As cryptocurrency’s popularity grows each day, numerous countries have started to reduce or even restrict access to it. For instance, in the UK, the Financial Conduct Authority (FCA) ruled against Binance, the largest cryptocurrency exchange in the world.
In Turkey, high inflation and economic instability pushed many people to convert their wealth into digital assets. To prevent the crash of the Turkish lira, the government planned to ban these digital tokens as a form of payment. When the news reached investors, the crypto exchange platforms collapsed.
These aspects, along with other similar movements worldwide, make cryptocurrencies more difficult to access and quite risky for investors. The next sections will help you understand how you can still gain access to this market, why you should consider investing in cryptocurrencies, and everything else you need to know to make an informed decision.
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Start Trading in 3 easy steps
1. Open a Free Account
Opening a free account with a broker is a simple process. Choose a platform that provides access to cryptocurrency and click on the sign-up button. You need to fill in a form with your personal information, including your name, address, and e-mail. To comply with current regulations, the broker will ask you to upload a valid ID to verify your identity. It may take several business days to activate your new trading account.
2. Choose Your Cryptocurrency
Once you have a free trading account, you need to choose the assets you want to add to your portfolio. There are more than 10,000 publicly traded cryptocurrencies. Thankfully, brokers provide a plethora of analysis tools that can help you identify trading opportunities. You may also use the virtual portfolio to test your strategy before risking your hard-earned cash if your chosen platform has this feature.
3. Place a Trade
After your account is verified, you need to deposit your funds. Brokers support numerous payment methods, including wire or electronic transfers. Make sure you familiarise yourself with any costs you may have to cover when you deposit money or buy assets. Then, choose your preferred cryptocurrency, add in the amount of money you want to invest, and place your trade.
What Is a Cryptocurrency?
For more than a decade, numerous cryptocurrencies were created - some of them, such as Bitcoin or Ethereum, have grown over time, while others disappeared as quickly as they popped up on the market. The name is derived from “cryptography” which is the method of keeping digital currency secure in the virtual environment.
Nowadays, there are more than 10,000 different cryptocurrencies available as more and more companies have started to create their own currencies, known as tokens. These tokens can be purchased with fiat currency and used to buy the firm’s own goods or services. More companies are now accepting Bitcoins as a method of payment while investors trade them for a profit.
How Does Cryptocurrency Trading Work?
Investors consider cryptocurrencies as speculations, unlike traditional assets, such as stocks. This is because the only way of earning profits is to sell the cryptocurrency at a higher price since there is no cash flow. As a result, cryptocurrency trading means that you buy coins at a given price and then sell them at a higher price.
Some cryptocurrencies can be bought with real currency, while others are only purchased with Bitcoin or another digital currency. To store the cryptocurrency, you need to have access to a wallet. This is an online app that holds your digital money. Alternatively, you can buy and sell cryptocurrency CFDs (contract for differences). However, authorities in several countries restricted retail investors’ access to CFDs and other crypto-derivatives.
Trading forex and crypto-assets are similar in the sense that both involve currencies. However, the differences between the two are considerable. Unlike cryptocurrencies, top-tier authorities regulate FX. Cryptocurrencies are also more volatile, so you can notice huge price swings over a short period.
Types of Cryptocurrencies
Cryptocurrencies can be categorised into tokens and coins. Coins include Bitcoin and altcoins, defined as “alternative to Bitcoin”. Some examples include Ethereum, Waves, Omni, and more. Some of these are built on the same framework as Bitcoin, while others have their own systems and protocols. Each altcoin is different as digital coins are created for various objectives.
Bitcoin is the most popular type of cryptocurrency nowadays. It is followed by Bitcoin Cash, introduced in 2017 to increase the processing speed from 1MB for Bitcoin to 8MB for Bitcoin Cash. This is the only difference between the two digital currencies.
Litecoin is similar to Bitcoin in terms of how it works. It was created in 2011 by a former Google employee, Charlie Lee. The purpose of this cryptocurrency was to improve the transaction times, the concentration of miners, and lower the fees.
Ethereum is different compared to Bitcoin in that it can be understood as an app store. Its purpose is to return the control to users and eliminate middlemen, such as Apple. The token used by users and app developers is known as ether.
Should You Invest in Cryptocurrencies?
Investing in crypto-assets is an excellent option for those seeking out greater market volatility and liquidity. Global and local crypto-exchanges offer Bitcoin, Ethereum, and other digital coins. One of the points that many find lucrative is that the crypto industry does not come under government control.
If you should invest in cryptocurrencies depends on your risk appetite and strategy. Trading these instruments is similar to other financial assets as you can buy and sell at a higher price or short them. Investing is easier than ever as online brokerages boost accessibility and convenience.
Pros and Cons of Investing in Cryptocurrencies
Where to Start Trading Cryptocurrencies?
Cryptocurrencies are available on most online brokerage platforms. These connect you with cryptocurrency exchanges, so you can buy and sell them directly or use CFDs, if available, as crypto-derivatives may not be available in certain countries.
Brokers are the main option among investors due to their low-cost structure, ease of use, and ability to trade numerous other assets. To help you identify the best online broker for your needs, we have hand-picked some of the best platforms available right now.
Expert Tip for Buying Cryptocurrency“ Speculating on cryptocurrencies via a spread betting or CFD brokerage account may necessitate you being classed as a professional trader rather than a retail trader. Not only does this require you to have a demonstrable amount of experience or financial assets, but also it means you’ll lose some important protections such as negative balance protection on your account as a whole. ”- Shams Ul Zoha
Things to Consider When Buying Cryptocurrency
Crypto assets are treated as speculative assets by many investors. Unlike buying stocks, cryptocurrencies do not provide any cash flow, so you need to sell the assets at a higher price to generate profit. Many experts warn against them as long-term investments as Bitcoin and other digital assets have been extremely volatile for their entire history. Additionally, you need to keep in mind that cryptocurrency investments are not insured for exchange failures, theft, and other events, unlike other assets that come with a protection of up to $500,000.
Top Cryptocurrencies to Invest in Right Now
Bitcoin is considered a pioneer in this field, so you may want to check out other assets that might turn into the coin of the future. In the next sections, we will look at some of the most popular cryptocurrencies right now.
Essentially, Ethereum is a software platform that allows for smart contracts and dapps (decentralised applications) to be created and run without fraud, control, downtime, or third parties. This cryptocurrency aims to create a decentralised platform with financial assets that anyone can freely access. Ether is a specific token used by developers that create apps for the Ethereum platform.
Ethereum is particularly appealing to people who live in emerging economies. In some regions, the lack of state infrastructure prevents individuals from accessing loans, bank accounts, and other important financial products.
Cardano was created by several cryptography experts, engineers, and mathematicians. These specialists wrote over 90 academic papers on blockchain technology and used all of this peer-reviewed research to create Cardano. Many consider Cardano as the “Ethereum killer” as they believe in its superiority. However, this cryptocurrency is still in its infancy, although it reached a market capitalisation of $42 billion as of June 2021.
Stelar is designed to facilitate large financial transactions between institutions and banks. Traditionally, these would take multiple days, go through numerous intermediaries, and incur high costs. Stellar is a platform where these huge transactions occur almost instantly with no intermediaries and no fees.
Despite its scope, Stellar is an open network that can be used by anyone, including individuals. It also allows for cross-border transactions in any currency. The token used on the platform is known as Lumens and is required to make transactions on the platform.
Buying Cryptocurrencies Summary
The crypto market is booming and may retain its bright prospects for a long time to come. The rush towards buying these assets is understandable as many believe that cryptocurrency is the future. However, keep in mind that there are high risks associated with crypto-assets, especially as this technology is still in its early stages.
Frequently Asked Questions
Cryptocurrencies can be a good investment for any type of investor. However, both novice and experienced traders must be cautious when investing in these volatile assets because of the high risks associated with them.
The minimum amount depends on your chosen broker. For instance, eToro requires as little as $50 to allow you to invest in crypto-derivatives.
Most brokers allow you to trade cryptocurrencies at any time. This is because these assets are not associated with the traditional stock exchanges that have certain market hours.
Not every broker may provide access to cryptocurrencies. You need to check whether your chosen broker offers these assets, or you can choose one of our recommended brokerage platforms.
Cryptocurrencies are currently legal in some countries and prohibited in others. For instance, China banned them, although they are legal in the United States. In the United Kingdom, trading cryptocurrencies is not directly regulated, but trading crypto-derivatives, such as CFDs, require authorisation. For other countries, you need to check the relevant legislation.
Some investors may consider that it is indeed the right time to invest in cryptocurrencies. Timing the market is extremely difficult, especially when it comes to volatile assets. As a result, the moment may not matter as much if you have a strong strategy and well-defined risk management methods.