Cryptocurrency trading, or more briefly crypto trading, is simply the exchange of cryptocurrencies. Just like in Forex, you can buy and sell one cryptocurrency for a fiat currency, like Bitcoin or Ripple for USD and Euro. Or you can trade one cryptocurrency for another, like Litecoin for Bitcoin and Ether.
What You Should Know Before You Start Cryptocurrency Trading
The cryptocurrency market is quite volatile. You might be able to make a fortune in a moment and lose it in the next whether you trade Bitcoin, Ripple, Ether, Litecoin, or Dash. Keeping that in mind if you are a beginner or even an expert in crypto trading, it would be a good start to choose a company with a good reputation that offers trading on the most well-known coins like Bitcoin (BTC) and Ethereum (ETH).
Additionally, it is always wise to stay updated with the current trends and news of the crypto market and do research on the market cap, history, and future of each cryptocurrency.
Mining or Trading Cryptocurrency?
Cryptocurrency mining is another way to get involved in crypto trading. It will require a large outgo of cash to buy the needed equipment an investment of time and resources like electricity for powering your computer, or you can invest a small amount of money and trade with an online broker.
Bitcoin and Ether mining are among the most popular coins to mine. However, if you are not interested in getting involved with all the technicalities of mining, then trading may be a better choice.
Factors that Affect Crypto Trading Prices
Some of the factors that cause fluctuations in the crypto trading market include a software update, wallet improvements, platform applications and of course governmental regulations.
If a cryptocurrency is updating its software to lower the transaction speed, for example, this could increase the value of that coin in the future. The same is true for wallets.
Unlike fiat currency that can be stored in a bank, cryptocurrencies need to have a compatible wallet to be stored safely. If a cryptocurrency does not have a good wallet solution yet, it may mean that it is undervalued and future improvements in the wallet may increase the price.
Some crypto platforms, like Ethereum, host other applications. If one of these platforms does very well, this could have a positive effect on the currency.
Finally, government regulations can have a large effect on the value of a cryptocurrency. That is why all investors should keep aware of current trends in government regulations and avoid crypto trading in currencies that could get red flagged by government agencies.