For several years, virtual currencies such as Bitcoin have established themselves as an essential investment vehicle for retail investors. The volatility of cryptocurrencies offers crypto traders many trading opportunities. Thus, digital currencies have become increasingly popular in the trading strategies of those who want to diversify their portfolios and improve their trading performance.
Today, there are two methods to take advantage of the cryptocurrency market:
- buy cryptocurrencies on an exchange platform to keep them in an online or offline cryptocurrency wallet
- trade these financial assets via CFDs directly on a trading platform
After reading this cryptocurrency trading guide, you will have all the keys to get started in cryptocurrency investing because you will know all the essential notions about:
- what are cryptocurrencies
- how do they work
- what is cryptocurrency trading
- why trade cryptocurrencies with CFDs
- how to take advantage of it and become a good crypto-trader
- what are the risks of trading ctypto-currencies
- how to buy and sell cryptocurrency CFDs on the platform provided by Admiral Markets
- which trading platform to choose according to your needs
- what future for cryptocurrencies
Why trade cryptocurrencies with CFDs?
Unlike cryptocurrency exchanges that allow you to exchange your euros for cryptocurrencies that you can keep as much time as you want in your virtual wallet, the benefits of trading cryptocurrencies with CFDs are greater – especially for those who want to take advantage of the quick price changes. But by the way, what is a CFD?
A CFD, Contract For Difference in English or Contrat Pour la Différence in French, is a type of derivative product. It is therefore a financial instrument whose valuation depends on another instrument called the “underlying”. By using a CFD, you never hold the underlying. You are, in fact, only investing in the variation of its price between the opening and closing of your contract. Advantages of Trading On Cryptocurrencies Via CFDs
- Bullish and bearish investments – Earn by taking advantage of the rise but also the fall in the prices of crypto-currencies
- Leverage – Enjoy margin trading and leverage that increases your exposure to the market
- High Volatility – Make the most of the volatility of the cryptocurrency market
- Better liquidity – Get better prices and shorter trading times allowing you to increase your performance through better liquidity
- No holding of cryptocurrencies – Avoid the risks of loss, theft and cyber-attacks related to storing your cryptocurrencies in a wallet since you do not hold tokens using CFDs
- Flexible trading hours – Trade on a 24-hour market
- Regulated and secure environment – Enjoy a safe and regulated trading environment with protections as a private trader like the one against negative balance
- Low initial capital requirement – Start trading cryptocurrency CFDs with relatively low capital (minimum deposit of 100 EUR at Admiral Markets)
Disadvantages of Trading Cryptocurrencies with CFDs
- No Holding Cryptocurrencies – You don’t hold cryptocurrencies using a crypto CFD
- Leverage – It is necessary to control its leverage. Traders are likely to lose their deposit faster when they use leverage – so use it with caution.
- High volatility – The volatility of cryptocurrency prices is high. It is for this reason that it is necessary to understand the concept of volatility and insert it into a rigorous trading plan.
Cryptocurrencies For Dummies
So, what exactly is cryptocurrency?
This section will give a simple explanation of what cryptocurrencies are. It will also answer other questions that you probably ask such as how many cryptocurrencies exist in the world, what is the best cryptocurrency, what are the different cryptocurrencies or what to choose between buying a virtual currency and trading cryptocurrency. What is a cryptocurrency? Definition
A global phenomenon, cryptocurrencies are sometimes complicated to understand while the definition of a cryptocurrency is relatively simple.
Cryptocurrency simple definition
Cryptocurrency definition – A cryptocurrency is a 100% digital and fully decentralized currency that only trades peer-to-peer. All validated crypto-transactions are recorded on what is called the blockchain. The latter brings together the history of all the operations carried out on its network since its creation.
Why is cryptocurrency interesting to use?
The principle of a cryptocurrency is to provide a monetary alternative for people who are looking to regain control of their money by becoming their own bank. Some properties of cryptocurrencies are revolutionary.
Among the characteristics of these currencies 2.0., decentralization and peer-to-peer exchanges allow their users to no longer entrust their money to banks and to make transactions without intermediaries.
Thus, the central organs no longer have control over the variation of the money supply of money (inflation vs. deflation). They also cannot refuse or cancel a transaction, or block funds, since they have no power over crypto-currencies! Cryptocurrencies def: How do cryptocurrencies work? What are the specific characteristics of crypto-currencies?
They exist only on a computer network thanks to a computer code. There is no coin or ticket. Everything is done electronically. Like any other currency, a cryptocurrency can be used to make purchases when accepted at merchants, send money to someone, receive money, etc.
There is no government or country that controls cryptocurrencies unlike traditional fiat currencies. The total money supply of a cryptocurrency is often limited. It is in this case determined at the time of the creation of the cryptocurrency and indicated in its white paper. The money supply of Bitcoin for example should not exceed 21 million BTC tokens.
- Without intermediary
To make a transaction with a cryptocurrency, it is not necessary to use a trusted third party such as a bank or other intermediary to validate it. Transactions are done peer-to-peer via electronic wallets that we hold on applications to buy crypto currencies, websites or exchange platforms.
- Based on the Blockchain
Fiat is under the control of central banks such as the Fed (Federal Reserve) for the US Dollar (USD) or the ECB (European Central Bank) for the Euro (EUR). In the case of cryptocurrencies, all transactions are done on the blockchain. The latter acts as a ledger open to all, transparent and forgery-proof. There are several protocols for validating transactions on the blockchain such as proof of work with miners on Bitcoin or proof of stake with stakeurs as soon on Ethereum.
The term “crypto” cryptocurrency comes from the premise that it is a crypto currency. It can only be used by the person with the decryption code to use the crypto-currencies present in a wallet for example.
Since crypto-funds use an advanced crypto system with a combination of private keys / public keys, your funds are safe. In addition, the blocks belonging to the blockchain (those that group all the validated transactions) are linked together by complex computer formulas that prevent any manipulation of the data.