This type of trading involves exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into crypto.
It bears some similarities to foreign exchange (forex), where fiat currencies from across the globe are traded 24 hours a day.
The number of cryptocurrencies has exploded in recent years – and estimates suggest there are now more than 1,500 in existence.
Many of these coins can only be acquired using a major cryptocurrency such as Bitcoin or Ethereum. Because of this, you’ll likely need to perform trades if you want to contribute to initial coin offerings (ICOs,) or use a blockchain company’s services.One upside of crypto trading is that you can get involved without mining coins yourself – a process that takes time, energy, technical knowhow and a lot of computing power.
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Crypto trading FAQ
- Apart from being the foundation for the creation of cryptocurrencies, blockchain technology has wider implications in the global economy, including the potential application in smart contracts and in the field of Internet of Things (IoT). As cryptocurrencies were only introduced in the last decade and are not considered a legal tender, they are not subject to the same market forces as traditional markets. This means that trading in cryptocurrencies is not like trading in traditional financial markets.
- Due to the centralised nature of cryptocurrencies, their price movements are less affected by factors such as data releases, political uncertainty, and interest rate changes. In addition, because they are a new type of financial instrument, cryptocurrencies have relatively few correlating assets which could affect their price movements.
- Nevertheless, the prices of cryptocurrencies can be affected by several factors such as changes in blockchain technologies and regulatory attempts to control their acceptability and ‘tradeability’ in the financial markets. News reports such as disagreements on how a particular cryptocurrency should be upgraded or processed can also affect its price. It is likely that any security flaws exposed by hackers will also adversely affect the price of a cryptocurrency. Of course, government policies and regulations that seek to ban or limit the sale of cryptocurrencies will also affect its price.
Cryptocurrency trading, just like all forms of financial trading, requires relevant knowledge, skills, and available capital. If you wish to trade the cryptocurrency market, you should first ensure that you have all the relevant skills for analysing the market. It should be noted that cryptocurrencies are more volatile than traditional instruments and, hence, riskier than most people are used to. This volatility can provide more opportunities for making a profit, but remember it can also result in losses that are greater than what you may be willing to bear.
If you do decide that trading cryptocurrencies is right for you, you could start by opening a trading account with FXVIP. You can then choose the crypto CFDs you want to trade from the rich selection on offer and open a position when your analysis tells you the time is right.
In 2008, Bitcoin or BTC was the first cryptocurrency that was introduced to the world. This cryptocurrency was the first to adopt blockchain technology. Today, Bitcoin has become one of the most valuable cryptocurrencies in the industry with its value surpassing even that of gold.