Cryptocurrencies are a hot topic right now, and for good reason. With Bitcoin prices reaching all-time highs, and new cryptocurrencies popping up every day, it’s no wonder everyone is talking about them. But what exactly are cryptocurrencies? And more importantly, how can you start trading them? And what factors do you need to consider before diving into the world of cryptocurrency trading?
In this article, we will discuss seven important things you should know about trading cryptos. By the end, you should have a basic understanding of what cryptocurrencies are, how they work, and how to get started trading them. Let’s get started:
Cryptos Are Extremely Volatile
Cryptocurrencies are a new and volatile investment asset, and as such, they are highly susceptible to price fluctuations. The prices of many cryptocurrencies can fluctuate drastically in just a few hours or days. For example, on January 17th, 2018, the price of Bitcoin was just over $11,000. However, by January 22nd, it had plummeted to just under $7,000 – a decline of nearly 35%. This volatility can be both exciting and risky for traders.
On one hand, it means that cryptocurrencies can offer high returns in a short period. But on the other hand, it also means that prices can rapidly decline, resulting in losses for traders who buy at the wrong time. So before you start trading cryptos, make sure you are aware of the risks involved and are prepared to handle potential losses.
You Don’t Need a Lot of Money to Start Trading
One of the great things about cryptocurrency trading is that you don’t need a lot of money to get started. You can start trading with as little as $10. This makes it a great option for new traders who are just starting. However, it’s important to note that higher capital investments can offer greater rewards but also come with greater risks.
So before you invest your life savings into cryptocurrencies it is a good idea to use a financial service to compare different platforms and service providers to find the one that is right for you. According to Sortter, finding the right platform is essential to success in the crypto market. Therefore you should take your time to research the best options and pick the service that caters to your needs.
Cryptocurrencies Are Decentralized
Cryptocurrencies are decentralized, meaning they are not controlled by any central authority such as a government or bank. Rather, they are controlled by the network of users who use them. This decentralized nature is one of the key features that sets cryptocurrencies apart from traditional currencies and makes them so popular among investors. Since cryptocurrencies are not regulated by any central authority, there is no governing body that oversees their use or protects investors from fraud or scams.
This also means that there is no guarantee that cryptocurrency exchanges will honor customer withdrawals. And since regulations surrounding them can vary from country to country, make sure you are aware of the specific rules and regulations that apply to cryptocurrency trading in your area.
Cryptocurrencies Are Anonymous
Another key feature of cryptocurrencies is their anonymity. Unlike traditional currencies, cryptocurrencies are not associated with any individual or entity. This means that transactions can be completed without revealing the identities of the parties involved. This anonymity has made cryptos popular among criminals and hackers, who use them to conduct illegal activities such as money laundering and trafficking. It has also led to several scams and Ponzi schemes in which investors are promised high returns in exchange for investing their money. If you are thinking of investing in cryptocurrencies, make sure you do your research first to avoid being scammed.
Cryptocurrencies Are Not Tangible
Unlike traditional currencies, which are physical objects such as coins and paper money, cryptocurrencies are digital assets that exist only online. This means that they cannot be physically held or touched like traditional currencies. While this may not seem like a big deal, it can be quite inconvenient when trying to use cryptos for everyday transactions.
For example, if you want to buy a coffee with Bitcoin, you first need to have a Bitcoin wallet and then find a café that accepts Bitcoin payments. And since the number of businesses that accept cryptocurrencies is still relatively small, this can be a difficult task. So if you are thinking of investing in cryptocurrencies, be prepared to face some of these usability challenges.
You Can Trade Cryptocurrencies on Multiple Platforms
Another great thing about cryptocurrency trading is that you can trade them on multiple platforms. This means that you can use the platform that is most convenient for you. There are several different platforms to choose from, including online exchanges, brokerages, and even social media networks. So if you don’t feel comfortable using an online exchange, you can always use a brokerage or social media network instead. Just make sure that the platform you choose offers the features that you need to be successful in your trading. Also if you are new to trading it might be a good idea to start with a demo account so that you can get used to the platform before risking your money.
Cryptocurrencies Are Taxable
Cryptocurrencies are taxable, and the tax laws surrounding them can be quite complex. This means that if you are thinking of investing in cryptocurrencies, it is important to understand how taxes will apply to your transactions. In most cases, the profits you make from trading cryptocurrencies will be subject to capital gains tax. This tax is levied on the difference between the purchase price and the sale price of an asset, and it is calculated as a percentage of the profit made.
So if you buy a cryptocurrency for $1 and sell it for $10, you will have to pay capital gains tax on the $9 profit. It is important to note that the tax laws surrounding cryptocurrencies are still in flux, and they may change in the future. So make sure you consult a tax professional if you have any questions about how taxes will apply to your cryptocurrency trading.
By understanding the basics of this concept, you will be in a better position to make informed decisions about whether or not investing in cryptos is right for you. Just remember to always do your research before investing any money and never invest more than you can afford to lose. Good luck!
About the Author
Alex Turner has authored numerous articles on cybersecurity. His primary interests lie in new technologies and innovative ways to use them. When he is not writing another article, he spends his time watching documentaries and playing video games.