9 bits of key information to get you started with Bitcoin trading!By CCTrader - August 24, 2018 |
With Cryptocurrency and Blockchain popularity surging ever more in the past months, more people are getting curious and are looking at how they can get themselves involved in crypto.
It’s critical to understand the basics behind crypto and trading crypto to be successful in this volatile market, before jumping in headfirst and potentially losing big. We’re going to start with the basics of cryptocurrency, specifically Bitcoin since it is the most popular coin and the one that most of you have at least heard about.
You don’t need to buy a whole bitcoin, phew
Maybe one of the most common misconceptions is that you need to buy at least 1 Bitcoin to start trading – a scary thought considering that Bitcoin trades at around 5500 EUR*, and once even traded for a phenomenal 16546 EUR. If you’re just getting into trading crypto this will sound like a lot to get started, especially for something that is still ambiguous.
Unlike conventional trading instruments however, Bitcoin can be traded in fractions – meaning you could own a 0.33, 0.5, or even 0.000238 of a Bitcoin. Sounds great right?
This means you don’t need to commit thousands to start trading Bitcoin. You can start slow as you get comfortable with how Bitcoin and crypto works, and then gradually adjust your investment.
Particularly for Bitcoin, a fraction is called a Satoshi, named after the infamous pseudonym of the Bitcoin creator Satoshi Nakamoto, who is still unknown to this day. 1 Satoshi is 0.00000001 bitcoin (one hundredth of a millionth). At the time of writing, 1 EUR is equivalent to 18, 000 Satoshi, or 0.00018 Bitcoin.
Bitcoin trades 24/7
You might be used to trade markets closing and opening at certain times during the day, and depending on the country. Bitcoin however, and all cryptocurrencies for that matter, trade on hundreds of exchanges all around the globe and essentially are open 24/7.
Since there is no official Bitcoin exchange, there is no official price for Bitcoin. This tends to create arbitrage between exchanges, however the prices are fairly similar across exchanges for the most part.
Don’t be afraid to take little profits
Cryptocurrency prices can fluctuate at a fast rate, and in great discrepancies. At its highest, Bitcoin reached a value of 16546 EUR (19345 USD) and currently it stands in the region of 5500 EUR. This fluctuation was in a period less than one year, which is a perfect example about how much cryptocurrencies can fluctuate.
Figure 1: Bitcoin Price over a year – Source: https://www.coindesk.com/price/
As you can see from the Bitcoin chart above, prices tend to fluctuate at high rates, and whilst some instances and coins are less volatile and trade at a steadier rate than others, it’s still not uncommon for prices to change as much as 20% in 24 hours trading. In fact Bitcoin had a max realised volatility of 60% during 2017 as shown above.
Don’t be afraid to cash out frequently and keep taking smaller profits. Even for more experienced traders, the crypto markets can be unpredictable and dangerous.
Make use of Bitcoin trading tools & communities
The rise in popularity of cryptocurrencies has inevitably created a number of discussion communities online, on platforms like Telegram, Facebook, and Reddit. Telegram is one of the most popular channels for crypto traders, as there are a significant number of groups that seasoned investors frequent. Some are free, but most of the groups are paid entry, and they charge a premium for companies who want to advertise on them.
Generally these are some of the best places to interact with individuals who are interested in trading and who share their experiences. However, it is extremely important to remain vigilant about the sort of advice that is shared in these groups. Never take it as trading advice, and never give out personal details or send someone money to trade on your behalf. If it sounds too good to be true it usually is.
These groups unfortunately have also spawn countless scams, and the crypto market is a victim of a significant amount of scams related to ICOs (initial coin offerings) that have prompted internet companies like Google and Facebook to ban any form of crypto advertising due to the amount of people being scammed. The ambiguity of the market is the perfect ground for scammers to profit from newcomers, so always been on your cautious side when discussing crypto in communities.
Cryptocurrencies react to economic conditions
Frequently investors seem to be treating cryptocurrencies as a safe haven. In traditional investments, the falling rate of dollar was usually hedged against Japanese Yen by investors to secure their investment portfolio and protect themselves against poor US performance.
However, more and more we are noticing trends where poor economic reports and government events are coinciding with sharp rises in cryptocurrency.
This was seen most recently when the Italian President refused the formation of an anti-establishment government, elected by the people.
In what was likely a show of distrust for the system, many investors quickly dropped their Italian portfolios and placed it into crypto, causing at least the top 5 cryptocurrencies to witness a short bull run.
Bitcoin is decentralised, no government interference
One of the biggest draws of Bitcoin is that it is decentralised. It works and runs on thousands of nodes called a Blockchain, and it can be setup as an application on your PC, or a huge crypto mining farm.
As a result Bitcoin payments and transactions are untraceable. Without government interference Bitcoin is largely unregulated, and in early years Bitcoin was popularly used for illicit purposes. As we move into 2019, Governments are now starting to address Bitcoin more effectively, with countries like Malta becoming crypto and bitcoin hubs, indeed Malta has been nicknamed the Blockchain Island.
Watch out for fake sites and scammers
Unfortunately cryptocurrencies have been in the media also for wrong reasons due to hacks and scams. The anonymity of crypto gives hackers added incentive to try and steal as much as they can since it is virtually impossible to trace where the funds go. Authorities are catching up quickly however, with the most recent crackdown coming from the Chinese authorities.
It is important however to be extra vigilant when browsing the internet, and be mindful of who you trust. If you do join communities treat advice and facts with suspicion, always make your due diligence, and avoid clicking on unknown and suspicious links.
Get down with the lingo
When getting into crypto you will soon start seeing terms and language you are not familiar with, and that may be developed by the communities who have been doing crypto for a while. It helps to know how the traders talk about crypto to understand what is being said.
We want to help facilitate the learning of such terms, so here are some of the most popular words and phrases used in crypto-space:
- Altcoin – Usually any cryptocurrency that isn’t Bitcoin. However, Ethereum, Litecoin and even Ripple are starting to be excluded from the Altcoin list. Cryptocurrencies that are not part of the ‘established list’ of cryptocurrencies are referred to as altcoins.
- Bear Market – A market that is in decline.
- Blockchain – The technology that forms the foundation of cryptocurrencies such as Ethereum. A decentralised ledger technology that stores data on multiple computers worldwide, and makes it incredibly secure.
- Bull Market – A market that is growing.
- Cold Storage – A method of storing currency in a safe location that prevents hacking. CCTraderCrypto stores 98% of client assets in cold storage for security purposes.
- Dump – When a coin’s price starts to fall faster and harder than it has done recently – referring to great drop fluctuations.
- Exchange – This is the place where people buy and sell crypto. CCTraderCrypto is one such exchange that allows you to buy and sell the most popular cryptocurrencies.
- FIAT currency – This is what is referred to as ‘normal’ currency such as the Euro or Dollar, that are issued by governments.
- FOMO: Fear of missing out – When you buy on a bull run or recent spike hoping the price hasn’t finished climbing.
- HODL: Hold on for dear life – holding onto a coin for a long term investment.
- ICO – Initial coin offering is when a company issues a set of tokens for a new cryptocurrency, allowing people to purchase tokens and own currency from the new crypto. This has been the subject of scrutiny due to the amount of scam ICOs, prompting advertising platforms like Facebook and Google to block any form of crypto advertising due to scams.
- Moon – when a coin increases significantly in a short period of time, similarly to Ripple and Bitcoin in December 2017.
- Pump & Dump – An organised, manipulative move conducted by whales (see below), or groups of people trying to push up the value of a coin rapidly, then sell it to gain large profits in short amounts of time. Never try and join in on one, you will ALWAYS get burnt.
- TA: Technical Analysis – Examining price movements using candlestick charts or an order book.
- Token – Think of tokens as the unit of exchange on cryptocurrencies built on the Ethereum network.
- Whales – A person, group, or corporation with a large amount of fiat or cryptocurrency.
Trade with your head, not your heart
Any good trader will tell you to never invest with your heart, but use your head instead. This is true for all trading, especially for crypto currencies due to the unfamiliarity with the market. For this reason some investors might gravitate to only Bitcoin, however other options exist if you want to learn more.
This is still a volatile market, and investing with your head takes time and calculated measure, however even then things might not pan out well. Some general advice to follow is that of investing money you are prepared to lose, establishing investment goals rather than investing blindly, and knowing when it’s time to sell.
Always have a reason to enter a crypto trade, never invest just to chase a profit.
We hope that the information above give you a bit of a primer in cryptocurrency investment. It is by far not an exhaustive list, and we will be exploring the topic more in the weeks and months to come. If you are still unsure about trading cryptocurrencies, or maybe have a question to ask, we invite you to drop a comment below, or reach out to one of our representatives on live chat.
If you’re looking to join in crypto trading you can sign up to CCTrader Crypto. We built this platform to be as easy as possible to get into crypto. It might not have all the features of more technical platforms, but it makes the most popular coins accessible to trade on the go. Download our app on iOS or Android, and if you need some questions answered our 24/7 support are ready to help.