With 24 hours trading volumes that average around $50 billion or even more and cross over $100 billion, the cryptocurrency market has grown significantly over the last few years. The participants of the crypto markets entail a mix of institutional and retail traders. Digital assets are considered as an alternative class of investment now. Crypto trading is an act of gambling on crypto price moves through CFD trading accounts or buying/ selling an underlying coin through an exchange.
How Does Crypto Trading Work?
You can trade cryptos using a CFD account. CFDs are derivative products that let you gamble on whether your selected crypto will fall or rise in value. The prices are available in traditional currencies like the US dollar. You can never take ownership of a cryptocurrency itself. A CFD is a leveraged product. It means that you can easily open positions for a fraction of the whole worth of the trade. Though leveraged products can amplify your profit, they can also amplify your losses when the market goes against you.
What Are the Types of Crypto Trading?
Crypto Trading is of two types. Let’s discuss each of them individually:
Fiat to Crypto Trading: In this type of trading, the base currency is fiat (INR, USD, SGD, GBP), and you can trade it against different cryptocurrencies like Ethereum, Bitcoin, and more. The aim is to increase your fiat money and regularly book your profits.
Crypto to Crypto Trading: By far, this is the most profitable type of crypto trading. The base here is the crypto, and it can be traded against other cryptos to increase the base. It is also called altcoin trading. During a bullish market, crypto to crypto trading is the best way to boost your Bitcoin holdings.
What Are the Benefits of Crypto Trading?
When you trade cryptos, you speculate on whether a selected market will fall or rise in value. You do not even have to own the digital assets to trade them. This can be done by using certain derivative products like CFDs. The main benefits of crypto trading include:
- Crypto Volatility: Though the crypto market is pretty new, it has already experienced noteworthy volatility because of the large amount of short-time speculative interest. The crypto volatility is what makes the cryptocurrency market very exciting. Fast intraday price moves can offer investors many opportunities to go short and long but come with risk.
- Enhanced Liquidity: Liquidity measures how easily and promptly crypto can be turned into cash without even impacting the price of the market. Liquidity plays a vital role as it gets better pricing, increased precision, and quicker transactions—Trade cryptos with a broker who gets prices from many venues to execute faster trades at a lower price.
- Market Hours: The crypto market is open to trade 24/7 since no centralized governance exists. Crypto transactions occur between individuals directly on various crypto exchanges around the world.
- Go Short or Long: If you purchase crypto, you are buying the asset upfront, believing it will increase its value. However, if you trade on a crypto’s price, you can benefit from the markets that are rising or falling in price.
Is Crypto Trading Profitable?
Traders have been using altcoins and bitcoins for a long time now. Big thanks to its high volatility, platforms like Stormgain offer margin trading to the traders, so that they can make profits faster than other more stable markets. But don’t anticipate earning millions within a month or become rich quickly. Investors should follow strict trading strategies with proper risk management limitations. Also, ensure that you do not risk over 1 percent of the capital you have. Though it will limit your profit, it will still collect overtime for the persistent traders.
Is Crypto Trading Legit?
Yes, cryptocurrency trading is completely legal. Crypto is legal in the US; however, China has banned its use. Ultimately, whether or not they are legal depends on every individual country.
Take this as a guide to trading cryptocurrencies, and you will avoid the most hurdles that many investors fall. Also, ensure that you stay aware of the differences in taxes and rules associated with crypto trading in different regions. You would not like to lose your profits to unforeseen regulations.