What Makes Crypto Trading So Unique?

If you keep up to date with the financial world, you’ve probably heard about cryptocurrency and the impact it has been making. While it is easy to discount the presence of digital assets in the market, they have become some of the most successful investment vehicles in the world.

Crypto trading, especially, is a massive market with billions of dollars in transactions every single day and individual tokens being worth thousands of dollars. But how does crypto trading differ from traditional trading? In this article, we break down everything you need to know about it.

What is Crypto?

First things first, it is important to know what cryptocurrency itself is before we get into how it is traded. Cryptocurrency refers to assets that are based on distributed ledger (blockchain) technology. Blockchains are typically public ledgers through which transactions can be carried out and are permanently recorded. They are unique because their computing power is split across many different computer networks that confirm transactions on the blockchain. In exchange for confirming these transactions, they receive cryptocurrency. Every crypto has an underlying blockchain and its value is based on market forces.

Cryptos are a little over a decade old, with the first and most famous being Bitcoin. Crypto assets are essentially currencies that are not issued by a central bank but by a private entity, with no single force controlling them completely. While they started out as obscure assets, they have become some of the most valuable in the world, with Bitcoin alone being worth over $60,000 per unit and becoming the highest-performing asset of the 2010s.

Tokens besides Bitcoin are referred to as altcoins and include assets like Ether, Dogecoin, Solana, and much more. There are thousands of cryptos in existence at any given time, being traded and used in various ways.

How Does Crypto Trading Work?

There are several things that can be done with cryptocurrency but the most common is speculative trading. Essentially, this involves buying a crypto at a certain price and then selling it later after it has made a profit. Crypto investors might buy the token at the presale or Initial Coin Offering (ICO) stage or when it is fully rolled out.

Presales and ICOs are popular ways to invest in cryptos because they are listed at lower prices for early investors. If a token is bought at this stage and is then rolled out into the market, it could appreciate even more in value. This has seen many investors eagerly seeking out ICOs and presales that seem promising to invest in. As Mark explains, many use resources like TechReport to find out about the latest ICOs.

If a consumer decides to forego ICOs and presales, they can visit one of the many crypto trading platforms in the market to get their needs met. While crypto trading can include complex strategies like margin trading, it is simply buying and selling tokens at its core. The industry is full of platforms to facilitate crypto trading and each comes with its pros and cons.

Types of Crypto Trading Platforms

There are several platforms through which crypto trading can be done, some of which are as follows:

• CEXs

These refer to centralized exchanges where different cryptos are listed and traded by users. Centralized exchanges have built-in wallets where users’ assets are kept as they trade unless they withdraw them. Examples of popular CEXs include Binance and Coinbse and they are probably the most popular way to trade cryptocurrency. When you use a CEX, you can buy and sell assets to the exchange itself or through its dedicated peer-to-peer market. While CEXs can access a lot of liquidity, it does come with a risk. If a CEX is hacked, customer funds stored in its wallets can be stolen so this is something to keep in mind.

• DEXs

These refer to decentralized exchanges where trading takes place while still offering control for the users. DEXs differ from CEXs because users do not deposit their tokens into the exchange when they want to trade. Instead, they connect their own third-party crypto wallet to the exchange and tokens are withdrawn and deposited as needed. This means that DEXs are less risky for consumers to use and popular DEXs include SushiSwap and UniSwap.

• Peer-to-Peer

Unlike DEXs and CEXs which involve users trading tokens with the exchange itself, peer-to-peer platforms connect crypto users who want to buy and sell tokens to one another. Using a Peer-to-peer platform essentially includes looking through listings of people who want to buy or sell the token you have or need, along with their price, payment method, and so on. After finding one that will meet your needs, you’ll connect with them on the platform and trade tokens as you need. Peer-to-peer platforms can sometimes be cheaper and less restrictive than exchanges but there is also the risk of falling prey to scams.

• Trading Bots

In a bid to take advantage of the market and save time, some crypto investors turn to trading bots to complete their orders. On platforms like Telegram and Discord, users can deploy bots that connect to their exchange accounts or third-party wallets and carry out trades for them. Some bots operate with text-based commands and some use prompts. For example, a trading bot can be programmed to sell when Bitcoin hits a certain price, buy when the market is in decline, and so on. These essentially simplify the process of trading crypto and make it more social.

How to Get Started With Crypto Trading

Anyone interested in crypto trading might want to take the following steps to get started:

• Deciding on an Asset

As we’ve explained previously, there are thousands of cryptos in existence and the first thing you’ll want to do is decide on which ones you want to invest in. You have the very popular cryptos like Bitcoin and Ether that have been delivering profits for years now. There are also newer promising tokens that you can buy at presale or ICO or when they hit exchanges.

Before you choose any crypto asset to invest in, consider its previous market performance to see where its price trajectory might be leading. Also, consider its use cases and the team behind it to avoid buying a shitcoin.

• Deciding on a Platform Type

We’ve gone into the different types of crypto trading platforms and you’ll need to decide which one is right for you. This comes down to both your specific preferences as well as your risk tolerance. A CEX carries more risk than a DEX but the former is more common and a better choice if you are placing a larger order. Also, consider if a peer-to-peer site or trading bot is more of your style as they offer their own unique benefits you might not be able to access with others.

• Choosing a Specific Platform

After you’ve decided on a crypto trading platform type, you’ll have to actually choose the site you’re going to trade with. If you choose a CEX or DEX, for example, you’ll need to make sure that they list the specific token that you want to trade. You also have to compare the trading fees across different assets and make sure you’re getting the best deal. Read reviews of all the sites you’re considering to make sure that they’re of good quality and have the sorts of features that you need. Also, feel free to consult online guides for in-depth reviews of popular exchanges.

• Signing Up

After you’ve chosen a platform, you have to go through the process of signing up for it. CEXs tend to have a more rigorous KYC process than DEXs, and you’ll have to provide a government ID, your name, and other details. If you sign up for a DEX or an anonymous exchange, you might only need to provide your email address or connect your wallet. Make sure you follow all of the signup instructions for the platform you choose and keep your account details safe.

• Placing Order

While there is some variance depending on the platform, placing an order for crypto usually works in the following steps; first, you’ll need to navigate to your platform’s listing page and search for your token of choice if you are buying. After selecting the token, you have to select a payment method (credit cards, bank transfer, etc,) and initiate a payment for the amount of crypto you want to buy. If you are selling, you have to either swap your tokens for other cryptos or fiat, and this will be done with the exchange or with another use on a peer-to-peer site.

Crypto Trading Safety

As exciting as crypto trading is, safety has to be at the forefront of your mind. The sector has been targeted in the past by hacks and scams, with both individuals and institutions being affected and millions of dollars being stolen at various points. While it is a complex and ever-evolving issue, crypto trading can be made safer in the following ways:

• Token Storage

The bedrock of responsible crypto use has always been token storage. Crypto transactions cannot be reversed and it is often quite hard to track them when they’ve been stolen so users have to be careful. A rule of thumb is to never keep tokens on an exchange if you are not trading them at the moment. If the exchange is hacked with your tokens on it, you might lose them. Instead, store your tokens in a secure wallet and keep the password and recovery phrase of said wallet safe. As long as your tokens are kept in a wallet, preferably a cold wallet, a lot of your worries will be addressed.

• Using Legitimate Platforms

As much as there are legitimate crypto trading platforms floating around, there are also many fraudulent and shady ones out to take consumers’ money. The key to avoiding them is to do your due diligence on every site you are considering trading with. Find out how long they have been operating, whether they are registered with any regulatory bodies, what their track record is, and so on. If you limit your crypto trading activities to only trusted and vetted sites, your risks go down significantly.

• Responsible Trading

At the end of the day, crypto trading is simply trading and certain precautions should always be taken. First, you should never invest more money than you can afford to lose comfortably. The crypto market is famously volatile so always keep this in mind when choosing what to invest in and how much to invest. Also, stay away from any crypto investment opportunities that seem too good to be true. There are a myriad of platforms and tokens promising to multiply your earning and you must be cautious to avoid getting scammed.

Conclusion

As long as cryptocurrency continues to be profitable, crypto trading will continue to thrive. This form of trading stands out from the rest because it deals with one of the most unique assets in the world. From its volatility to the use of innovative technology to the community behind it, there is nothing quite like crypto trading.

In this article, we’ve broken down what crypto is, the platforms you can trade crypto on, how to get started with these platforms, and how to stay safe. With this information at your fingertips, you can begin your journey with crypto trading on a high note.

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