Guidelines on Trading Cryptocurrency Over the Blockchain

Blockchain technology has become widely used in the cryptocurrency sector and is the basis for cryptocurrency exchanges.
bitcoin blockchain
Shutterstock Licensed Photo - By Tetiana Yurchenko

Cryptocurrencies are evolving with new technology and growing interest. The blockchain has made cryptocurrencies very valuable investments for millions of people all over the world.

If you want to invest in bitcoin, ethereum or other cryptocurrencies, then you can easily purchase them over the blockchain. You just need to know which exchange to use and what steps to take to process your transactions.

You might not appreciate the importance of blockchain yet. After all, is currently utilizing it. However, there are a lot of reasons to anticipate it will become more important. If you are planning to invest in bitcoin or another cryptocurrency, then you are going to have to know how to leverage it when buying through a popular cryptocurrency exchange.

Blockchain is an Essential Backbone for Cryptocurrency Exchanges

You might be thinking “What is cryptocurrency?”, or you may know it but not what it can do. Well, crypto-currency is a way to make transactions in units such as bitcoins (BTC) or ethereum (ETH). These units are made up of the buying and selling of goods and services.

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These exchanges wouldn’t be possible without the advent of blockchain. Blockchain is used to authenticate cryptocurrency transactions and keep permanent, unalterable records of them, which has helped make cryptocurrencies viable digital assets. These benefits have made it useful for a number of industries.

If you have never heard of blockchain before, you might understandably be skeptical of the benefits it provides or the security claims behind its architects. However, you will probably be more inclined to trust blockchain if you know that it is used by some of the world’s largest banks .

If you want to trade crypto, you need to know about the top exchanges for this market.

Below is the for beginners that want to trade cryptos. All of these exchanges use blockchain to authenticate transactions and provide robust security to crypto investors.

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  • Coinbase – Coinbase is a digital currency exchange and they accept investments in cryptocurrencies by trading in their system. Millions of users have used their platform since it came into existence in 2012 and they are one of the most trusted exchanges.
  • Kraken – Kraken is an online trading platform that allows users to trade bitcoins, cryptocurrencies, and other digital assets with minimal fees. This platform has been around for more than 8 years and it is gaining popularity with users.
  • Bitfinex – Bitfinex is a digital asset exchange BFX that offers a trading platform, margin trading, and peer-to-peer financing. The company was founded in 2013, and it has been around since then.
  • Poloniex – Poloniex is a digital currency exchange specializing in the crypto market. The Poland-based exchange has been around since 2014 and they have grown to become an authority in the cryptocurrency industry.
  • Bybit – Relatively a newcomer to the crypto trading scene, they’ve been one of the fastest-growing cryptocurrency exchanges since their inception in 2018. Ever since they started, they have had more than 3 million registered users and currently growing.

Cryptocurrency Trading Steps

Step 1: Make a Cryptocurrency Brokerage Account

If you want to delve into trading cryptocurrency, the first thing you need to do is open a brokerage account. A broker will allow you to buy and sell digital currencies using different payment methods and it is one of the easiest ways to enter into this market.

Step 2: Fund Your Account

After you have opened your brokerage account, you need to deposit some money into it. This is usually done using a wire transfer. If the exchange allows third-party payments, you can also use a credit or debit card. It is recommended that you fund your trading account with an amount equal to about 20% of the total value of your planned trade. This will reduce the risk of losing all your money in case one trade goes wrong and keep you from giving up on cryptocurrency trading before you make any real profits.

Step 3: Pick a Crypto to Invest In

Once you have your brokerage account, you need to think about which currency or coins you want to trade. You can pick the one with the best performance and the highest growth rate. Some of them are:

•             Bitcoin (BTC) – The first cryptocurrency ever created, Bitcoin has established itself as an investment asset and its value is far above what it was a year ago. If you are looking to trade BTC, look for exchanges that have low spread and low transaction fees.

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•             Ethereum (ETH) – This cryptocurrency was created to improve the Ethereum platform. It offers a decentralized way to manage apps, and it also has a strong community that is working on the platform.

•             Ripple (XRP) – Ripple has been growing in popularity over the past few months due to its ability to make fast, secure, and cost-effective global transactions.

Step 4: Choose a Strategy

Once you have picked a cryptocurrency to invest in, you will need to make a trading strategy. You need to know how much money you will put into cryptocurrency trading and pay attention to the markets. You can place large investments in some markets with low volatility and other coins with very high volatility. Some of them are:

•             High Volatility – These currencies have been known for their unpredictability, as well as their ability to fluctuate rapidly across different exchanges. They can be risky to trade and results may not be what you want.

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•             Low Volatility – Do your research and make sure to choose those coins that have a low volatility rate. The lower the volatility, the better the chances of making a profitable trade.

•             Medium Volatility – These are coins that are stable and have a middle-ground volatility rate. They offer you a chance to make consistent profits rather than losing them all in a single day’s trading as some of these virtual currencies do.

Step 5: Consider Automated Crypto Trading

One of the easiest ways to make money in this market is by automating your trading. However, you have to be careful as there are many scammers out there. You can get automated trading bots, but only the best will make you money. You need to do your research and check with existing users before you spend your money on a bot.

Step 6: Store Your Cryptocurrency

Once you have bought your cryptocurrency, you need to store it somewhere. Since each exchange is unique and has different requirements, there are several ways to store your cryptocurrency. Some of them are:

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•             Hardware wallet – A hardware wallet is one of the best ways to store virtual currency because they allow you to securely connect a device that has the ability to run a number of blockchain applications and secure them using a passphrase.

•             Digital wallet – This is a software wallet that you can access from your desktop or mobile device. It allows you to send and receive cryptocurrencies and they usually have a built-in way of storing cryptocurrency.

•             Cryptocurrency exchange – This is where you need to store your digital currency to trade it on the market. Many exchanges offer this service, but it is best to keep your currency off.

Pros and Cons of Investing in Cryptocurrencies through Blockchain

Blockchain technology has become very useful in the financial sector. It is still particularly important in trading cryptocurrencies. Here are some benefits and drawbacks.

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Pros of Investing

1.            Cryptocurrency trading is a very lucrative market. Most of these currencies have demonstrated upwards tendencies, and they usually recover quickly after a dip in their value.

2.            People have been using cryptocurrency trading to make a living since it gained popularity.

3.            The market is very active and this allows you to make quick profits when your chosen currency gains in value.

Cons of Investing

1.            There are many scams out there and the cryptocurrency community is not particularly supportive of newcomers.

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2.            It isn’t easy to make money in this market as many people try to get rich overnight, but it will take some time before it becomes profitable for them.

3.            It is difficult to make money in this market as many people try to get rich overnight, but it will take some time before it becomes profitable for them.

4.            Blockchain technology is very energy intensive. This means it isn’t very good for the environment.

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