Cryptocurrencies are unregulated, digital currencies that traders speculate on to make profits. You may have heard about Bitcoin, Ethereum, etc. These are virtual currencies, which are decentralized and work on blockchain technology. The major feature of cryptocurrencies is that they are not issued or controlled by any central authority or government.
If you are wondering how to trade cryptocurrencies and want to start investing in cryptocurrencies, this blog is for you. Let’s understand what cryptocurrency trading is and how does it work.
Crypto trading is an act of making speculations on price movements of different cryptocurrencies and buying or selling them to book a profit.
Traders can speculate on cryptocurrency price movements without owning the underlying coins. They can go long (buy) or short (sell) based on their price speculations. For example, if you think the price of crypto will rise, you can go long (buy) and if you think the price will fall then you can go short (sell).
This buying and selling of the coins happen via an exchange. This means, when you purchase crypto, you buy the coin itself. For this, you have to create an exchange account, fund it, or put up the full value of the underlying coin and open a position. The crypto will get stored in a digital wallet until you sell it again.
Cryptocurrencies are decentralized and are not issued by any central authority like the government. These are digital currencies which run across a blockchain network, which is a network of computers.
You cannot really own cryptocurrencies like the traditional currencies as these are only shared with you as a digital record and are only stored on the blockchain, in digital wallets. And if you send a crypto to another user, you send it to their digital wallet. This transaction is not final until it gets verified and is added to the blockchain through mining. This is how the cryptos are created.
Mining is the process of checking recent cryptocurrency transactions and adding new blocks to the blockchain accordingly.
A blockchain is where the cryptocurrency data is recorded. It’s basically a shared register which stores transaction history for each unit of the cryptocurrencies and shows how the ownership of those cryptocurrencies gets changed over time. Blockchain records the transactions in "blocks"
Cryptocurrency markets are influenced by demand and supply. Since they are decentralized, they do not get affected by economic or political concerns that affect the traditional currencies. These are the factors which move the crypto markets –
To invest in cryptocurrency, you need a wallet to hold them. For this, you need to create an account and then you can transfer funds to trade cryptocurrencies. Here’s how you can start –
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