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The landscape of the cryptocurrency market is changing all the time, and while there are many trading platforms available that have been in the market for many years, every few months it seems like new platforms are being introduced that provide bigger and better opportunities for traders to generate profit.
However for beginners, it is particularly difficult to keep up with the changing trends of the cryptocurrency market, and as well as the importance of understanding which platforms are available it is often difficult for beginners to find the right information to understand the concepts of cryptocurrency and of trading in general.
While there is much information online available for beginner cryptocurrency traders, finding a cohesive description of a range of the most important topics such as what cryptocurrency is, what trading is, and the best places online for beginners to trade can be difficult, to say the least.
With this in mind, this guide takes a deeper look at these questions and more and shows some of the best cryptocurrency trading platforms available online for beginners, as well as covering a wide range of different information that is critically important for beginners to understand before they start trading.
What Actually are Cryptocurrencies?
What are Cryptocurrencies?
Cryptocurrencies are a type of virtual money that was created in 2009 and that over the last 10 years have grown to become one of the most talked-about and hyped technologies in the world.
Cryptocurrencies can be used like cash in order to buy services and goods online, and could also be used like gold in order to store value over time, as well as being able to be traded online in a similar way to stocks or foreign currencies.
The main differentiating factor between cryptocurrency and other forms of money are that cryptocurrencies are managed in a decentralized fashion, where instead of having a central bank like fiat currencies such as the USD or EUR, cryptocurrency decentralize the power amongst all of the users involved, and mathematics manages the money supply instead of a central organization.
While there are large organizations such as the Federal Reserve that have for decades, or even centuries, managed the monetary policy of different currencies by applying their own interest rates and supply rates, the goal of cryptocurrencies, when they were first created, was to give birth to an asset class which could moderate itself with the use of feedback from the amount of power that is being dedicated to mining them.
This has allowed cryptocurrencies such as Bitcoin to self-regulate themselves in a wide range of different scenarios, while simultaneously being robust enough to prevent governments, regulators, or other malicious actors from being able to shut them down or being able to create free cryptocurrency for themselves.
Perhaps the best testament to the strength of cryptocurrencies is that not even the creator of Bitcoin themselves, Satoshi Nakamoto, would be able today to give themselves free Bitcoin, and this certainly cannot be said for the central organizations that are free to print as much money as they want whenever they want.
What is Bitcoin?
Bitcoin is the world’s largest cryptocurrency by value and the number of traders, as well as being the first cryptocurrency to ever be created, with this being by an anonymous group or individual known as “Satoshi Nakamoto” in late 2009.
Bitcoin was the first implementation of a revolutionary new technology known as blockchain that enables the majority of cryptocurrencies to be able to function in a decentralized manner and is used in a range of other applications as well as for cryptocurrencies.
The Bitcoin blockchain was first launched in early 2010, with the first block of the blockchain being mined and a reward of 25 BTC being provided for the miner, and since then Bitcoin has grown exponentially in both its value and the number of users globally.
This has been as a result of a combination of the profitability that has been available from speculation over the years drawing in many new users that would like to get a share in the profits being created, as well as the mechanics of Bitcoin itself being designed and developed in order to artificially increase its price continually over time through in-built scarcity.
A limited number of Bitcoin of 21 million will ever be created, and every 4 years a process known as the “Bitcoin halving” reduces the rewards paid to miners every day by 50%, maintaining the demand for Bitcoin at that point in time, whilst cutting its supply significantly, introducing artificial scarcity over time.
When Was Bitcoin Created?
Bitcoin was launched in early 2010 and for the first few years of the life of Bitcoin, its value was less than $1, with its original value being so low for 1 BTC that traders were able to buy thousands of BTC with a single dollar.
As the number of bitcoin traders and miners grew, platforms began to be introduced where traders could come and buy and sell bitcoin easily, with these trading platforms mimicking the same kinds of functionality of stock and commodities online trading platforms that were already in operation.
Since the earliest years of Bitcoin until today, an entire industry and infrastructure have been built around the world’s number one cryptocurrency, and as more cryptocurrencies were created over the last 10 years and introduced into the market, these have also become widely traded on a range of different platforms.
How Are Cryptocurrencies Different from Normal Money?
What is Decentralisation?
Decentralization is the core concept behind cryptocurrency and is the most important concept to understand for anyone that would like to know why it is that people actually started using cryptocurrencies instead of the traditional financial system.
Decentralization is the principle of spreading the control of a system over a wider number of people as opposed to having a hierarchy with a smaller number of people at the top who control the system as is the case with the global traditional financial market.
Many have noted that in 2009 when Nakamoto developed Bitcoin the world was still reeling from the global financial crisis which itself was a massive financial catastrophe that wiped trillions of dollars of value off global markets and was a result of the centralized financial system and its greed.
The creation of Blockchain by Nakamoto was a creation of a decentralized new version of the financial system, which for the first time would take the control over people’s finances out of the hands of banks and other financial institutions such as PayPal, and put that power into the hands of the people that contributed to the Bitcoin network such as its miners, early adopters, and its users.
What is Blockchain?
Blockchain is a revolutionary technology developed by Satoshi Nakamoto and implemented in Bitcoin, and since then it has been implemented in 95% of all cryptocurrencies in existence today.
As the name suggests, blockchains are simply a chain of blocks of temporally-linked data which are primarily composed of transaction data recording all of the transfers of cryptocurrency from one account to another.
Blockchains are essentially a collection of solutions to complex computational and economic problems that all work together in-sync to allow for a coherent financial system based on decentralization to be not just brought about but to be robust enough to survive all attacks over the past decade.
One of the most interesting properties of blockchains as well is that they are immutable, being that once the data that is put into a block is put there, it cannot be edited later.
This is achieved with the use of cryptography, being that each block is put through a hash function after it is created, and the hash from the process is stored in the next block, ensuring that if any block previously is edited and changed, for example giving free Bitcoin to somebody, that it will change all of the hashes is following that and be clearly obvious to anyone viewing the blockchain.
Why Do People Use Crypto Instead of Fiat Currencies?
There is a range of reasons that people began using cryptocurrencies, such as the ability to make anonymous transactions, lower transaction fees than alternatives, foster transaction times, as well as the ability to self-manage their own finances instead of having to use a third-party intermediary such as a bank.
Another major factor in the growth of the popularity of cryptocurrencies has been the ability for traders to speculate on the price change of different cryptocurrencies with there being significant financial rewards to investing and trading in cryptocurrency historically.
Cryptocurrency trading is easily the most popular activity relating to these digital assets, and as an example of the kind of return on investments that have been possible over the years, it’s been calculated that at the current price of a Bitcoin that anyone that purchase Bitcoin when it was first launched and sold it now would generate more than 27,000,000% ROI.
Trading 101
What is Trading?
Trading is a financial activity that involves the purchase and sale of different financial assets, or within the realm of margin trading, creating long and short positions as well.
Traders are typically most interested in the movements of the price of an asset historically in trading charts, as well as differences in the volume of trades being made, with this area of trading for being known as technical analysis.
Traders will use a range of tools including software to monitor the charts of different assets, trading platforms which allow for traders to be able to create different trades in the market, and different financial news sites which provide an insight into the overall picture regarding the assets themselves.
Are Trading and Investing the Same?
While trading and investing are very similar activities, they are distinctly different from each other with a number of factors being different for traders and for investors.
For a start, it is far more likely the traders will create multiple shorter trades over the course of a period of time compared to investors that typically will make less trades and will look more to a long-term perspective of how to make money in the market.
Investors are also far more interested in looking at the macro factors that influence the underlying value of different assets with this area known as fundamental analysis, and involving monitoring different sources of information such as the sentiments surrounding different assets on social media and elsewhere, the news surrounding developments in the organizations that are behind each asset, and other factors which are external of the charts.
How Popular is Cryptocurrency Trading?
In 2020, cryptocurrency trading is one of the most popular and hyped ways of making money online in any industry, with this being largely fuelled by the high volatility within the cryptocurrency market leading to the ability to generate higher amounts of profit in comparable periods of time.
Cryptocurrency trading grew from being a loosely connected and small number of people that owned thousands of Bitcoin each, trading them for pennies amongst each other, to today being a multi-billion dollar financial sector in its own right and being integrated over the past few years especially with the mainstream financial sector.
As the exposure to cryptocurrency has grown exponentially over the years so too has the number of cryptocurrency traders globally, and with the continued growth in the penetration of cryptocurrency into the mainstream, it is expected that there will be significant growth in the number of cryptocurrency traders around the world in future years.
Where are the Best Places to Trade Cryptocurrencies Online?
PrimeXBT
PrimeXBT is the premiere multi-asset margin trading platform in the world today and over the past 2 or 3 years of its existence, it has gone from launching with a waitlist of 150,000 traders to today managing up to $2 billion worth of global trade.
The platform provides a range of advantages for cryptocurrency traders and investors, such as the lowest fee schedule of any major cryptocurrency trading platform on the market of just 0.05%, as well as having bank-grade security implemented throughout the site which has ensured that the platform has never been hacked and has protected its users’ funds over the past few years.
More recently, PrimeXBT has partnered with Covesting.io to bring covesting to the platform in the form of a new module that was launched in April and as a beta and concluded in August after more than $1 million worth of equity had been provided by investors, with the full version of the Covesting module operating today on PrimeXBT.
Binance
Binance is another well-known cryptocurrency trading platform in the market in 2020 and also one that launched at roughly the same time that PrimeXBT did, also growing at a rapid rate over the past few years as a result of the services it provides.
Much of the growth of Binance has been as a result of the introduction and integration of its native token, the BNB coin, which has been widely used by traders in order to reduce the trading fees by up to 25% on the platform by holding and staking an amount of BNB.
Saying this, however, it is important to understand that Binance’s fees are significantly higher than other trading platforms on average, with it being up to 10 times more expensive to trade at Binance and other platforms, even with the 25% reduction taken into account.
What are Some Common Crypto Trading Strategies?
Crypto Day Trading
Crypto day trading is the cryptocurrency version of the strategy used in the traditional markets with the same name, with day trading being the process of developing trades at last for a few days in general, and aim to exploit the natural fluctuations of assets during that period of time.
When executed successfully, crypto day trading can be significantly more profitable than in other markets being cryptocurrencies tend to have higher volatility, and with the greater level of volatility comes a greater potential for generating profit.
In order to be able to successfully crypto day trade it is important to have a firm grasp of the concepts of technical analysis, which is the study of the charts, and in particular the study of the movements in price and volume of different assets, which are typically broken down into indicators based upon these movements.
Crypto Scalping
Crypto scalping is a strategy that takes its name from the same strategy within the traditional asset markets, albeit with this focusing on executing the strategy in the cryptocurrency market instead.
Crypto scalping is the process of searching for short term opportunities within the cryptocurrency market to be able to generate profit, with the length of each scalp being much shorter than many other strategies, and this purportedly leading to reduced risk compared to other activities.
Instead of creating a few trades over a period of time that last for days or weeks, scalpers will look for opportunities that may only last minutes or hours and will look for multiple opportunities, all of which typically generate a lesser amount of profit, but when combined collectively create sufficient ROI.
HODLing
HODLing is the most famous catchphrase within the cryptocurrency industry and although it was created as a typo many years ago, today it has been spread and used continuously to represent one of the easiest trading strategies, if not the easiest.
The idea behind HODLing is to buy an amount of cryptocurrency and hold onto it without selling, irrespective of the fluctuations in price over time, with the goal being to hold that amount of cryptocurrency for a long enough period of time that it will increase in value, often significantly.
The popularity of the strategy is in no small part as a result of the in-built mechanisms within Bitcoin that continuously over the long term pushes its price higher, as well as the prices of all cryptocurrencies in the market.
What Are Some Advanced Crypto Trading Strategies for More Profit?
Covesting
Covesting is the newest form of social trading that has been introduced to the world’s financial markets, however, unlike other forms of social trading such as copy trading that have been around for almost 15 years, covesting was created a little over 3 years ago.
Covesting provides superior opportunities for traders and investors within the cryptocurrency market to be able to collaboratively work together and to collectively increase their potential for profiting, as well as collectively reducing the risk of everybody involved.
The structure behind covesting is a peer-to-peer investment fund that is created by experienced traders that have a proven track record for reliably generating profit, with investors being able to compare different investment funds easily to select the funds that have historically generated the highest levels of profit and to invest into them.
Crypto Algo Trading
The kind of trading that most people do is manual trading, which is the process of physically watching the charts for different cryptocurrencies and then using a mouse and keyboard in order to create trades and close them.
An alternative method of interacting with the cryptocurrency market is crypto algorithmic trading, which is the process of developing software-based bots which will autonomously work 24/7 to create and close trades depending on an algorithm which is built into them.
Although the process of designing and developing these bots is complicated, the potential rewards of algorithmic trading can be significant, in particular, that a profitable strategy can run continuously and can execute many more trades then a human would be able to over the course of time.
Crypto Margin Trading
Crypto margin trading has become extremely popular in the last 3 or 4 years, although before that and for the earliest years of the cryptocurrency industry that were relatively limited options available for crypto traders that would like to margin trade.
Instead, now there is a wide range of different trading platforms online that have integrated margin trading into the systems, as well as it being platforms that have been built around crypto margin trading such as PrimeXBT, which is the world’s leading multi-asset margin trading platform.
Margin trading opens up a significantly larger range of opportunities in the cryptocurrency market, for example, shorting allows traders to generate profit from price drops as well as price increases, and leverage allows the use of capital in the cryptocurrency market in a maximally efficient way, generating the most amount of profit that is possible with the capital available.
What is the Future of Crypto Trading After 2020?
Over the past 10 years there have been different phases of the life of cryptocurrency with it progressively moving from being highly obscure and largely unheard of for a number of years, to a lot of innovation between 2013 and 2015 when it first started to really come to prominence, then a boom in the growth of the cryptocurrency market throughout 2016 and 2017’s bull run, and the consolidation and preparation for the next step since then until now.
The cryptocurrency industry and market itself in 2020 are significantly different to any point previously in the life of crypto, with the infrastructure required for the next step of development now being largely completed, and a vastly greater level of connectivity between the cryptocurrency market and the mainstream financial industry.
The technologies that will underpin the future of the cryptocurrency market have been in development in a major way since 2017 until today, with the hype following 2017’s bull run dying down and turning into a 2-year-long bear market, and this providing cryptocurrency and blockchain-based projects with a substantial amount of time to build the platforms and technologies that they needed to.
What this means for the cryptocurrency space as a whole is that the next bull run which is predicted to be starting in 2020 and concluding around the end of 2021 will see a growth that is not only a speculatory growth in the price of cryptocurrencies as has previously been seen but the growth of the influence of cryptocurrency as an alternative option for financial activities for the world.
While it remains to be seen whether or not this next phase is already underway, it is expected that if this does come to fruition that the last remaining sectors of the world that have been untouched by cryptocurrency will all but be introduced to it in a major way by the end of this next phase.
Final Thoughts
The cryptocurrency market is one of the most rapidly developing environments online in 2020, as it has been for much of its life, as waves of new users have attracted startups and other projects that bring renewed innovation to what is available for crypto traders.
As the constitution of the cryptocurrency market changes with each new trader that comes into the fold, the strategies that are used in order to monopolize the profits available in the cryptocurrency market are also continually developing.
While there are a number of more common strategies, there are also new strategies and new tools being developed such as covesting, crypto algo trading, and crypto margin trading, which allow traders to explore unique new opportunities in the cryptocurrency market for greater profits.
To learn more about the trading platforms mentioned in this guide, and to learn about the advantages and benefits of both platforms in greater detail, check out PrimeXBT and Binance.
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The Best Crypto Trading Platforms for Beginners: The Definitive Guide [2020] was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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