4 Things Foreign Exchange Traders Need to Be Aware of Before Trading Cryptocurrency
The global public awareness regarding crypto has tremendously increased over the last few years, and crypto is here to stay in the market for a while. However, due to the rumors, misconceptions and misinformation, traders and investors may still find it difficult to enter the crypto market. Therefore, in this article we have identified and presented to you 5 major tips we think will help you get off to a good start in the crypto market. These 5 tips are as follows:
1. Where and how to start from
The primary and foremost step, in everything, is to first familiarize yourself with the phenomenon. The same goes with the concept of cryptocurrency. It is vital to understand the basic principles of virtual currencies in order to further make profits out of them. These principles may include their basics such as concepts and forms of different digital currencies existing in the market. This article attempts to walk you through these aforementioned basics and enhance your knowledge in this matter
2. Distinguishing between Foreign Exchange and Cryptocurrency
Although digital currencies can prove to be volatile at most times, they are nonetheless unaffected by political influence, unlike the traditional currency trading, which is largely affected by international relations. As for the volatility of crypto, it highlights the large amount of underlying risk in crypto, along with the chances of making equally massive profits as well.
For traders and investors, the two markets – forex and eKrona crypto are very similar, given trading occurs online in both of them. However, the main difference between the two is the amounts of returns and the subsequent risks, which demand two different strategies for the two different trading options. Also, the crypto traders generally tend to buy digital currencies and then keep them in their investment portfolios for a relatively longer time, anticipating growth in crypto prices and larger profits in the longer term. In contrast, the traders of forex keep their forex in the portfolio for a shorter amount of time, and make profits through quick trading.
3. Best Performing Crypto Coins
Ever since the beginning of the crypto market through the introduction of Bitcoin, almost 1500 virtual currencies have been introduced in the market, of which not all but just a few have been a success story. An increasing number of digital currencies are continuing to enter the market, providing you with a vast variety of coins to trade in.
It is important to note that all these crypto are different in nature, and therefore require to be traded in their variable distinctive ways.
Equipping yourself with the basics of the digital currency and their functions can greatly make you understand when to buy or sell the crypto in order to make profits out of it.
BTC is the pioneer virtual currency, which marked the beginning of the concept itself. It is still the leading crypto in the market, with the highest market cap, and the highest price per coin. It is important to know, however, some facts about bitcoin. There is a limit set to its total mining capacity, which is 21 million coins. 18.5 million coins have already been mined out of these 21 million. Scarcity by design is the term used to refer to this concept of diminishing crypto capacity of BTC over the time. Scarcity by design is one of the main reasons it is believed that the value of BTC will only go upwards in the long-term.
One of the issues, however, in the BTC network is that it allows only 7 transactions per second on its network. This is known as the scaling issue.
It is said that efforts are already being made to solve this scaling problem in the BTC Network. It should be known that other crypto are already free of this issue and allow their users to conduct faster and greater amounts of transactions, at lower costs.
Famously known as the alternative to Bitcoin, the purpose of the introduction of Litecoin was to have an alternative to the mighty bitcoin. Litecoin utilizes a very similar code to that of BTC, except for a few tweaks made by the developers in order to enhance the transaction speeds of the crypto.
The key features of Litcoin are their transaction speeds, which is four times quicker than that of BTC. Also, the total limit set for Litecoins are way greater than that of BTC. Compared to BTC’s 21 million coins, Litecoins have a total capacity of 84 million coins which can be mined.
People are often confused between Ether and Ethereum. Ether is basically which powers the network of Ethereum. Ethereum itself is a decentralized blockchain for the crypto.
One of the first significant executions of smart contracts in crypto was Ethereum. These smart contracts were basically computer programs which conducted transactions without the involvement of trusted third parties.
4. Ways Trading Strategies of Forex & Crypto Could Be Similar
Despite the many differences in forex and crypto trading, there are several areas and conditions where similar market strategies and principles may still apply.
It is vital to go through the charts and make technical analysis in both options in order to make use of the market conditions the best way in your favor. A detailed market analysis, both internal as well as external, may prove to be important as it can allow you to forecast a specific feature of the market beforehand and enable you to avoid it or make the best use of it, depending on the nature of the forecast.
We suggest our readers to keep their investment portfolios diverse, and include not one of the two but even both options, as they will reduce the individual risks of forex or crypto and protect you against their underlying volatiles. A thorough research is very important before entering any market and including anything in your investment bucket.