This blog is about Crypto currencies and the potential advantages and disadvantages of trading them online.
Over the past decade Cryptocurrency became the ‘new kid on the block’ and subsequently filtered into the online trading world. Bitcoin, first released as open-source software in 2009, becoming the first decentralized cryptocurrency.
The emergence of Crypto currencies, especially with the introduction of Bitcoin brings many opinions across the globe. Mainly fear, doubt, excitement, and curiosity.
I do not want to go into the continued debate surrounding them, with reference to exchanges, no central authority or middlemen, fraud, and money laundering etc. This debate will go on for a long time. However, the facts are that the technology, Block Chain is here to stay and so are some of the established currencies and therefore many CFD brokerages will offer them to trade as an asset.
Many intraday traders love them.
The emergence of the Crypto’s has enthused many traders because crypto’s prices, in general, are extremely volatile and move rapidly often in a few minutes, hours, or days. Hence, for some online traders they have found new opportunities to speculate and trade and make gains via quick sharp price fluctuations.
There are many ways of trading cryptocurrency, but a popular strategy is to sell high and buy low or vice versa over a brief period. Holding for a long time hoping BTC will hit $20k again may be feasible but the costs incurred by the brokers can eat away at your potential gains.
There are thousands of cryptocurrencies, but most Brokers opt to list the more established ones.
There are generally three ways to analyse the market and trade online, fundamental, technical, and sentimental.
Cryptocurrency’s are no doubt influenced by market sentiment. Market sentiment refers to the overall mindset of traders toward a particular asset. It is the attitude/feelings/instinct, of the traders and investors, therefore rising prices indicate bullish market sentiment, while falling prices indicate bearish market sentiment. With crypto’s the younger generation, born in this fast-paced technology surge have shown an avid interest. Cryptocurrencies becoming a popular topic causing a lot of sentiment and opinion with an audience perhaps not involved or interested in the traditional markets.
Pros & Cons
Leverage. If you trade Forex/CFD’s online, most brokers offer you leverage on the asset. Due to most regulatory bodies, this has been reduced for Cryptos because of its volatility, however it still makes them more affordable to trade them than out right buying them. Leverage is always a pro & con since leverage is a two-sided sword, great when it works in your favour but can also move against you quickly, especially with volatile assets.
Cryptocurrencies trade on multiple exchanges and exchange rates vary. Traders must ensure they understand which bitcoin exchange rates the forex broker will be using. Therefore, a transparent regulated broker is essential.
The asset has been associated with a system called pump and dump, frowned upon by the establishment. Because they are not centralised, they are available to trade 24/7 to trade, this can cause unexpected movement quickly. This has been attributed to just one of the reasons for their volatility.
Many have been intrigued with the cryptocurrency emergence and it brings a lot of mixed emotions and sentiment as well as good and bad publicity.
No doubt the volatility can cause quick losses for inexperienced traders but potential good gains for others.
If you are interested, perhaps dabbling the online market will give you a better understanding of cryptocurrencies and helping you make an informed decision if you actually want to own some as well as trade them.
So, if you trade with a trusted broker and understand the volatility of the crypto’s, why not speculate?
If you are new to trading, the Brokers recommended on our site offer demo accounts to test specific strategies before you trade for real.