There are over 420 million crypto users in the world today, and a good share of those are active traders. What’s the reason for all this hype? Well, cryptocurrency trading is an attractive investment opportunity and even a full-time job that more people are participating in every day.
As crypto becomes a more mainstream payment method and asset, the importance of learning about crypto also grows. Cryptocurrency is a relatively new tradable asset, but it has taken the globe by storm. You can access it from any location, and start trading for pocket change.
Want to learn how to use crypto to your advantage and reach new financial heights? This course provides an in-depth, comprehensive overview of trading crypto for beginners. This is the first lesson of the course. It will cover:
- The definition of crypto trading
- How does crypto trading work
- Crypto trading benefits
- Crypto trading risks
- And more
What is cryptocurrency trading?
Cryptocurrencies are digital assets, which run entirely online using blockchain technology. Bitcoin and Ethereum are two popular examples. This decentralized system verifies digital currency transactions without oversight from a third party.
Cryptocurrency trading is very similar to stock trading - where users can buy or sell crypto on online markets. These markets are usually called crypto exchanges, which let traders safely and conveniently make crypto transactions. Walbi is one such crypto exchange - amongst many others (but more on that later).
How does cryptocurrency trading work?
Cryptocurrency trading, in simple terms, is done by guessing an asset’s price movements to make a profit. Traders can use tools provided by their exchange to manage their trades. They can also select from a huge range of versatile cryptos, many of which operate using different technology. Traders can also customize their strategies to better support their financial goals.
Making guesses on the crypto market’s movements is a sophisticated game. By becoming more knowledgeable and experienced, you can use several factors to become a better trader.
A crypto’s price movements can depend on:
- historical data,
- industry trends or events,
- market sentiments,
- and breakthroughs in technology.
Cryptocurrencies are made even more dynamic by their multiple use cases. Unlike other tradable assets, like stocks or gold, many cryptos are highly liquid. They work wonderfully as a payment method for all sorts of needs - from daily sales to large purchases. Traders can use them to support their Web3 projects or as a long-term hedge against inflation.
Why trade cryptocurrency?
Cryptocurrency trading offers many benefits and practical uses. Let’s explore some of the main advantages that might make crypto appealing to you.
Cryptocurrency is a highly accessible tradable asset for everyone. No matter your location, experience, class, or device, you can access the crypto market with an internet connection. There are only two main barriers to access - knowledge, and restrictions.
If you’re not sure how to trade crypto, reading a guide (like this one) will help you gain an understanding. Regarding restricted access, only nine countries worldwide have imposed bans on crypto. These are Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia.
There is no minimum budget to get started in trading crypto. Some crypto exchanges accept transactions of just $5 to $10. Even someone with an extremely low budget can enter the market.
- Global Reach
There are no borders to crypto transactions. Traders can send crypto to each other from different continents almost instantly. Crypto also offers lower fees, making international trade much more convenient.
- High Liquidity
As mentioned above, many cryptocurrencies are highly liquid. Bitcoin is one example, which makes it a great payment method for quick sales with little price difference. Entering or exiting an investment position is also easier with a liquid asset.
Crypto traders have full control, ownership, and oversight of their crypto assets. There are no intermediaries who oversee your digital wallet, transactions, or strategies. This is very different from regular currency.
Think about how you need to meet with a bank to deposit checks, get a loan, or withdraw a large amount. With crypto, you can choose to act as the custodian for your funds. You are your own bank.
- Growth Potential
Cryptocurrencies have a huge growth potential, offering traders more significant possible returns than most stocks. The most well-known cryptocurrency that gained huge returns is Bitcoin (BTC). It launched in 2009, and in 2017 the digital currency reached a 1900% price increase. Now, the crypto is trading at almost $27,000 (at the time of writing).
That is just one example in a sea of hundreds. The opportunities are there for the taking.
Crypto supports a huge, diverse array of innovative technology projects. From DeFi (decentralized finance) applications to NFTs (non-fungible tokens), virtual reality, and more, crypto has it all. These Web3 concepts have the potential to reshape multiple industries. As a result, huge names like Amazon, Google, and Tesla have already invested in blockchain technology.
It’s difficult to foresee the conditions of the economy. No one suspected events like the COVID-19 pandemic would happen, or impact the world’s economy so hard. Using assets like crypto to hedge against inflation and economic instability is a great strategy. Crypto can even act as a store of value - similar to gold and land. However, beware that cryptocurrencies can also be very volatile. Hence, research is important to understand which ones to include in your portfolio.
Cryptocurrencies allow their traders to work anonymously, even though the blockchain’s ledger is open to all. Some cryptos, like Zcash, even offer more privacy settings to users. Some crypto exchanges require identity verification before using the exchange - but not Walbi.
Blockchain technology uses highly advanced cryptographic techniques to protect transactions and crypto validation. It’s incredibly difficult for malicious parties to successfully attack these systems.
What are the risks of cryptocurrency trading?
Cryptocurrency is an especially volatile asset. Many traders can make a quick profit off the short-term fluctuations; using it to their advantage. However, the volatile nature of crypto can also lead to significant losses. It also makes long-term price movements harder to speculate on.
- Lack of Regulation
While crypto’s decentralized nature is attractive to many, the market is lacking in oversight as a result. If exchanges or digital wallets are hacked, users may not have a regulatory body to ask for recompense. However, the E.U. and other regions are making substantial strides to improve regulation in the industry. That’s positive for the future.
Changes in regulatory status can also jeopardize crypto. If your country institutes new regulations, laws, or taxes, you’ll have to incorporate them into your strategy. New rules can add liability to your crypto account.
- Hard Forks
A hard fork occurs when there’s a change or upgrade in the blockchain’s underlying technology. When this happens, it can change how your cryptocurrency is processed and what it’s able to do.
- Loss of Access
Since you act as a self-custodian for your digital wallet, you can’t ask anyone else for help gaining access to it. Digital wallets provide a public and private key for your digital wallet. The public key allows you to make transactions, while the private key unlocks the wallet. If you lose your key, you may lose access to your funds forever.
- Scams and Market Manipulation
Some smaller markets that aren’t as well known or protected are vulnerable to scams or manipulation. Pump-and-dump schemes are also a risk.
Just like any other tradable asset or financial investment, cryptocurrency has both advantages and inherent risks. To mitigate these risks, traders should armor themselves with a mix of risk management strategies.
PRO TIP! We will cover crypto trading risk management strategies in an upcoming lesson. Stay tuned
Traders must gather knowledge of their crypto assets, blockchain technology, and trading strategies. Use reputable exchanges, and digital wallets, and set parameters to protect against emotional trading.
Additionally, traders should get involved with Walbi’s crypto community to gain more insights. Market sentiments can cause price fluctuations; so it’s beneficial to stay up-to-date on people’s opinions. Keeping a diverse portfolio and asking for professionals’ opinions can also help prevent losses.
Cryptocurrency trading is a thrilling but complex opportunity, especially for beginner traders. The crypto realm requires careful consideration, decision-making, and continuous research. Crypto offers multiple benefits, from high returns to accessibility, but it also has risks.
To safely navigate trading with the digital asset, users should embrace the opportunity while remaining vigilant. As you read through this guide, you’ll gain an understanding of how to get started in crypto trading and use it to your advantage.
Put your knowledge to the test: Take the Walbi Academy Quiz!
Congratulations on finishing the fist lesson of this Introduction to Cryptocurrency Trading course. Now, it's time to put your newfound knowledge to the test. Click the button below to take the first Walbi Academy Quiz and earn XP rewards for getting answers right.
If you answer all questions correctly, you get 1000 XP (100 XP per question). At the end of the course, we'll tally all the XP points earned and create a leaderboard to determine the winners. The total Prize Pool is worth $500 for 50 winners with $250 in USDT to be deposited to the platform and $250 in the form of Walbi Vouchers.
There's never been a better time to take your classes seriously. Happy studying!