Introduction to Cryptocurrency Trading

Here is an overview of the mechanics of cryptocurrency trading, the disclosure of useful terms used to describe market conditions, such as bearish and bullish, long and short positions and etc., as well as the explanation of different types of trading.

Finrazor readers have been already provided with the way to earn on crypto via mining and mining pools. This article and the following ones are going to explain how to invest in Bitcoin and other altcoins and start making a profit out of it. Here you can get familiar with the general idea of cryptocurrency trading and understand its basic terms and ideas.

Bitcoin, the first cryptocurrency, was born about ten years ago. Since then, the blockchain industry has been steadily growing with mostly ups but not without downs. The cryptocurrencies market is well on its way to a properly regulated legitimate entity. It is a place where millions of people make their living off of trading.

Trading cryptocurrencies refer to the process of buying and selling cryptocurrencies or corresponding financial derivatives with the purpose of making a profit. The general mechanics of crypto trading is similar to that of stock trading: buying low and selling high.

Useful terms

People use special terms to describe markets conditions. When the prices of cryptocurrencies are steadily going down, the market is often described as bearish, or the bear market. When the prices are on the rise, the market is bullish, or the bull market.

Trading, in its sincerest form, implies speculating on prices, and there are two positions you can take: long or short. Long position is betting that the prices will go up. Shorting is, on the contrary, betting on the depreciation of cryptocurrencies. In crypto market, most cryptocurrencies largely depend on bitcoin, and if it’s on the bull run, most altcoins follow suit. Going short is risky, and there is a good chance of coming short. For more detailed analysis, check out our article.

A trading portfolio is a group of assets belonging to an individual trader.

Types of trading

Day trading involves buying cryptocurrencies and selling them at higher prices within the same day or a short period. Day-traders operate on exchanges and trading platforms. Exchanges are different: some support fiat money, others are crypto-to-crypto only. Exchanges can be centralized (all orders are done through a central stock of assets) or decentralized (the exchange matches traders based on their orders). Some of the more established exchanges are Bitfinex, Binance, Coinbase, GDAX (for experienced traders).

In margin trading, a trader borrows money against its existing deposit on the exchange to increase their buying power and then returns the borrowed money often with interest. The borrowed money, the leverage, depends on the deposit, the margin. Depending on the exchange, the leverage-to-margin ratio can 2:1, 5:1, 10:1, etc. A few examples of exchanges that support margin trading: Bitfinex, Bitmex, Plus500, Poloniex.

Trading derivatives are buying and selling contracts that mirror prices of their underlying cryptocurrencies. CFDs (Contract-for-Difference), futures contracts, and options are tools that allow traders both short or long crypto assets without actually buying or selling them. Among exchanges that support bitcoin and altcoin derivatives are CBOE, CME, AVAtrade, Bitmex, Deribit.

Tether

Tether is a blockchain platform that hosts fiat-backed cryptocurrencies. This types of cryptocurrencies are called stable coins. USDT is a stable coin backed by the U.S. dollar at 1:1 ratio. EURT is tied to euro. Tether aims to bring more stability to an incredibly volatile cryptocurrencies market. Tether allows individuals to manage and store fiat money in a decentralized way without the fear of the crypto market crashing down. Most popular exchanges that support USDT and EURT are Binance, Bittrex, Poloniex, Kraken.

Trading is not the most reliable way of making money. It implies a lot of speculation, guessing, and luck. This article is descriptive in nature and aims only to give a picture of cryptocurrency trading. Do you own diligence and act at your own risk.

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Blockchain vs. PayPal: Understanding the Difference and Evolution

In today’s world, everyone wants everything in a hurry. The faster, the better. In the world of digital payments, a major competition is underway between the blockchain and PayPal. The blockchain is the relative newcomer, while PayPal has been around for about two decades. Here’s a look at some of the pros and cons of both money transfer systems to help you decide the long-term winner in the blockchain vs. PayPal debate. Blockchain Technology and Other World-Changers Blockchain technology is one of those digital revolutions that only comes around once or twice every generation. It’s as important an invention as the integrated circuit (1958), the microprocessor (1971), the personal computer (MITS Altair 8800, 1975), the internet (ARPANET, 1969), Windows (1985) and smartphones (2007). 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Peer-to-peer: Cross-border payments take less time with blockchain due to fewer checkpoints. Permissionless: Payments don’t need a bank’s approval before they can be sent. The payor and payee control the transaction process, not a third party. No limit on payment size: Need to send someone five million dollars worth of Bitcoin, pronto? You can do it on the blockchain. Just make sure you’re aware of any applicable fiat-to crypto (and vice-versa) costs. Blockchain technology is what makes peer-to-peer international payments happen quickly and efficiently. Photo by Craig Cooper on Unsplash Blockchain Payment Disadvantages Slower transaction speeds (transactions per second) compared to PayPal, Visa, and Mastercard. Costly mistakes: If you make a mistake and send funds (crypto) to the wrong address, don’t look for any government regulator to bail you out. Fiat-to-crypto conversion costs: Unless all of your payments occur within the crypto ecosystem, you’ll need to convert your USD, EUR or GBP, etc. to Bitcoin, Ether, etc. When you receive payments in crypto, you’ll also incur transaction costs to convert the funds back to fiat. Transparency: Blockchain ledgers are public knowledge, inasmuch as anyone with the correct access codes can view the details of each transaction within. Privacy-minded individuals and companies may not be cozy with that arrangement. PayPal Advantages Send money to anyone in up to 26 different (fiat) currencies with an email address. Well, as long as they have a bank account and have signed up for PayPal, that is. Regulation and oversight: PayPal users are protected by at least some of the rules and regs that govern traditional banks, such as Regulation E and the USA PATRIOT Act. 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Might PayPal payments be sent via DLT in the near future? No one knows, but it’s certainly a possibility worth contemplating as this decade rapidly draws to a close. For all anyone knows, blockchain vs. PayPal might morph into something like BlockPal or PayChain. The Wild Card in the Mix Bitcoin hash rates continue to climb, albeit slowly as of early 2019. More and more merchants are willing to accept cryptos as payment. With the possibility of a major US (worldwide?) recession looming in 2019-2020, it’s possible that revenue-hungry retailers will welcome any form of payment they can get, including major cryptos. However, what happens if 100 million Americans decide to use crypto every day to complete their personal and business transactions? Further, what if most of those consumers simply choose to keep their funds within the crypto ecosystem, never again converting their coins to fiat? Be Optimistic, yet Ever-Vigilant Overall, the future looks great for both blockchain and PayPal as world-class payment systems, worldwide. However, always be aware of the potential for government restrictions on crypto use (on consumer purchases, not on actual crypto trading). If crypto purchases are limited by government decree, then the blockchain will also be affected and its development could be slowed down. PayPal appears to be immune from such a hypothetical crackdown unless they begin offering cryptos as an additional currency. Regardless of future events, the blockchain vs. PayPal saga should prove to be an interesting competition in the 2020s and beyond. The post Blockchain vs. PayPal: Understanding the Difference and Evolution appeared first on CoinCentral.
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