How Cryptocurrency Trading Can Turn Profitable


Trading for some goods with something valuable has always been a way to trade. In the olden days, people used barter systems while trading, and it won't be long before cryptocurrency trading platform becomes a norm.

Cryptocurrency Trading

We have come a long way while trading, right from the barter system to the use of currencies made up of gold, silver, and even bronze. Today these currencies are replaced and minted with copper-nickel mixed coins and paper currencies. Some countries also use plastic material while minting currencies, replacing paper ones.

Although many paper currencies were previously backed with gold standards, in the late 1950s, replacing these minted currencies with plastic cards or credit and debit cards came into existence. Under President Richard Nixon's reign, from the early 1970s, currencies were no longer backed by gold standards but continued to be minted by the sole authority of the U.S. government. These currencies are also called "Fiat currencies."

In 2009, Satoshi Nakamoto launched the first cryptocurrency called Bitcoin. It used a unique feature that allowed the users to transfer funds from one country to another while maintaining and tracking down money in the most democratic way.

Bitcoin uses blockchain technology, where each block maintains trade of it like a ledger. The transaction and the account user's name are recorded in an encrypted method on a blockchain block. These blocks are linked to form a chain, thus blockchain technology.

Thus, a user can remain anonymous while several blockchain miners authenticate the trade. Blockchain miners mine or mint a Bitcoin whose job is to verify the transaction's authenticity and are rewarded in Bitcoins for their work. This system is called decentralized finance or DeFi. Thus it is virtually impossible to duplicate a trade since there are several nodes where the transaction is recorded.

Bitcoin has revolutionized our world since many developers have been inspired and developed their version of Bitcoins, generally known as altcoins. However, for an average person, Bitcoin and other cryptocurrencies are the same.

Cryptocurrencies are the way into the future; it won't be long before they replace fiat currencies. Governments across the globe recognize the viability and utility of cryptocurrency trading; traditional stock traders can trade Bitcoin and Ethereum without owning these cryptos through crypto options and futures. Governments across the globe are keen and are in the process of creating their digital or cryptocurrency.

Huge financial institutes have also shown a keen interest in cryptocurrencies. Although a colossal market needs to explore its full potential in the crypto world, we have only scratched the tip of the iceberg.

Since the United States disclosed its intention to launch its Digital Dollar, many countries have followed its lead. India has created its Digital Rupee and is in the process of testing it. However, it gave authority to trade between banks actively. It has yet to open for retail investors.

Digital Yen will begin its testing in the early spring of 2023, and many more are yet to join the bandwagon of government-issued cryptocurrencies.

2022 has been a rollercoaster ride for the crypto industries. There has been plenty of good news besides scams and exchanges going bankrupt. The latest is FTX, a crypto exchange that used nefarious means to swindle billions of dollars from poor hapless victims who may only find justice by watching the board members of the FTX exchange behind bars.

Cryptos are popular with the citizens of Mexico; since the Peso is becoming weaker, many Mexicans have started cryptocurrency trading and investing to hedge against inflation.

Not far behind is El Salvador, a Central American country. President Nayib Bukele has announced that he intends to create the world's first "Bitcoin City," Bitcoin has become a legal tender in El Salvador.

Legalizing Bitcoin allows citizens to trade in it; even the municipal taxes are being planned to be collected in Bitcoins too. However, a lot of energy is being wasted and creates heat which is detrimental to the climate of the earth while mining Bitcoins and other cryptocurrencies. Hence, President Nayib Bukele announced that Bitcoin would be mined using eco-friendly alternatives. For example, there are active volcanoes nearby, and the energy released by them would be used as energy for mining bitcoins and other cryptos.

During the initial months of 2023, the Russians started invading Ukraine; the conflict can be termed a mighty elephant trying to trample feeble ants. However, these ants got financial support all around the globe in the form of cryptos. Thus, again showing the usefulness of sending huge funds quickly through borderless transfer.

During the pandemic, many found refuge in crypto and invested heavily in it, thus the bullish market when the rest of the traditional financial markets crashed. However, there has been a steady increase in the adoption of cryptocurrencies which baffled many since many believe that only whales (a term for investors hodling more than 1000 Bitcoins) with loads of cash ever venture into cryptocurrency trading for short-term and investing for long-term.

As per the report, shrimps, a term coined for people hodling less than one Bitcoin and crabs hodling less than 10 Bitcoins, the rate of crypto adoption has steadily increased since many have seen the potential of cryptocurrencies and honestly believe that the only way to hedge the inflation is through trading in cryptocurrencies.

With so much potential and some more untapped, it is no wonder many are excited to adopt cryptos, trade, invest, and treat them as a passive or alternate source of income.

But what about the ongoing scams and crypto exchanges going bust?

Like any other business, there is a certain level of risk involved. Agreed, there is a dime a dozen scammers impersonating celebrities and many social influencers misguide the masses.

You cannot even deny many social influencers rug-pull specific cryptos. Yes, such devious-minded selfish people cannot be counted on the tip of your fingertips; the only way out is to self-educate and ask questions to those influences. If they happen to downplay your queries or get angry, rest assured these so-called influences are out there to profit from you. If someone is genuinely trying to help you with your finances, then they won't get offended by your questions which are genuinely linked to the topic. However, if the question is outrageously dumb and stupid, then be assured that they won't spare you.

As an aspiring crypto enthusiast or a trader, I recommend reading and exploring online articles related to cryptos. It would also help you out if you joined some crypto communities. These crypto communities are focused on cryptos and will help you better understand the concept of cryptocurrencies.

Before you go on the rampant speed of cryptocurrency trading, you need to understand the fundamental differences and how they will help future implementation.

Generally, there are two critical challenges that a cryptocurrency faces, how quickly will the transaction take place? And how secure is the cryptocurrency against a cyber threat?

A quicker transaction means paying fewer transaction fees or the "gas fees," while a secured cryptocurrency means it is difficult to steal it. But, of course, there is always a trade-off between the two.

Since cryptocurrency is a digital currency, it is based on complicated codes. Therefore, a secured cryptocurrency will be heavy. More secure the cryptocurrency is, the heavier the file.

Consider you want to download an image on your electronic device. The file will get downloaded very fast if the file is small. On the other hand, if the file is enormous, it will take more time to download, no matter how fast your internet speed is.

Similarly, when a transaction takes place on an exchange, the most secure crypto will take a lot of time since each verified transaction requires a lot of time. Thus you end up paying a good amount of cryptos in the form of gas fees.

Thus if the crypto is relatively less secure, it trades at a faster speed requiring fewer gas fees.

Thus, each crypto developer has to face an ongoing struggle while creating a new crypto or update in the form of a "hard fork." These developers are on a constant quest to create a perfect crypto that has the right balance of security and requires fewer gas fees.

Thus, it would serve you best to explore the "white paper" of each cryptocurrency you are interested in. A white paper is a short description of the cryptocurrency that showcases who it will help and shape the future. It also describes the total number of cryptos the developers intend to create. If you find it challenging to understand the white paper, then feel free to discuss it in a cryptocurrency community, and they will answer all your questions.

Unlike the Feds, who have the authority to print unlimited fiat money, in the crypto world, cryptos have a limit to how much they can come into existence. Furthermore, unlike the Forex or foregin exchange market, which relies on economic indicators to trade currencies, the crypto market depends on the demand and supply of the crypto. Therefore, the cryptocurrency indicators are different from the Forex market, although there are a few factors that do affect the cryptos.

Before you start cryptocurrency trading, remember that it will help you if you were to select a trusted and reliable online crypto broker and brokerage firm. Choosing a good one is crucial as you won't be scammed and will be in charge of your cryptos.

Since these online crypto brokers or brokerage firms make money by charging commissions every time you trade. At times there are a few who also levy hidden charges. Thus, it would serve you best if you understood the terms and conditions and got them in writing. If you find understanding these terms and conditions challenging, get professional help like a lawyer or financial advisor. Ensure that you do not use contact that is recommended by the online crypto broker or brokerage firm but rather those in your nearby vicinity. Ensure you take this step before signing the papers and paying them money.

Besides offering a secured trading platform, these online crypto brokers or brokerage firms also offer crypto trading courses that will help you immensely. They will teach you how to conduct research based on the tell-tale signs of the currency market indicators to help you make a substantial profit.

Are exchanges safe after all a few of them went bust?

Well, there is a way to avoid all the mental stress and hardship one might face while storing on a crypto wallet of an exchange, the threat of cyber attack or exchange going bust. You can either keep your cryptos in a printed format or buy crypto wallet hardware to store them.

Although the physical crypto wallet might be expensive, it helps you secure your cryptos safely; you can be assured that your cryptocurrency trading will not be affected if one exchange goes bust. In addition, these physical crypto wallets will ensure you remain in control of your cryptos. These physical crypto wallets have a password that will allow those to access the wallet who knows the password.

So is it wise to invest in cryptos?

With inflation, you need some cushion to save you from those blows. At the time of writing this article, Bitcoin, the undisputed king of the cryptos, is trending between $18,000 and $16,000. There is no significant price fluctuation, but the crypto is moving sideways.

Bitcoin can soar again in the future, as we saw its potential during the pandemic. Although, as per the experts, it won't surge as high as it did during the pandemic season, it will increase to a reasonable price.

How does one continue to invest in cryptos in today's scenarios?

The entire economy has slowed down, so naturally, people do not wave a surplus amount to invest in. However, as per the experts, conditions are bound to change in the next six months; till then, you need to stretch it out.

While cryptocurrency trading, day trading, and swing trading are popular with some crypto enthusiasts for short-term trading and long-term Dollar-Cost-Averaging, you can use other strategies.

While day trading, you open up your position as per your research and close the position before the day ends. Refrain from being taken aback by price fluctuation; stick to your exit plan, and everything will work in your favor.

While in day trading, you hold a position open till the end of the day, in swing trading, you keep an open position based on your research for a few days to weeks before closing it.

You invest 10% to 20% of your annual income after tax. And out of that saved amount, invest 1% to 2% per trade.

Dollar-Cost-Averaging is quite popular with most crypto traders. This is because you never invest the entire amount in one go. But instead, invest little by little over a while. For example, suppose with the above calculation, your 20% is equal to $700, and you want to invest in the next six months, then you invest roughly $116 per month in buying cryptos.

Final thoughts

Like any other financial investment, you should only allow yourself to invest money you would not regret losing.

As per the experts, now is the correct time to invest in cryptos, as the price of these cryptos is reasonable.