Aimed at novice traders, new to the cryptocurrency market and eager for new trading experiences.
In this article, we will analyze the basic characteristics of cryptocurrencies. Through the use of simple concepts and within the reach of all novice traders interested in the fantastic world of virtual currencies, the light will be shed on the following topics.
- What is cryptocurrency.
- Gold Standard.
- How cryptocurrencies can be used.
Cryptocurrency is now considered an integral part of the new financial world, both private investors and large companies make use of this innovative tool for sale and purchase negotiations and other various uses. The structure of this rapidly expanding new market is becoming clearer year after year and all the processes and operations that are part of it are becoming more and more transparent. but we must act with the utmost caution, the high volatility and high risk associated with cryptocurrencies are still a reality to be kept under control, and in order to invest in this market and be able to profit from it, it will be necessary to study every single one. characteristic to always be prepared for any eventuality.
What is cryptocurrency
Basically, cryptocurrency is a type of digital currency created through a system of codes processed by a program, it is neither paper nor hard cash and can only be used online confined to the network space. It has no constraints, it is not backed by gold. Any trader who has the necessary means (both technological and monetary) to proceed with the purchase of cryptocurrencies will be able to opt for this type of investment.
Anyone is aware that in the fiat world, i.e. conventional currencies, everything is completely different. Central banks around the world are continuously printing new banknotes and this inevitably leads to inflation and the relative exchange rates of world currencies are manipulated by states that each issue their own currency. In the world of cryptocurrencies, all this does not happen, everything is decentralized and there is no single control center, they do not depend on any state, they are not influenced by them. The extreme speed of payments and the number of fees for the transfer of cryptocurrencies are generally lower than in the conventional currency market.
The main advantage of the cryptocurrency markets, which continuously attract more and more users from all over the world, comes from the absolute anonymity, each transaction is impossible both to track and to discover. But at the same time, there are also disadvantages: very high volatility and the impossibility of a wide circulation of digital money in public life due to the scarcity of infrastructures.
In order to fully understand what a cryptocurrency is and how to learn how to use it, it will be better to take a look at the crypto par excellence, Bitcoin. Bitcoin is the gold standard, i.e. the first-ever cryptocurrency in the cryptocurrency market. Its trading symbol is BTC, which in English can be translated as a bit-sized coin or a minimal coin.
Bitcoin is completely decentralized and does not undergo any control by any central bank or nation. The virtual currency in question can be used in various ways, buying and selling goods and services, trading or as a simple means of saving. Each trader will be able to exchange the currency via online trading or alternatively using an exchange office with any currency in the world at rates developed based on market fluctuations.
With the boom of Bitcoin, numerous other cryptocurrencies commonly called altcoins began to be created in the world. this new term embraces a wide range of cryptographic financial instruments, including so-called tokens. To date, digital coins are made and used as a full-fledged means of payment. And tokens, which are digital assets that operate by exploiting the already existing blockchains, turn out to be a type of investment with a high rate of risk.
Bitcoin and altcoins
Since altcoins are an integral part of the world of cryptocurrencies, not mentioning them would render any analysis on virtual currencies incomplete. The most quoted altcoins on the markets to date are Ethereum, Ripple, Litecoin and Monero. Each of them is based on the blockchain and is not subject to any influence of the initial algorithm as is the case with Bitcoin. This means that their transactions are faster than Bitcoin due to the differences in the cryptographic codes.
However, the main problem of altcoins is very simple to understand, they are extremely dependent on the rate of the “gold standard” ie Bitcoin. Consequently, if the bitcoin rate decreases, the value of the altcoins decreases and vice versa.
Returning to tokens, we can categorize them as an investment having a more aggressive and risky mechanism. Real shares of the cryptocurrency market. Any trader has the possibility of being able to buy them through the ICO and wait for any growth with a consequent profit or a loss resulting from a collapse.
Alternatively, although the cryptocurrency market is extremely volatile, the actual purchase of virtual coins will be less risky. With this type of strategy, it will be possible to play on market fluctuations with more prudence and tranquility.
Buying tokens indicates a high-risk appetite of the investor. Tokens should not be purchased with the latest available funds, because the rapid growth of the stock will give great profits but on the contrary, a possible collapse will completely cancel the capital without the possibility of recovery.
Before purchasing any type of cryptocurrency, every trader will have to think and worry mainly about where to store it. The main medium used for storing virtual currencies is called a wallet. A wallet is a mobile application, special program or device created solely to carry out all transactions related to electronic money.
In the digital world, there are mainly 5 types of wallets.
- Software Wallets.
- Using software wallets, you can store money on the hard drive of a computer or laptop. Their main advantage lies in a fairly high level of security.
The disadvantage comes from the space used for storage equivalent to 150 gigabytes for every single currency.
- Online Wallets.
- Online wallets provide for the storage of digital capital on third-party servers (in the cloud). You will be able to use money from any device you want. but the disadvantages of this archiving method derive both from the mobility fees to be paid and from the questionable security. Convenient, but risky, when hacked, all your money could be lost.
- Mobile wallets.
- Versatile, quick and easy to use, they can be installed on phones and tablets. but losing your device, leaving it unattended, could lead to unpleasant consequences falling into the wrong hands.
- Hardware Wallets.
- A hardware wallet, which is in fact a standalone device, is certainly the safest way to store your cryptocurrencies. Hardly decipherable. The only disadvantage derives from the fact that for any operation it will be necessary to be in possession of the device in question and remember all the pin codes in order to log in.
- Paper wallets.
- A paper-format wallet is just a private and public key generated using a website that specializes in this procedure. The code can be transcribed anywhere, a piece of paper, a diary, a notebook. But it is advisable to jealously guard this code and possibly write it more than once on several reminders because the loss of the key leads to the loss of money.
Before you can start using virtual coins freely you will need to buy them. One of the most used methods by traders for buying Bitcoin and other types of cryptocurrencies is by the exchange. There are various trading methods that differ from each other in the amount of commissions to be incurred and ease of use.
Other aspects of extreme importance are the reputation, reliability and safety of the means that allow the purchase of cryptocurrencies. There are countless cases of unfortunate traders who found themselves in unpleasant situations such as scams or deceptions. To ensure that this does not happen, every trader can make use of exchange aggregators, which are actively involved in the search for increasingly reliable resources. But you must never let your guard down, the risks remain and losing your capital is always possible.
The technology that allows the exchange of fiat money in cryptocurrencies is as if it were offline, you choose the currency to buy, analyze the details and proceed with the transaction.
Another very common method for obtaining cryptocurrencies derives from a possible registration on an exchange. There are basically two types of exchanges: some specialize exclusively in cryptocurrency transactions, and others work with both digital money and fiat currencies.
The selection criteria that lead to the choice of your exchange office are reliability, reputation, speed of transactions and convenience on any operation to be carried out. In order to trade with large sums of money, you will need to check the validity of your account.
Eventually, it would also be possible to opt for the search for a cryptocurrency seller through sites that use p2p (peer-to-peer) technology. On these sites, there are numerous advertisements through which sellers and buyers meet. Before carrying out any purchase operation it is advisable to check the chosen seller. This control will be made possible by an efficient evaluation system present very similar to that present in the most common online stores. But it should be noted that the risks in such transactions are greater than when working with exchanges and exchange bureaus.
In conclusion, in order to invest in cryptocurrencies, every trader should carefully consider his degree of preparation, his experience and if necessary follow the learning courses necessary to fully understand every single feature that is part of the world of cryptocurrencies. So you can be constantly prepared and updated for any eventuality and achieve excellent results deriving from trading with finely structured strategies.