We have all heard about trading cryptocurrency. Crypto trading is becoming a hot topic, and many people aspire to become traders. In this article, we will cover every important aspect of crypto trading that a beginner must know. We will learn about crypto trading from scratch. So, let’s begin the learning!
Table of Contents
What is cryptocurrency?
Cryptocurrency, or simply crypto, is a type of digital money. Unlike regular currencies like dollars or rupees, it is not controlled by any central authority like a bank or government. This makes it different from the money you use every day.
Cryptos use a technology called cryptography. This technology secures transactions and helps control the creation of new coins.
Each transaction is verified and recorded in a digital ledger called the blockchain. The blockchain is like a public record that everyone can see, but no one can change.
Examples of Cryptocurrency
- Bitcoin (BTC): Bitcoin is the first and most well-known cryptocurrency. It was created in 2009 by an anonymous person or group called Satoshi Nakamoto. Bitcoin is often called “digital gold” because it was the first to introduce the idea of decentralized money.
- Ethereum (ETH): Ethereum is the second-largest cryptocurrency by market cap. It is more than just a digital currency; it is also a platform that allows developers to build decentralized applications (dApps) using smart contracts.
- Ripple (XRP): Ripple is both a platform and a cryptocurrency. It is mainly used to enable fast, low-cost international money transfers. Banks and payment providers use Ripple’s technology to send funds across borders.
- Litecoin (LTC): Created by Charlie Lee in 2011, Litecoin is often referred to as the “silver” to Bitcoin’s “gold.” It is similar to Bitcoin but has faster transaction times and a different mining algorithm.
- Binance Coin (BNB): Binance Coin is the native currency of the Binance exchange, one of the largest crypto exchanges in the world. BNB is used to pay for transactions on the Binance platform and is also traded like other cryptocurrencies.
- Cardano (ADA): Cardano is a blockchain platform with its cryptocurrency called ADA. It focuses on sustainability and scalability, aiming to solve some of the issues faced by older blockchains like Ethereum.
- Dogecoin (DOGE): Originally started as a joke in 2013, Dogecoin has gained popularity due to its community and support from high-profile individuals like Elon Musk. It is known for its Shiba Inu dog logo.
- Polkadot (DOT): Polkadot is a blockchain platform that allows different blockchains to interconnect. Its cryptocurrency, DOT, is used for governance and operations on the network.
Other examples of cryptocurrencies include Solana (SOL), which is known for its fast transaction speeds and low fees; Chainlink (LINK), a platform that connects smart contracts to real-world data; Stellar (XLM), designed for quick cross-border payments; Monero (XMR), a privacy-focused cryptocurrency that hides transaction details; Tether (USDT), a stablecoin that is tied to the US dollar to maintain a stable value; Avalanche (AVAX), a platform for building decentralized applications and financial products; Shiba Inu (SHIB), which gained popularity as a meme coin like Dogecoin; and Polygon (MATIC), which is used for scaling and improving Ethereum’s capabilities. Each of these cryptocurrencies has different functions and features in the crypto world.
What is crypto trading?
Crypto trading means buying and selling cryptocurrencies to make a profit. Similar to stock trading, traders try to buy crypto at a lower price and sell it at a higher price. Or, they try to short sell crypto at higher price and buy it at lower price.
How crypto trading works?
When it comes to crypto trading, most of the action happens in the derivatives market. This means traders often deal with futures and options based on cryptocurrency prices, rather than directly owning the coins. Let’s explore both options:
1. Direct Investment in Cryptocurrencies
You can invest directly in cryptocurrencies like Bitcoin or Ethereum. However, for many investors, the cost of buying a whole unit of these cryptocurrencies can be quite high. For example, one Bitcoin can be very expensive, making it difficult for small investors to buy even a single unit. Fortunately, most exchanges allow you to buy fractional amounts of cryptocurrency, meaning you don’t need to purchase a full Bitcoin or Ethereum to start investing.
2. Trading Cryptocurrencies through Derivatives
For those who may not want to buy cryptocurrency directly or have limited funds, trading through derivatives is an alternative. Derivative products like futures and options allow you to speculate on the price movements of cryptocurrencies without actually owning them. These products also offer leverage, meaning you can control a larger position with a smaller amount of capital. This makes derivatives appealing to traders who want to benefit from price changes without having to buy the asset itself.
3. Why Traders Choose Derivatives
Many traders prefer the derivatives market because it offers more flexibility, especially for those who want to make short-term gains. Additionally, since the initial investment can be smaller compared to buying the actual cryptocurrency, derivatives trading opens up opportunities for more people to participate in the market.
How can you trade crypto from India?
To trade in cryptocurrency, you need a broker. I mean, a good broker whom you can trust to a great extent. It’s better if the broker is somehow regulated by a government authority. This factor ensures the safety of your investment to some extent.
In India, Delta Exchange is one such broker you can trust for cryptocurrency trading. This broker is registered with the FIU (Financial Intelligence Unit) in India.
Open your account with Delta Exchange through this link and get access to our premium crypto trading Telegram channel. You will also receive a free crypto trading ebook to simplify your trading journey.