How to Select the Right CryptoCurrency Broker When you Want to Start Trading CryptoCurrencies?
As always, there are some important features that you should take into consideration when you choose your broker. The main ones are:
The Trading Platform
The trading platform is the software with which you actually will trade the cryptocurrencies. It is the place where you will open and close your trades and is the most important aspect for your success. If the platform does not perform the way you want or does not provide you with the tools you think you need then this is not the right broker for you.
Many brokers offer demo accounts for this reason allowing you to test their platform. You will be able to open and close trades with some virtual money and understand whether the platform functions according to your expectations.
Regulation should also be very important to you. It won’t give you all the answers but it does indicate that the broker has a certain stability and financial requirements.
For brokers, regulation isn’t cheap! Licenses can cost hundreds of thousands of not even more than a million dollars. As so, you will come to the conclusion that a broker which has a cySEC or FCA license will have sufficient funds and additionally, a long term strategy meaning they won’t disappear one day. Many regulators also require the broker to keep the investments of their clients in separated (segregated) accounts. This means that your funds cannot be used for the purpose of company development related purposes. Also, these funds function as an insurance should the broker go bankrupt. Generally, this insurance is around 20K euro per person.
Regulation also obligated a broker to perform compliance meaning you will have to provide the needed documentation upon account opening such as a copy of your passport and a utility bill.
When you enter the world of cryptocurrencies trading you enter a world of a lot of changes that sometimes occur in a short span. As so, it is vital to be able to talk to a representative or communicate with the broker through other means.
Naturally, the asset list of a broker is important as well. The asset list allows you to see which assets you can trade at the broker. Not all brokers implemented all cryptocurrencies till today so check carefully which ones are available to trade. All of them might offer bitcoin but maybe they don’t offer Ethereum, Ripple, Dash, Litecoin or others cryptocurrencies.
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Cryptocurrencies is the Big thing at the moment.
It will be hard to not have heard about Bitcoin, Litecoin and Ethereum. The markets of these cryptocoins have gone through the roof and those that were early to get in are reaping now the fruits.
But in order for you to do the same you need a little bit more information
What are Cryptocurrencies?
Cryptography has everything to do with coding to keep data secure. This term is not something new. The cryptocurrency is a virtual or better said digital asset that utilizes cryptography as its security measure. That makes it thus saver and makes it very hard to impossible counterfeit unlike regular bills and coins.
Bitcoin was one of the pioneers
and the most known of the first cryptocurrencies that were launched and opened the way for Crypto Currencies Trading on other cryptocoins. It was launched in 2009 by “Satoshi Nakamoto“, a pseudonym that could be a person or a group , there has been some debate about this and every now and then this story pops back up.
The system was open source and peer to peer. The most important aspect of this is that there’s no central agency (like the government) that regulates or issues these cryptocurrencies or CryptoCurrencies Trading in general
The same fact made it also somewhat perfect for the business that were trying to keep their delaing off the books and unknown to the goverments and banks.
Cryptocurrencies Trading is the same as other investments where you are able to buy and sell the conventional currency.
The difference being that cryptocurrencies have ICOs, initial coin offerings, and any entity or group is able to launch it as an investment, while regular companies have IPOs, or initial public offerings.
The Atlantic lays bare the actual problem with not having a central authority regulating these currencies. Because there are no checks and balances the way there are with IPOs, there are many scammers out there looking for fast cash. So, This brings me to the points that if you plan to invest in a cryptocoin and want to do some cryptocurrency Trading you better make sure that it is a save and sound currency with a good reputation.
What about for example CryptoCurrencies Trading in Bitcoin or Ethereum? . Are they smart investments? Since both are very popular, and are actually used as currency.
Are Cryptocurrencies a Good Investment?
Some are, some might be and some are not.
Not the answer you were looking for ? look at it from this way
While there are people that state that investing in general is just gambling this is not really the case. Investment that are long-term. And broad investments are very different from active trading and more speculative investment, in the short term format it can go either way , like forex or retail commodity trading and cryptocurrencies trading falls into that category.
Is there profits in Cryptocurrencies Trading ?
With active short term trading, you are predicting in a short term what the coin will do. This has been for many an amazing income when it comes to bitcoin , but keep in mind where there are winners there losers.
Since the prices go up and down so fast as in forex , you are able to buy bitcoin and lose money , there is no sure thing .
the price of these cryptocurrencies often swings from one extreme to another. For example in one day in June, the price of Ethereum plummeted from $US319 to $US0.1o.
This does not mean that you have to run now as the price recovered and then some. It just means that you have to be aware of the market like any day trading requires. This is not like buying Bitcoin forgetting about it and then just cash in and buy a car. You have to educate yourself, find the right broker and watch the markets and news for developments.
But as a price goes down it also can go up tremendously. This creates thou the fear of a bubble which will make the price eventually crash. People that cashed out before a crash are the lucky or well, educated ones and make enormous amounts of money.
So be aware of the risks but if you were not interested you would not be reading this. There sis money to be made in cryptocurrency trading.
That was my little moment of doom , now let’s looks how it actually works
How does cryptocurrency work?
All cryptocurrencies follow the same general system.
It starts by a cryptocurrency choosing a base unit and how much that particular unit is worth when compared to other currencies (often, the U.S. dollar is used as a baseline).this would be the ICOs.
Here everyone goes about it a bit different and this often will already indicate what kind and how success full the crypto coin will be.
Keep in mind that there are sometimes very smart people behind it that try to push the envelope of what is done till that moment but in the end, the unit in one way or another relates to the value of other established currency, which is the format all currencies are following
Units of the new cryptocurrency are then created. When a transaction is made the units are carefully formed and preserved through algorithmic encryption, then linked together in enormous chains of data (term is blockchains) , where the currency can be tracked and exchanged.
This is not enough thou, as this is not secure enough it needs more information to keep it save. The currency units need to be timestamped and properly processed to make them more stable and harder to copy.
Third Party Developers
This can be done by a third party developer, but today most of the cryptocurrencies rather crowdsource the process to those with the correct hardware and software to “mine” the cryptocurrency.
- Mining uses the unique and most very complex algorithms to go through each transaction.
- Then encrypt the cryptocurrency.
- then add it to a digital ledger.
This in essentially verifies the transaction and build its position online. This entire process is most of the times called the “consensus protocols”, there are some variations of this due to other currencies.
This it will make the currency very hard to duplicate and this forger it. Some say that it can be done but in general a good crypto currency has this part covered as it would be in most cases be simpler to just print fake bills.
Since the coins are only digital ( regardless of the nice bitcoin pictures ) there are some serious implications.
- There are digital wallets and exchanges
- there is no physical money to be stolen
- there is no physical money to be transported or simple get lost.
- There is also no physical way to track a cryptocurrency.
- cryptocurrency can be programmed!
How Many cryptocurrencies are there?
When last checked there are more than a thousand different cryptocurrencies and more are popping up every month.
Some of these are to be taken very serious and those in general are the ones we are looking at when talking about cryptocurrencies trading in general.
Others are more for fun experiments or for other reasons (that you have to ask those developers).
Besides Bitcoin (who remains the big leader of the pack) there are a few crypto currencies out there that you should take notice of if you are interested in cryptocurrencies trading online. I can mention them all but that would not really help you.
cryptocurrency needs to overcome three important challenges.
- The Use, reputation and perception.
Since many of the uses are still in the shadow it is perceived as a way to stay under the radar for less kosher deals, it needs to become a legit means of payment for everyday life and business to succeed.
Japan makes waves in this direction allowing micropayments in supermarkets with some crypto currencies.
2. The pass-through problem.
Investors, that can be even you and me, need to hold onto and invest these currencies long-term if they are going to become a real force.
As long as they are used by companies as well as regular people to switch between other currencies but for the reason to only avoid paying the exchange rates it will not achieve the right reputation, this also reflects back on point one.
3. Continues Stability.
They need to be more save then regular currencies and remain this for a longer period of time. When Ethereum, was hacked which made a damage of around 50 million dollars. It hurt then entire Cryptocurrency world.
The cryptocurrency will have to be fully trusted to see real mainstream use which is currently still not the case. On the other hand, as long as governments keep on printing money whenever they need some regular currencies are not a better option just less volatile in most cases.
The thing is thou that crypto currencies will never go away, it simple cannot be erased or ignored anymore, the banks start to fear as they are losing business and some smart countries like some Scandinavian ones are integrating some cryptocurrencies in their society making it more mainstream and accepted.
What will Happen
In some years to come I expect that we would know any better and the trading would be like trading EUR US is now. That said Cryptocurrencies trading is exciting and with the right education, the right broker and exchange can be very profitable.
Enjoy but be smart careful and educated. Don’t trade with funds you cannot spare and follow the markets.