The concept of digital currencies has gone through many different stages since its introduction in 2009. We can see that many people were hesitant about it at first. We understand why so many people weren’t sure about it. It was a new concept, and it seemed like something impossible at first. Digital currencies were something that was only in movies.
Step by step, the public adopted cryptocurrencies. We can see they have become mainstream. At first, there was only one of these to choose from, Bitcoin. Over time, numerous other cryptocurrencies appeared on the market. Today, you can choose from more than five thousand of these.
Despite this number, Bitcoin still has the top position. The most widespread reason so many people want to invest in these is to receive significant profits. Naturally, this trading is not something you should tread lightly. While even the tiniest elements can hurt your investment, they can make you rich. As you can see, the devil is still in the details.
Now, we want to provide our readers with a guide on how to trade cryptocurrencies in 2022.
How Do These Work?
One of the most frequently asked questions is what determines the value of crypto. For other assets, the value depends on the different factors in the market. While cryptocurrencies also have their market, things work significantly differently in this case. First, they don’t have anything to do with the local economy.
Also, their value doesn’t have anything to do with corporate profits. The value of digital currencies on the market resembles the interests shown in them by investors. The value will rise if many individuals want to invest in particular crypto. If that trend continues, then you can expect another rise in the future.
While this concept has been around for a decade, some veterans do not understand this nature completely. But, when you talk with someone with a lot of experience with investing in numerous volatile assets, it becomes obvious why this concept has gathered so much attention.
Cryptocurrencies are volatile assets. For those who don’t know what this means, the value can change significantly in a short period. As a result, your investment can either get hurt pretty bad. At the same time, it can become the best one you have made in your lifetime. Naturally, this is much easier to do than to manage.
What Should Beginners Do?
As is the case with any activity out there, beginners need to understand some elements before they are ready to enter the market and expect success.
1. Choose The Right Platform
Choosing the crypto trading platforms might seem like an easy thing to do, but it’s not. These come with a plethora of details you should be aware. First, you need to notice the fees charged by the platform for each transaction you make. Whenever you make one of these, a percentage goes to the platform.
So, it pays to pay attention to this aspect. Generally speaking, these fees are much lower than in, let’s say, bank transactions. Another aspect that requires your attention is possible limitations when you invest or withdraw your funds. These are not common, but you need to be aware of them.
Above all, it is essential to check the platform’s credibility. Since the market has grown enormously over time, many scammers appeared. Since we know how hefty these investments are, it is crucial to select a well-known one. Before you are ready to commit, find a way to find a credible one.
2. Select The Crypto
All the surveys and the market itself show that most investors opt for either BTC or ETH. As we’ve said, their value resembles the interests shown in them. Surprisingly, their value is not the main reason so many choose these. They are more predictable than any other ones on the market.
Over time, we can see that altcoins gathered more attention. Once again, their value doesn’t play a significant role. They are assets that have more potential to grow in the future. With the attention they got recently, we cannot say anything against this statement. Still, not all of them have this potential. So, it is crucial to be careful about every single element.
From our experience, beginners should choose only one crypto to invest in. After they become familiar with all the processes on the market, then they should move on with adding one or two other ones. Of course, these decisions need to be a result of thorough research conducted by the trader.
3. Choose The Wallet
You need a place to store your digital currencies and keep them safe from any potential danger. To do that, you need to find an e-wallet that can provide all the security to your assets. The list of these options is quite long, and it is not possible to decide in a short period.
Beginners should stick to those that do not offer a lot of different options to them. The “Receive” and “Send” options will be more than enough for the time being. After they gather more experience, they should seek an alternative. If you are interested in day trading, seeking an e-wallet is not necessary.
But if you want to store them for a long time, then you need one of these. There are two main types of e-wallets to choose from, hardware and software wallets. Even though both of these can preserve your assets efficiently, we prefer hardware ones becomes they work offline. They are out of reach from anyone interested in stealing them.
4. Find An Appropriate Strategy
At first, it is challenging to find a strategy that will lead you to success. We all know that being successful with every single investment is not possible, no matter what assets we are talking about. Still, utilizing a strategy is a layer of ensuring that your efforts will come to fruition down the road. However, choosing the right one is not something we would describe as simple.
To do that, you need to know what is the reason for your investment. If you want to utilize day trading, then this question is of the utmost importance. On the other hand, if you are interested in keeping your assets in e-wallets long-term, then this question doesn’t require as much attention on your behalf.
A trading strategy is also a way to avoid many risks and pitfalls you can stumble across on your journey. Yet again, a lot depends on your level of knowledge, patience, discipline, analytical skills, and what we’ve already stated, the goal you want to achieve. Thinking hard about these things is an absolute must before you make the final decision regarding the strategy you want to utilize.
Investing vs. Trading
The next thing we want to shine light upon is the difference between trading and investing. Sometimes, these two terms can seem like synonyms. But in reality, they cannot be farther from each other. Trading means that you are trying to make a profit within a certain period, while investment is more of a long-term approach.
The best way to describe it is to purchase a crypto and hold onto it until it reaches the value you prefer. Sometimes, this period can be short, but some surveys have shown that the average time people keep these in their wallets is a year. Still, we can never be completely sure of these claims since e-wallets are completely private.
Trading, or day trading, is a method that operates in certain time frames. Sometimes, you may make a purchase and sell assets for a profit in a couple of days. We do not recommend this approach to beginners until they gather enough experience on how to follow all the trends and other significant elements.
The final thing we want to touch upon is the nature of digital currencies. One of their main traits is decentralization. It means that they do not have any authority above them. They function within their circle and do not need approval from any bank or government institution.
Instead, each crypto out there emerges from its blockchain system. We are talking about a distributed ledger that share data among the nodes of a network. So, all the information relevant to the cryptocurrency are inside these in a digital format.
Without any doubt, we think that this trait is the biggest strength digital currencies have. Since no authority oversees any action, the owner’s privacy is guaranteed. Also, the transactions are swift. So, you are not obligated to wait too long before the transaction is complete. That’s the main reason why so many investors choose the cryptocurrency market.
The Bottom Line
The concept of digital currencies is a mystery to many individuals even in this day and age. That’s why it is necessary to update your knowledge constantly as you continue this journey. You can be sure that this requires a lot of time, effort, and patience. We hope this guide will assist you with making the baby steps on the way to becoming an established trader in the future.