Cryptocurrency trading is the buying and selling of cryptocurrencies on an exchange. Unlike old-fashioned paper currencies, cryptocurrency is entirely digital, with a decentralized network forming the market. Cryptocurrency relies on peer-to-peer transactions instead of a central server controlled by a government that could collapse without warning, and remain largely free of the economic and political concerns that often affect traditional currencies. Selling and buying cryptocurrencies add the transactions to the blockchain, which is a shared digital ledger housed on multiple computers across the globe.
Although cryptocurrencies are free of many of the constraints of traditional currencies, they can still be taxed in certain instances. Click here for more information on crypto tax and how it can affect you. Because cryptocurrency is a digital currency made secure by cryptography, it’s nearly impossible to counterfeit or double-spend it. Even so, investing in cryptocurrencies can be daunting, as they often defy the rules that apply to other markets, and are volatile by their very nature. Despite all that, there are profits to be made for those with the right combination of courage and caution!
If you plan to trade cryptocurrencies you’ll need to purchase a special wallet to hold them and to access them when you are ready to use or trade them. There are two types of cryptocurrency wallets, software and hardware. They are both relatively safe, but a hardware wallet has the advantage of keeping your investment in a physical device that is disconnected from the internet, preventing any hacking shenanigans!
Like all market trades, a cryptocurrency transaction involves a buyer and a seller. Because there are two opposing sides, a purchase and a sale, one participant is going to gain more than the other. To put it bluntly, there will be a winner and a loser. The value of cryptocurrencies is determined by a real-time market that runs 24/7. Because they are autonomous digital assets whose values are determined by an open market, the values of cryptocurrencies are more volatile than traditional currencies and investments.
This makes it critical for newcomers to invest in learning how crypto-asset markets work so that they can safely navigate the markets in a way that allows them to receive the most value from their investments. In other words, you will have to do a bit more research than just reading this article, this is just the start of your crypto adventure!