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Trading Cryptocurrencies — What You Should Know

The crypto market is still evaluated at $1 trillion even after the devastating crypto winter that wiped away over 60% of its value. There was a moment in 2021 when the total market cap reached an impressive $3 trillion mark. The latest bitcoin news suggests that we will breach this limit by the end of the next year after the world finally gets out of the recession.

Trading cryptocurrencies is a new investment option that became a thing less than a decade ago with the arrival of new-age crypto exchanges. Today, we have many huge players in the industry including established institutions like Fidelity Investments and Samsung offering their services to retail traders interested in crypto.

At the same time, traditional CEX platforms like Coinbase, Binance, and FTC are also used by millions of people from across the globe.

How to trade cryptocurrencies

It depends on what you want to achieve by entering the market. There are two main approaches to trading crypto that you should be aware of:

  1. You can accumulate a large portfolio in hopes that it will be appreciated over time. DCA-buying on spot markets is the best approach for this strategy.
  2. You could try to engage in speculative trading by buying low and selling high on spot markets with high liquidity.

There is also an emerging market for crypto derivatives. One of the biggest platforms where you can try trading perpetual and regular futures on Bitcoin, Ethereum, and other tokens is Binance. Derivatives based on cryptocurrencies are a little bit more volatile than assets themselves which can be a good thing for scalpers and aggressive day traders.

DCA-buying crypto

Spot markets are featured on many CEX platforms. The idea is that you can swap fiat currencies for digital assets. The general mechanic is a little bit more complicated, but it goes like this:

  • You use fiat money to buy a stablecoin like Tether (USDT).
  • You exchange USDT for coins that you want to buy on the spot market.
  • You can continue trading coins or simply hold acquired tokens.

The idea of “HODL” became prominent in the Bitcoin community several years ago following the massive Bull Run that happened before that in 2016. While many believe that it is nothing more than a meme, we can firmly state that it is an investment philosophy and a valid approach to investing in the future of the crypto industry.

Right now is the best time to start buying Bitcoin considering its recent crash to the $18K support line which means that you can buy it now and wait until it appreciates.

DCA stands for “distributed cost average” which is a method of buying assets while reducing the average price. Instead of buying in bulk at once, you can start buying in portions during a bearish movement. The principle is quite simple:

  • You choose a price point to start buying and wait for the price to move.
  • If the price continues going downward, you make another purchase.
  • If the price stays the same or goes upward, you don’t make any purchases.

This approach allows you to accumulate assets quickly without overpaying for them. At the same time, it is a good method to use if you cannot afford to buy in bulk and want to reduce the average price by investing spare money each month or week. Even without a large capital, you can still make your investment strategy work with DCA.

Working on CEX platforms

It is a good idea to choose trading platforms that offer multiple products at once. For example, you could sign up with a crypto exchange that allows for marginal trading, passive investing, staking, NFT trading, and spot market. With enough options to work with, you can diversify your trading efforts and spread attention across multiple cryptocurrencies at once.

Trading crypto is strongly associated with knowing your technical analysis game well, the ability to understand crypto news, and relying less on social media hype and fundamental analysis.

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