The rise of cryptocurrency is certainly this year’s biggest newsmaker so far. But will it shoot for the moon, or take a spectacular plunge?
- Cryptocurrency is a decentralized cash exchange system that requires no interaction with financial institutions.
- The value of cryptocurrency is solely dependent on a free market supply and demand.
- Transaction fees, selection of cryptocurrencies supported, and user interface are important factors in choosing the right platform.
What is “cryptocurrency” exactly?
Before investing in cryptocurrency, we must start with understanding its origins and purpose. In 2008, an entity known as Satoshi Nakamoto published an abstract outlining a peer-to-peer cash transaction system known as “Bitcoin” that did not rely on a financial institution or governmental control. Instead, it functions on a decentralized ledger where transactions are validated by solving mathematical problems. This solves a major bottleneck in the transfer of money as transactions become fast, secure, and fully verifiable.
Why should anyone pay attention to cryptocurrency?
Unlike traditional money (called fiat currency), there is no physical representation of cryptocurrency. It isn’t controlled by any regulatory bodies, yet it is entirely safe because all users play a role in validating every transaction. Also, it ensures anonymity as participants can own a crypto wallet without ever revealing their personal information. And last but not least, its value is entirely determined by real-time supply and demand.
How do I trade cryptocurrency?
There are many different types of cryptocurrency available today, but by market capitalization, the largest remains Bitcoin and followed by Ethereum. In the last few months, joke currency Dogecoin also made its way up due to vocal support by Tesla founder Elon Musk. Do note that not every trading platform will support every cryptocurrency, and each platform will have its own fee schedule. Here are a few noteworthy ones:
One of the first dedicated trading exchanges, it offers a good variety of cryptocurrencies as well as insured custodian wallets to protect investors. But in order to achieve that, Coinbase retains ownership of wallet keys which might deter some more experienced users.
A favorite among crypto enthusiasts, Binance offers a selection of over 200 currencies and perhaps the lowest fees on the market. It also features advanced trading tools such as stop-limit orders, futures, and derivative products.
While its selection of currencies is not as big as Binance, its mobile interface is perhaps the easiest to learn, and fees remain at a reasonable entry point. The exchange also happens to offer Dogecoin among other more obscure cryptocurrencies.
Ready to trade?
Regardless of the platform chosen, trading cryptocurrency requires extensive research and instinct of market trends, a knack for technical analysis, and a good amount of luck to top it off. But in spite of its controversial nature, it is safe to assume that it is here to stay for a very long time.