How to Invest and Trade with Cryptocurrency
From the time it was introduced back in 2009, cryptocurrency has quickly transformed from being a disregarded blip on the computer screen into a global phenomenon that make and break fortunes with its soaring growth trends and typically volatile patterns in trading.
Different Types of Cryptocurrency
There are currently more than 1,000 types of cryptocurrencies that exist, collectively called altcoins. These include the grandfather of the cryptocurrency trading market today, none other than Bitcoin. Active traders of altcoin have plenty of options to choose from.
But, fledgling or less active cryptocurrencies might have limited opportunities for trading that could mean fewer buyers once it is time to sell. New traders who don’t like to be overwhelmed with all the options can focus their initial trading on the primary types of cryptocurrencies to have the assurance that they will trade in an active market.
The leading types of cryptocurrencies today include Bitcoin, Ethereum, Litecoin, Zcash, Rippple (XRP), Dash, and Monero.
How is Cryptocurrency Trading Done?
Cryptocurrency trading is almost comparable to forex trading in many ways with the markets in different flat currencies from various corners of the world get traded against one another. Cryptocurrency trading is just like forex as it lets traders buy cryptocurrency with US dollars.
Cryptocurrency traders can also trade with buy and hold strategy. They can also trade the weekly or daily up and down volatility. There are various strategies available that will help you potentially profit when a cryptocurrency goes down in value, such as binary options and futures contracts.
As a result of the volatility in altcoin and Bitcoin trading and the common use of leverage in such trades, betting on the downward price move, called shorting, is not recommended in general for traders with less experience.
With Bitcoin trading for thousands, this may seem as like its cost is price-prohibitive for many traders to take position. However, Bitcoins as well as other cryptocurrencies could be bought as decimal-based fraction of a coin.
Even though Bitcoin is only limited to 21 million coins, with around 17 million of them being circulated, the ability of trading partial Bitcoins allows the split of each of these 21 million coins 100 million times in theory. Current exchanges in practice don’t really support these small trade units. Many exchanges let you specify the amount you wish to purchase in US dollars. This exchange computes the amount of Bitcoin or altcoins that you can purchase with this amount.
Invest in Cryptocurrency to Gain More Exposure
Investors looking for an easier way of investing in cryptocurrencies could now invest in the funds that buy altcoins or Bitcoin. These funds carry a substantial premium unlike direct trading. However, they simplify the ownership of cryptocurrency and offer a way of gaining exposure to the cryptocurrencies in the more traditional investment accounts such as personal accounts and IRAs.
Grayscale Bitcoin Investment Trust that trades as GTBC is the most popular cryptocurrency fund. The fund’s success prompted Grayscale to introduce additional four cryptocurrency funds, including XRP Investment Trust, Litecoin Investment Trust, Ethereum Investment Trust and Bitcoin Cash Investment Trust. Higher expenses with the funds can lead to lower returns compared to direct cryptocurrency trading. However, funds can offer other benefits and could be bought through various traditional investment accounts.
Cryptocurrency is among the most exciting new classes of asset ever seen in the markets. Since this market is still in its infancy with limited consumer protections put in place, it is up to the investor or trader to keep himself safe and protected.
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