Get Into Cryptocurrency Trading Today

As it is currently defined and understood, Cryptocurrency started back in 2008 with the launch of Bitcoin (alongside the release of its seminal whitepaper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ penned by the enigmatic and anonymous Satoshi Nakamoto).

This was before exchanges grew in prominence, and gained reputations and regulatory approval, when there were less options available for attaining cryptocurrency (namely Bitcoin). These included (straight-up) mining, and the most peer-to-peer methods: such as message boards, forums, and IRC.

Since then, a lot of options have emerged for investors seeking to begin crypto trading: from peer-to-peer and over-the-counter exchanges; in addition to Futures and CFD via brokers, etc.

What are the different ways you can trade cryptocurrency, and what are the pros and cons?

Cryptocurrency Exchanges

(1) Benefits

Exchanges are the most common form of crypto trading and they come in two flavours, centralized and decentralized. The majority of which fall into the former camp.

On the plus side: (centralized) exchanges offer a high liquidity, custodial liability, and customer service making them one of the most user-friendly options available. Furthermore, even though they are registered and regulated entities and include integrated KYC verification: opening an account is easy and it’s quick to start trading.

Such exchanges offer users a Large variety of digital currency trading pairs available for buying and selling (including fiat-pegged stablecoins used as a safeguard against crypto volatility)- as well as a wide variety of trading options (stop loss, etc), fiat to crypto exchange (USD, EUR, etc), and 24/7 service availability.

Furthermore, the biggest centralized exchanges offer a level of security in spite of being targets for hacks, due to their volume of reserve funds which are often used in such situations to compensate users who fall victim to attacks.

(2) Risks

Conversely, it must be noted that there are a handful of risks which must be considered when dealing with traditional cryptocurrency exchanges for retail investors.

The centralized server location of exchange ‘hot wallets’, for example, makes the location for users funds a bountiful target for bad actors such as hackers. Additionally, the lack of transparency from a centralized exchange means it is difficult to determine when internal events which are fraudulent (such as the advertisement of illegitimate numbers like token values, or an exit-scam) or even internal issues which may not be public such as either exit scams or financial / regulatory difficulties.

As such, they are great for the trading services they provide: however they are not recommended as a location for storage of funds long or even medium term. What is recommended is storage using private custody wallets, if you are prepared to take on the responsibility of managing your own private keys and mnemonic recovery phrases.

For the same reasons: during times of high volatility, there is a chance for the sites / servers to be inundated with requests preventing access to funds and potentially causing loss of funds that could have been acquired or protected through selling or trading assets. This happened with Coinbase recently.

(3) Top Exchanges

Kraken (2011)

• Fourth most popular trading platform by ‘web traffic factor’ according to Coinmarketcap, with a $483 million 24 hour trading volume. Coinmarket cap is a data aggregate which includes data and trends on cryptocurrency market performance and price movements.

Coinbase (2012)

• Under the name ‘Coinbase pro’ - Coinmarketcap ranks Coinbase second. It has a $528 million 24 hour trading volume.

Binance (2017)

• Currently the exchange with the greatest 24hr volume ($9.13 billion) + #1 ‘web traffic factor’ according to Coinmarketcap.

BitMEX (2014)

• Coinmarketcap’s third ranked exchange in terms of ‘web traffic factor’ as well as the third greatest recorded 24hr trading volume ($4.07 billion).

CFD Trading

CFD (or ‘Contract For Difference’) trading offers a range of benefits, many of which outlined in our recent article ‘Top Five Most Traded Cryptos’.

Among these benefits is the ability for participants to apply leverage to investments. This gives investors the chance to earn large returns on investment with relatively low capital investment; though there is also a considerable chance of losing money rapidly, and beyond the initial investment value. 

In fact, it must be noted that statistically, the majority of retail investor accounts lose money: according to the ESMA (‘European Securities and Markets Authority’), this number is approximately 74-89% of investors. As such, This route should be taken only if you can afford to take the high risk of losing your money.

CFD Trading is most often administered through ‘Brokers’. Unlike exchanges, brokers offer an additional layer between you and the direct asset itself. They primarily work using ‘CFDs which themselves come with their own pros and cons; many, such as eToro, offer demo accounts to users seeking to learn the ropes.

Futures

Futures are a relatively recent form of investment offering in cryptocurrency, and as such only the most popular crypto Bitcoin (and just this week, Ether) products are currently available.

Investors choose cryptocurrencies (or ‘digital assets’) for trading over traditional markets (including commodities and precious metals) for a range of reasons. One of which is the high volatility when compared to those aforementioned markets, with a notable positive example being the 2017 boom which lasted through the year until December. Of course, high volatility is great for speculative and short-term traders however you have to be prepared for the eventuality that you might not only win but you could also lose money when trading

So long as there is a high level of volatility with the cryptocurrency markets, there will be a high value to speculative traders: whether retail or institutional. As such, they offer less security compared to many traditional asset markets - but with the greater risk, there is a greater potential for return on investments in digital assets compared to many alternatives such as commodities.

Furthermore, the versatility with regards to investment options (both tokens and platforms) as well as the existence of safeguards such as stablecoins and private decentralized wallets means that there is arguably a lot more options and freedom available to the digital asset trader or investor compared to non-crypto alternatives.

Buy & Sell Cryptocurrency Instantly