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With all the negative and positive commotion surrounding the Crypto market – it still begs the question, for those still curious. What does it take to engage in the trading of Cryptocurrency?
And by trading, we are not referring to the price speculation in a portfolio as one would with the price of a company’s shares or even CFDs.
We are rather referring to trading it as a commodity against other ‘Cryptos’ in a properly regulated online market setting. Similar to how a Foreign Exchange (Forex) market operates.
As with trading traditional fiat currencies, the price is purely determined by good old supply and demand for the currency and monitored by the availability versus volume traded.
It is therefore just a medium between traders where they can set limit orders to buy/sell Bitcoins for a certain price.
So, in the true approach of Debunqed, we will decipher crypto-exchange trading by looking at what you need to do to get into it, and what you stand to gain.
The first step would be to open a secure Crypto wallet to physically purchase (own) some altcoins. Bitcoin, Ethereum, and Litecoin are the main coins offered by Crypto wallet providers.
They hold the most value and can thus be broken down into smaller denominations (Altcoins). The same way the dollar is used as the main exchange for other fiat currencies. This example helps to put things into perspective.
Make sure you do your research into which wallet you will use. Obviously, if you are mining a certain Cryptocurrency you would naturally purchase them directly from that software provider of the Altcoin.
Using Ripple mining as an example, the platform is supplied by RippleNet and naturally, it follows that the Ripple company mines all the volume and controls its supply.
Getting the digital currency into a wallet can be a quick exercise.
It can take as quickly as between 5 – 20 minutes via a peer-to-peer Bitcoin marketplace connecting buyers with sellers like at Paxful.
Make sure you deal with reputable sellers. This wallet provider rates suppliers based on how reliable they are so only deal with sellers of the highest ratings.
The actual purchase (mostly conducted via online chat) can be made via a Credit/Debit Card, online banking or convenient money transfer facilities like (Europe-based) N26 Bank, Skrill or PayPal.
You can even purchase and send gift cards from Amazon for instance, to the seller (to the value of the currency being purchased) for the seller to release the Altcoins.
The actual coins are stored as an alpha-numeric key code – with the currency value in the wallet once acquired.
This after the wallet-broker takes a small fee for the transaction. This code/key needs to be kept secure – backed up online and offline (highly recommended). This is possible on special flash-drive (Crypto wallet) like the Trezor or a Ledger Nano. The device would hold the deposit key if you were transferring it to another wallet or to an exchange to trade.
The next step would be then to source a robust and user-friendly platform to trade your newly acquired currency on.
The best cryptocurrency exchanges would allow you to swap fiat currency such as dollar/euro for the digital currency directly. Naturally, you can trade one digital currency for another as well.
There are quite a few to choose from so it is good to read the reviews. You should then select one based on the number of deposit/withdrawal methods, the fee structure level, number of countries served, availability of security tools and features.
The last aspect is a huge determining factor: exchanges can be prone to hacking, or loss from outages. Lastly, their margins and exchange trading functions are good to observe too.
For serious and equally secure trading, you will likely need to use an exchange like Binance that requires the user to verify their ID before being opening an account. Make sure you have all your documents ready and up to date!
When it comes to the actual trading, let’s take a scenario where two people want to sell an altcoin but not for the market price. One sets a limit order for lower and the other for a slightly higher price. So, the best price to purchase Bitcoins, in this case, would be the median of the two prices.
If the buyer wants to purchase more than one altcoin, they will continually take the lowest price available. By doing this, the “price” of the altcoin will increase as the lower-price sell orders are no longer available.
You will then, as with Forex, purchase pairs of where you think your digital currency will be stronger against another e.g. BTC (Bitcoin) vs XRP (Ripple).
This combo would look like this on the exchange: BTC/ XRP – 0.00011960. What this means is that one Ripple coin is worth that much Bitcoin for instance.
This type of trading, like commodities or forex, requires constant attention and the monitoring of prices. But there are tools that can also help you set prices and have the trades auto-execute.
So, a platform which provides such tools conveniently allows you the time to do other important things. Like paying attention to your spouse, formal job or family and friends. That would be ideal.
If you have the cash, time, expertise and financial clout, it is even possible to run your own Crypto Exchange!
This is another benefit of a decentralized currency system that will allow you to earn some cash by charging for the usage of your robust platform.
Well, this may be until the fiscal authorities’ crackdown on all of the platforms with restrictive legislation.
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Cryptos have a way of creating something supposedly of intrinsic value out of nothing. This is as dangerous as propaganda that leads to conflict or promotes struggle.
They are backed up by a cloud of non-regulatory policies by states who themselves, still traditional monetary policy measures.
And this is despite their full understanding of the instruments of financial wizardry.
In economics, the term creative destruction, however, has a paradoxically positive meaning. It is perfectly suited to the new form of “crypto”- currency (Bitcoin) that is not as mystic as it seems.
Money is a concept that probably also met up with resilience when it was first supposedly introduced by the Chinese. They started carrying folding money during the Tang Dynasty (A.D. 618-907).
The instability generated by uncontrolled usage and denomination, however, soon led to rapid inflation. This prompted the Chinese to drop it, only for it to be taken up again later when it got stabilized by the adoption and use by the West.
They developed paper money as an offshoot of the invention of block printing. Block printing is like stamping.
Ironically that very same term ‘block’ is the foundation behind the Bitcoin – which is generated using blockchains (digital public ledger).
We won’t get into the mechanics of Bitcoins. We will, however, attempt to increase awareness on why and how this new payment method could cause positive ripples in the financial global system.
As per Wikipedia, and as simple as it can get in terms of a description: Bitcoin is a cryptocurrency and a digital payment system.
It was supposedly invented by an unknown programmer, or a group of programmers, under the alias Satoshi Nakamoto in 2009.
Though the anonymity creates an element of distrust about the agenda of its creators, it is surprisingly more transparent than derivatives.
Cryptocurrency uses a system of cryptography (encryption) to control the creation of digital ‘coins’ and to verify millions of transactions.
These transactions include are a basic movement of funds between two digital wallets and get submitted to a public ledger and await confirmation through encryption.
This video is a great and simple way for you to understand the above because it is best understood when explained as a larger picture. Check out this useful and basic video on Bitcoins.
That is quite a feat worth acknowledging because 11 years of existence is nothing compared to gold’s multiple century reigns.
Now 2009 was not long ago considering the Bitcoin is now ‘worth’ well over $20 000 each (updated to 2021 levels).
For centuries, gold has been our standard of trade or backing of all types of currency until it was ‘uncoupled’ by Nixon in 1971.
The future of trade and commerce is in the digital sphere – are you in the know?
For something to become the standard measure or mode of trade it, however, needs to be stable. So, while the technology behind Bitcoin (the Blockchain) is relatively sound, its actual price needs to find its firm nesting.
Established currencies trade on markets via exchange rates with relatively minuscule increments of change in price and value. In comparison, Bitcoin can jump in value by $1000 within (minutes or seconds) – prompting skepticism about its stability.
Google Engineer Ray Kurzweil, who is revered as a “prophet” for his mysterious predictions, such inconsistency undermines the cryptocurrency’s value as a currency.
The aim is nevertheless to relieve our dependency on money or more so, the iron grip and often abusive control that some banking institutions have over consumers.
You could even argue that the recent surge in its price is being fuelled by agents of the traditional banking industry. They naturally feel threatened by the fact that they may not fully understand it and its inherent potential. So they (cash-flush) could inflate it for an inevitable ‘burst’.
But the currency though very volatile in its movement has remained buoyant. It has now held for well above $10 000 for sustained periods since its inception. Gold is now approx. $1,900.
Bitcoins provide more guarantee than financial derivatives especially because of their open-source approach to its existence and use.
The tricky part is simply getting to grips with the vastly abundant information about it and how you could even generate it.
It is still a great backup ‘of a backup’. We rely on technology and more specifically the Internet for transactions and the associated traffic for our daily lives.
A simultaneous crash of a few major servers, however, could send it all tumbling back into the digital abyss. But as with money and other forms of currencies, only time will tell.
Bitcoin will just have to further prove its resilience and stability in the long run.
It is certainly not a ‘fly by night’ thing because it has sparked the interests of both public and private institutions globally. China even made a bold move to block the Bitcoin market from trading within its borders at some stage.
China is notorious for blocking things that stem from the ‘West’ only to later introduce it under their own control to protect their financial sector.
So, we can be rest assured that the creator is not Chinese! Sweden has allegedly passed legislature to make it an accepted form of currency.
Currently, banks and governments are frantically creating their own sets of blockchains to ensure they are not caught off-guard.
Read more about the implications of Cryptocurrency on the financial sector.
Bitcoin also gets its collective strength (intrinsic value) from its limited quantity in circulation (19 million out of a finite 21 million).
Bitcoin has also paved the way for others such as Ethereum, (mostly used for smart contracts and by developers) which is also seeing good growth.
Then there is Litecoin, which was formed as part of a controversial yet civil split from the originators of Bitcoin to use ‘variant technologies’.
All these platforms (companies) now use the blockchain to create all types of cryptocurrencies to capitalize on the spoils of this digital revolution.
There are also several institutions that are offering late-comers a chance to benefit from the spoils of using and investing in digital currency.
Naturally, all these schemes with their investment packages would require a ‘buy-in’ and marketing to attract more takers.
Such Crypto ‘companies’ are likened to a pyramid scheme and subject to many investigations by fiscal and criminal authorities.
But that is how Bitcoin, its promoters, and the market were initially treated.
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