How trading or investing in digital money works
Are you interested in digital currencies? Then it is important to know how trading or investing in digital money works. Of course, this trade does not go through a bank but through a broker or an exchange. At a broker you can convert your Euros and Dollars into digital currencies such as bitcoin or one of the altcoins. In addition, you can of course go to a broker for a reverse transaction. So you can best think of a broker as a cryptocurrency exchange office.
Read elsewhere on this Crypto price guide website how you can convert your Bitcoins into Euros in the easiest way. If you are planning to buy cryptocurrency, you can use various widely used payment methods such as IDeal, PayPal, Bancontact or another option at the better brokers.
For the actual trading or investment in digital money, you can go to an exchange platform. These are the digital trading platforms where you can buy and sell your digital coins. It is therefore best to compare an exchange platform with a stock exchange. To make it easy for you, it is good to know that a number of brokers also facilitate an online trading platform. In that case, you can manage your wallet through a broker.
The choice of a suitable euro-crypto exchange therefore forms the basis of trading and investing in digital money. If you have decided to start with cryptocurrencies, choosing a suitable exchange is the first step you need to take. We have therefore placed an extensive article about this on our website. Here we give a detailed explanation about the use of a euro-crypto exchange and we give you insight into what you should pay attention to when choosing this. What are exchanges?
Detailed explanation
What does a digital wallet look like?
If you are going to start with cryptocurrencies, you will undoubtedly want to know what a digital wallet looks like. As indicated, your digital wallet is nothing more and nothing less than your digital wallet in combination with your bank account. You use your wallet to store your digital currencies if you have decided to invest in one of the most promising cryptocurrencies. In addition, you use the digital wallet to make payments and transfers. To identify your wallet, it has a unique “address” that is shaped by a very long string of characters.
This series of numbers, letters and characters can be seen as your bank account number. This is also called a “public key”. In order to give yourself access to your digital cryptocurrency wallet and to actually be able to carry out a transaction, you have been assigned a “private key”.
This key is therefore best seen as your PIN code. It is important to realize that you are the only person who has these keys in your possession. This is because a decentralized system is used. We explicitly bring this point to your attention because you no longer have access to your digital money if you no longer have the access codes (the keys) in your possession.
There are a large number of different types of crypto wallets on the market today. For example, you can choose a hot wallet or a hardware wallet. A hot wallet is more suitable for the traders in cryptocurrencies, so the active traders while a hard wallet is a safe option for the investors in this area. Given that the volatility in the crypto market entails many (financial) dangers, a hardware wallet can be an interesting option for you…. or not? You can read all about hardware wallets elsewhere on this Cryptokoers website.
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How anonymous is cryptocurrency trading?
Before you start with crypto coins, it is good to know that the transactions do not take place completely anonymously. Your privacy, on the other hand, is guaranteed. This obviously requires some explanation. When using blockchain technology, the transactions can be tracked exactly. It is therefore visible to each participant from the network which amount has been transferred and when.
However, it is not possible to see which persons are the owners of the wallets in question. As a result, outsiders do not know who the sending party is and which person the recipient is. You can see this partial insight as a disadvantage, but you can also see this as an advantage. After all, the security features of blockchain technology are (partly) based on this. After all, this set-up makes it very difficult to commit fraud with these types of transactions. How does crypto work?
Detailed explanation
Another point regarding your privacy and anonymity when trading cryptocurrency is the creation of your wallet. The broker and/or exchange you use will of course only provide your digital wallet if you provide a number of personal details. If you make the choice for a good euro-crypto exchange, your data is in reliable hands!
Do you want to read more about your privacy when trading cryptocurrencies here? In our extensive article titled “How does cryptocurrency work” we go deeper into this.
Advantages and disadvantages of trading and/or investing in cryptocurrencies
If you have decided to start with cryptocurrencies, the proverb “reflect before you begin” will undoubtedly have shot through your head. In this context, it is good to list the advantages and disadvantages of trading and / or investing in cryptocurrencies. In this guide, we’ll make this phase a little easier for you by listing these pros and cons for you below.
Benefits of trading and/or investing in cryptocurrency
- The availability and possession of cryptocurrencies offers you all the freedom in your ability to pay. This point has two similarities. First of all, there are more and more possibilities to pay with cryptocurrency. In addition, you have all the freedoms to make transactions with digital money because no third party is involved because blockchain technology is used.
- There is considerable transparency in the provision of information. In practice, this means that all transactions are transparent to the network, while of course the privacy with regard to the personal data is guaranteed.
- Trading and investing in cryptocurrencies is seen as a safe way of managing cryptocurrencies. You can manage your digital currencies in a secure environment and exercise control over them yourself.
- Low transaction costs are charged when trading and / or investing in cryptocurrency, provided you use the right broker / exchange for this but more about that elsewhere in this manual. This is certainly the case if you compare cryptocurrency trading with other forms of stock or bond trading. In addition, no transaction costs will be charged if you pay with cryptocurrency.
Disadvantages of trading and/or investing in cryptocurrency
- Trading and/or investing with cryptocurrency involves risks. Many people also see the volatility (the volatility of these prices) as a disadvantage, but this can of course also be seen as an advantage. This volatility is caused by the limited supply in many cryptocurrencies where there is a sharply increasing demand. It’s good to emphasize that you should only bet money that you can afford to lose. So do not borrow money to be able to trade in cryptocurrency and do not use the money you need to pay your fixed costs! The money you have bet, you must therefore consider as spent. Trading cryptocurrency should under no circumstances be a burden for you or your loved ones!
- Trading and/or investing in cryptocurrencies is seen by many people as a step in a completely new environment. It is therefore of great importance to delve into this matter before you take this step. By going through this manual and the large amount of information on this website that we refer to in this guide, you will already be well on your way.
Do you want to know more about how you can best apply good risk management to your crypto holdings? Then read our 3 crucial tips about this.
Trading €1000crypto for free?
