization. $5 trillion USD is traded on most days in Forex markets versus $21 billion USD for crypto.
Nonetheless, market capitalization shouldn’t be much of a deterrent if you’re serious about trading the crypto market because it is still very fluid and buyers have little difficulty finding sellers. However, there can be some limitations since prices on one exchange can vary from others at the same time. Also, since there are so many altcoins available worldwide, not every exchange will necessarily offer all the coins you want to trade.
Of course, nearly all exchanges will have the major coins with the highest capitalization – Bitcoin, Ethereum, Ripple, Dash, and Litecoin. Commissions and other fees will also vary depending on the exchange you use and often additional costs may accompany certain exchanges so be sure to read the fine print before setting up your account.
Additionally, many exchanges don’t or are forbidden from attaching fiat currency (dollars, Euros, Yen, etc.) to your account. This means that you will need to buy crypto currency in one place before transferring/depositing it to that exchange. Conversely, to make a withdrawal, you will have to then transfer your crypto out again to convert it to fiat currency.
On these types of exchanges, you will have a few options for making trades. You can use Bitcoin to buy other crypto assets, you may use other coins such as Ethereum to buy crypto assets, or you can use Tether. Tether is a virtual coin that is tied to the USD and works to maintain a 1 to 1 ratio with the U.S. currency. Using Tether means you are trading a virtual equivalent of the U.S. dollar to buy crypto assets. This is one way exchanges can work around a prohibition on maintaining Fiat currency accounts.
Transferring Tether out of your exchange account is often more difficult and you will usually want to (or be forced to) convert it to Bitcoin beforehand, which will incur an additional commission on the trade.
Trading Crypto on Olymp Trade Reduces Risks
By now, you have probably come to the realization that investing in crypto has some upside, but it also has some significant drawbacks and complications compared to trading Forex or stocks. The need to buy, store, transfer, and convert your crypto in order to trade on the markets can be quite a minefield to navigate especially for people that aren’t extremely tech savvy. It can also be costly as transfer fees stack up.
Moreover, mistakes can be costly as your crypto may become irretrievable, which can be more painful than losing money in a bad trade because you at least know where it went and what happened.
Fortunately, there is an easy and far less complicated way to invest in cryptocurrency that eliminates nearly all of the downsides to these profitable markets – Olymp Trade. Trading crypto assets on the Olymp Trade platform takes much of the uncertainty out of the processes associated with the blockchain.
First of all, you probably already have an Olymp Trade account and if you don’t, you can open one easily and for free. You won’t need to master any blockchain skills, buy a cold wallet, set up a hot wallet, or anything else. Opening an account with Olymp Trade doesn’t require you to buy Bitcoin or any other altcoin in order to make a deposit. Instead, most Olymp Trade clients just use USD or Euros.
Of course, if you have some crypto, you can also use it as a deposit method to your Olymp Trade account. Olymp Trade accepts a few coins for deposits and withdrawals including Bitcoin, Tether, and Ethereum.
Also, the prices for crypto assets on Olymp Trade are averaged across many different exchanges giving traders the best quotes for opening and closing trades. Next and maybe most powerful, Olymp Trade allows traders to take short (Sell) positions on crypto assets that clients don’t even need to own outright. Because Olymp Trade’s Forex mode functions as a Contract for Difference (CFD), clients can trade crypto assets and profit off these markets without needing to purchase the underlying asset.
Using CFDs allows traders to enter and exit these often volatile markets easily and with significantly less risk. The Olymp Trade platform has professional trading tools that many of the crypto exchanges don’t, such as Take Profit and Stop Loss so investors don’t have to worry about their trades if they are offline or go to sleep.
Lastly, the Olymp Trade multiplier feature allows you to increase the size of your trade by 5 or 10 times the amount you invest. This provides traders additional profitability on their trades while keeping the same level of risk (only the invested amount). Typical crypto exchanges don’t offer this feature.
Trading crypto on Olymp Trade provides the best of all worlds involving the crypto markets – the ability to profit off volatile assets combined with the ease of use of a traditional trading platform.
If you’re serious about getting into the cryptocurrency market, starting with Olymp Trade is highly recommended as a starting point. On Olymp Trade you can do your trading and make profit today. Then use those earning you can always buy actual crypto and “HODL” it in a hot or cold wallet on the side and watch it as it steadily increases in value.