Cryptocurrency has become a significant player in the financial market. According to Beyond Market Insights, the global cryptocurrency industry was valued at $4.40 billion in 2021 and is expected to reach $12.10 billion by 2030. These figures highlight the increasing interest in cryptocurrencies as both an asset class and an investment opportunity.
Being relatively unregulated, cryptocurrency continues to evolve with rules set by the players themselves. While it’s an interesting investment instrument, it also carries risks. But if for experienced investors this instrument is already familiar, then for beginners this sphere of absolute incognito. However, with the expertise of Rates – manage your finance like investment management, budgeting, tax planning and navigating the complex world of cryptocurrency investing – all of these processes become effortless. If you’re curious about cryptocurrency and whether it aligns with your interests, we recommend familiarizing yourself with the basics of the crypto market and understanding the criteria for selecting a platform and strategy. Let’s get started.
Cryptocurrency Basics
Before delving into the topic, it’s important to understand the basics and the inner logic of what cryptocurrency is and how it works. Cryptocurrencies are digital or virtual currencies that use cryptography (a field of science that deals with protecting information using mathematical methods and algorithms) for security and run on blockchain technology. A blockchain is a distributed database that stores information about all transactions in the form of “blocks”.
Overview of the main cryptocurrencies:
Bitcoin (BTC) – the symbol of cryptocurrency, continues to rise in value. Feature: limited quantity (21 million), which makes it a valuable asset.
Etherium (ETH) – a platform allows the creation of smart contracts and decentralized applications.
Binance Coin (BNB) – a utility token used on the eponymous platform. It offers fast transactions and low fees.
Several new coins have appeared in the last 30 days: American Shib (SHIBA), Kernel (KERN), DOGGY, Chirpy Boy, Gremly.
As digital technologies became accessible to the masses, the emergence of digital money was inevitable. Blockchain technology, with its robust security and protection against manipulation, as well as the decentralization that offers independence from traditional financial systems, attracts investors. While cryptocurrency remains risky, it also holds promise. Diversifying your investment portfolio with it can provide high liquidity. Just in case, platforms like Rates assist in efficiently managing digital finances.
Market Study
Getting started in the cryptocurrency market involves learning the fundamentals of trading and investing. It’s crucial to understand the distinction between these two approaches. Trading is a short-term activity, while investing focuses on long-term growth in crypto portfolios. Additionally, there are various ways to earn money within the cryptocurrency non-tradable space.
Mining – the process of creating new cryptocurrency tokens.
Staking – you store a certain amount of cryptocurrency in your wallet, keep the blockchain running – for this you will be rewarded with tokens.
Investing in new coins and pre-sales early to earn when and if the portfolio becomes liquid on the exchange.
Participate in NFT games for a fee.
Farm and Decentralize Finance (DeFi) to earn interest or participate in liquidity.
Airdrops and giveaways are a format for token participation in games and promotions.
In the cryptocurrency market, understanding the basics involves as well researching successful crypto projects, the teams behind them, the technology they use, and the investment or trading prospects. The initial lesson should conclude by examining the tax and legal considerations that accompany digital currency transactions in your specific country.
Choosing Trading Platform
Once you’ve decided how you’ll earn from crypto, the next question arises: where will you operate with digital currency? This decision revolves around choosing a trading platform, which ultimately determines your success or failure.
Selection Criteria:
Cryptocurrency support. The platform you decide should give you the ability to work with the range of cryptocurrencies you intend to operate.
Regulatory policies. Check what kind of regulatory environment surrounds the platform – this answers the question of security and legal protection.
Security. Look for a platform that uses advanced encryption and two-factor authentication.
Liquidity. This determines your ability to buy and sell digital currency quickly. High liquidity will help you avoid difficulties in executing orders.
Commission – the fee charged for trading transactions. Comparing the commissions of different exchanges will help you find the best one. Low commissions don’t always mean cheap. High liquidity compensates for high commissions.
When choosing a platform, it’s essential as well to consider the user interface and how easily you can manage the tools. Look for intuitive design, accessibility, and reliable customer support. Convenience is highly individual – what works best for one trader might not suit another. Over time, your experience and wallet account will guide you toward the optimal choice. If you’re curious, Business Insider provides an overview of the top cryptocurrency trading platforms.
Strategy Selection
Selecting a strategy for operating with cryptocurrency is an interdependent decision that occurs during the previous step – when choosing a trading platform. Your strategy should align with your investing style and be based on your risk tolerance. Traditionally, the strategies for profiting from cryptocurrency can be broadly categorized into two main approaches:
Long-Term Investing
Short-Term Trading
However, for a deeper exploration of this topic, let’s delve into the specifics of these two criteria. Here are some of the most popular strategies.
Strategies
Description
Spot trading
Direct purchase or sale of cryptocurrency with on-the-spot settlement. You own a real asset.
Arbitration
A strategy for profiting from differences in prices for the same cryptocurrency on different exchanges.
Trading
The process of buying, selling and exchanging cryptocurrencies on online platforms. Includes different approaches:
Automated programs for performing trading operations. Analyze the market and trade.
Your choice of investment strategy will depend on factors such as your initial capital, investment goals, prior experience and financial management style – the experts at Rates share their observations. Regardless of your approach, consider starting with small amounts. Keep in mind that every strategy promising potential profits also carries potential risks. Only risk funds that won’t jeopardize your financial stability.
Virtual currency is managed through cryptocurrency wallets – software programs and applications that enable you to store digital assets and conduct transfers and transactions. When choosing a wallet, consider factors such as affordability and compatibility with various crypto platforms. Irina Tsymbaliuk, writing for the information portal Rates, provides further insights into various crypto wallets.
Bottom line
In this article, we don’t promise immediate wealth, but we aim to convince you with rational arguments: cryptocurrency is the future, and it’s already here. The sooner you embrace it, the faster you’ll break free from traditional methods of earning and financial management. Understanding the basics of the cryptocurrency market and the criteria for choosing a platform and strategy will empower you to take the first step – deciding to register on a cryptocurrency exchange, creating a wallet, and selecting a strategy for your initial investment. The consequences of your actions will depend on the quality of these foundational steps. So, are you ready?
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