In this article the author Qrius discusses what cryptocurrency is and how it works and its different trading strategies.
As a volatile asset, Bitcoin is popular among traders. Investments in crypto, if timed right, can yield far higher returns than traditional investments.
The two most common goals of cryptocurrency traders are to accumulate Bitcoins or to profit in US dollars. It is relatively easy to increase the value of your portfolio in USD during a crypto bull market, but increasing the value of Bitcoin is significantly more difficult. You can trade altcoins against Bitcoin on sites such as Coinbase Pro in order to keep track of the Bitcoin value of your portfolio.
Traders who are enthusiastic about bitcoins run the risk of losing them. Since cryptocurrency values fluctuate so much, traders rarely lose money quickly when they trade cryptocurrencies. For this reason, Bitcoin enthusiasts HODL their coins.
What exactly is cryptocurrency?
A cryptocurrency is a type of digital currency that is unrelated to any country or government. Instead, who owns what is recorded on computerised systems protected by strong cryptography and blockchain technology.
While some establishments accept cryptocurrencies for everyday purchases, they are more often exchanged as digital assets for investment benefit. On cryptocurrency exchanges, you may make a lot of money by buying and selling. However, because prices are so unpredictable, you might lose a lot of money.
What are the 4 different crypto trading strategies?
Those looking to make money from bitcoin trading use a number of strategies. A handful of the most important are listed here.
1. Day Trading
This is a fast-paced form of cryptocurrency trading in which investors buy and sell cryptocurrencies often throughout the day in order to profit from price swings. However, for novices, this may not be the greatest way to trade bitcoins. This is because attempting to time the market has a great risk of losing money.
2. Hedging
Hedging is a method adopted by certain crypto traders who want to keep the coins but not be over-exposed to volatile swings. It involves one of your assets cancelling out some or all of the risk of losses with another.
Financial products like contracts for difference and futures can be used to hedge cryptocurrencies. These basically enable you to stake on the future value of the coins. This is a hazardous process that should only be employed if you are entirely assured in your capabilities.
3. HODLing
Those that “hodl” a cryptocurrency reserve it in their tenure during good times and bad. If it seems like a typo, that’s because it was — the phrase was coined as a result of a typing error on an early bitcoin forum. However, it is sometimes interpreted in retrospect as meaning for “Holding on for Dear Life.”
4. Investing in trends
Crypto traders practice trend trading to choose whether to buy or sell specific currencies based on whether their price is rising or falling.
There are many more complicated theories on how to spot a trend or predict when it will shift. However, the underlying principle is that these cryptocurrency traders purchase when the market is rising and sell when it is falling.
Want to invest in Cryptocurrency?
Some of the most well-known cryptocurrencies are bitcoin, ether, and dogecoin. However, there are hundreds to pick from now. There are numerous facts to consider while investing in the Cryptocurrency. The fundamental analysis assesses an asset’s fundamental worth, which is more difficult to accomplish with crypto. You must also consider risk management.
Few of the currencies, whose manufacture imposes a lot of computational power, may cause you to be worried about their environmental impact. If that’s the case, you could choose an environmentally friendly alternative. Alternatively, you could be interested in utilising a specialised coin exchange or broker that exclusively works with a restricted number of currencies, limiting your options. This prevents the perplexity that occurs with having too many options.
Some individuals may be drawn to the newcomer world coin, which is backed by some big Silicon Valley personalities and is said to be established on the altruistic principle of better income sharing. For determined HODlers, Safemoon, a new currency designed to dissuade day traders by imposing a penalty on those who sell the currency, is a viable option.
Which Cryptocurrency you should choose?
There are several cryptocurrency investment possibilities available, but none of them is likely to be suitable for everyone. Before buying, you should consider crypto investing guidelines to get the most out of the investment. Do you expect it to appreciate? Do you want to use cryptocurrencies to carry out transactions? Do you want to use the underlying technology to create decentralised apps? These might assist you in making your selection.
WDDUK has prepared guidelines for some of the most popularly used cryptocurrencies, such as Bitcoin and several Bitcoin alternatives:
| Cryptocurrency | Market capitalization |
| Bitcoin | $829.6 billion. |
| Ethereum | $369.5 billion. |
| Tether | $78.7 billion. |
| BNB | $70.4 billion. |
| USD Coin | $52.5 billion. |
| XRP | $39.3 billion. |
| Cardano | $36.1 billion. |
| Solana | $31.7 billion. |
| Avalanche | $22.7 billion. |
| Terra | $22 billion. |
Conclusion:
Cryptocurrency trading is sometimes seen as having a higher risk than stock trading, however, this is dependent on the stocks or cryptocurrency you’re trading and how you’re doing it. Trading penny stocks or options may be just as hazardous as trading cryptocurrencies, if not more so.
You should be aware that trading bitcoin has the risk of losing your money to the market. If you truly believe in the future of cryptocurrencies, it may be more profitable to store your crypto assets for the long term rather than trying to time the markets.
Disclaimer: The information provided on this page does not constitute investment advice, financial advice, trading advice, or any other sort of advice and it should not be treated as such. This content is the opinion of a third party and this site does not recommend that any specific cryptocurrency should be bought, sold, or held, or that any crypto investment should be made. The Crypto market is high-risk, with high-risk and unproven projects. Readers should do their own research and consult a professional financial advisor before making any investment decisions.
