Crypto trading, or cryptocurrency trading, is simply the exchange of cryptocurrencies. Like in Forex, you can also buy and sell a cryptocurrency for another, like Bitcoin or altcoin for USD and Euro. This is one way of getting involved in the world of cryptocurrencies without having to mine it.
The value of cryptocurrencies is increasing. In 2017 bitcoin (BTC) grew from around £600/BTC to over £8,000/BTC. With such growth comes an increase in market trading, which in turn helps the currency keep growing.
It can be a good choice for cryptocurrency beginners because you don’t need your own cryptocurrency wallet, and you can get a feel for the market movements without needing to buy it outright.
Market trading might sound like something reserved for the financial elite, but the growth of cryptocurrency is accompanied by the growth of online currency exchanges and trading platforms where anyone can take part in market speculation. You just need to know how it works.
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Cryptocurrency trading
Trading cryptocurrencies works exactly the same, but instead of selling and buying fiat currencies, such as euros or US dollars, traders buy and sell cryptocurrencies, such as bitcoin, Ethereum or Litecoin.
For example, you might bet on the changing price difference between the US dollar and bitcoin. Or you might bet on the changing values between two different cryptocurrencies, such as by trading a BTC:ETH pair.
If you think bitcoin will increase in value you might “go long” on it. This means betting that it will increase in value relative to the US dollar.
If you think bitcoin will decrease in value you might “short” it instead. This means betting that it will decrease in value relative to the US dollar.
You’re not actually buying the cryptocurrency. Instead, you’re just placing an order on the market.
What’s the difference between XBT vs BTC?
Just like forex market trading, cryptocurrency trading works by exchanging one currency into another and back. You will usually exchange a fiat currency into a cryptocurrency and then, at a later date, back into a fiat currency, although there are traders and exchanges that allow cryptocurrency-to-cryptocurrency trading.
The advantages of trading cryptocurrencies
Trading cryptocurrencies, while similar to trading fiat currencies on forex, comes with its own set of advantages.
Cheap fees and fast exchanges. For each trade, the exchange platform you’re using will take a small percentage as commission for the service they’re providing. This is inevitable. Where cryptocurrency trades differ from their fiat currency equivalent is in the size of this fee. Because the fees for transferring cryptocurrencies (typically via wallet payments) are cheaper than credit card and bank transfer fees, market-trading fees are cheaper than forex-trading fees.
Extreme volatility. Traders make profits when the price of the currency takes large strides upwards, and cryptocurrencies often experience large price movements. While this increases the risk (large price movements happen downwards as well), you can often make a lot of profit with a relatively small bankroll.
Open all week. You can only trade stocks and commodities during business hours, and you can often only trade forex during weekdays. Cryptocurrencies, on the other hand, can be traded 24/7, anytime and anywhere, depending on the exchange.
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