How does cryptocurrency trading work
Cryptocurrencies are the new talk of the town owing to their secure, transparent, and hassle-free nature. Cryptocurrency is one ideal investment option and traders these days look forward to crypto exchange software further leading to the growth of multiple Cryptocurrency exchange development companies.
CFD trading concept
Since Cryptocurrency is the favored term of this new era. The world is seemingly getting shifted from the traditional market to this digital market and trading cryptocurrencies is the need of the hour. The said trading happens through a CFD (contract for differences) trading account which helps in analyzing the bull and bear trends of the financial market including shares, commodities, treasuries, etc. CFD acts as the financial contract that bridges the gap between rising and falling rates. There happens no exchange of physical properties with CFDs and it’s a short-term exchange policy. Exchange-traded funds (ETFs) can also be traded via CFD. The trading happens through a chain of brokers who speculate the market trend following demand and supply before setting the prices. Fewer rules get applied to CFD if compared to other standard accounts. CFDs increase the gain but can also magnify huge losses. Also, there remains a high risk regarding price volatility.
Fiat payment for Cryptocurrency exchange:
The value of Fiat money is connected to Government-issued currency making it a legal tender. Fiat money can be coins or paper bills. Some popular fiat currencies are U.S Dollar, Euro, and Japanese Yen. They can also be used to trade cryptocurrencies. For example, Bitcoins can be exchanged via top fiat currencies like the U.S Dollar or Japanese Yen. According to Coinhills, there is data available on national currencies used for trading Bitcoin. The list follows below-
- USD:  U.S was quick to adapt with the rising change of cryptocurrencies than the other nations and that’s why today it ranks first on the list of Bitcoins trading fiat currencies. It holds over 82% market shares.
- JPY: Japanese Yen comes second on the list. It holds 7% share of the market at present.
- EUR: Euro owns 4.9% market share and is third on the list.
- KRW: The South Korean Won is fourth on the list with 3.3% market share. For few years trading cryptocurrencies was banned here but from 2020 onwards the process became smooth.
How to register for trading?
Before trading one including a beginner as well as the skilled must understand the risk factors and then chalk out the best possible routes of trading, know A to Z about cryptocurrencies, and then build strategies. The steps can be;
-Deciding on the route of trading:
One can trade via CFDs or via an exchange. For CFDs, if you open a long position and the value of cryptocurrencies increases then there is a chance for profit, whereas the fall in price leads you to loss. The mentioned scenario is completely different in the case of a short position though. In CFD one does not need to take the ownership but speculate the market price but the case is different via exchange; one needs to have a crypto wallet and an account meant for the exchange before claiming ownership of the digital currency.
-Knowing particulars of crypto market:
Since the technicalities of this market are different from the conventional, one needs to have a thorough idea about the happenings. Cryptocurrencies are digital and operate through peer to peer network rather than a central server. Blockchain helps in recording data during the process of buying and selling such currencies.
-Account opening:
Unless you are opting to trade via an exchange, you don’t need a digital wallet. Through CFDs, one can have an account with a leveraged trader.
-Building trading plans:
Since the Crypto market is highly volatile, one must well understand the risk factors involved in it. The trading plan should include risk management tools and strategies to enter or exit the trade.
Trading pairs of cryptocurrency:
Trading pair is a combination of exchange. These are assets that can be traded for each other- for example, Bitcoin (BTC)/ Litecoin (LTC), Ethereum/Bitcoin Cash. The concept of crypto trading pairs relies on Base Currency. Base currencies are tools to compare rates across fiat currencies across different countries. For exchanging lesser-known crypto, one needs to about the base currencies listed in a pair.
Following are the top 3 cryptocurrencies according to their 24-hour market volume;
- Tether: 24-hour volume is US$89 Billion
- Bitcoin: 24-hour volume is US$53 Billion
- Ethereum: 24-hour volume is US$34 Billion
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