And while we have seen a significant price correction, even today cryptocurrencies remain one of the most popular and widely traded assets attracting even more individual investors to the market. While there are a number of trading venues where one can trade and invest in digital assets, many newbie investors might feel lost as to what option to choose and what their advantages are. Below we cover the most popular trading venues and explain what the differences are.
The most popular way to invest in cryptocurrencies is through a crypto exchange. You can deposit funds with exchange using various payment methods and can store all your digital assets on the exchange. The main advantage of this method is that you can buy or sell Bitcoin instantly. While some exchanges offer only up to 10-15 cryptocurrencies that you can trade, others allow you to invest in hundreds of digital tokens.
Binance is the largest cryptocurrency exchange in the world with hundreds of token listings which may seem a little daunting to use at first, but you would soon get the hang of it.
Also see: Binance 2020 Comprehensive Review
If you are investing in Bitcoin long-term, you can simply buy and hold it in a digital wallet. Usually, digital wallets are the most secure way to store Bitcoins (but be careful) but if you really need to sell your Bitcoin quickly that might not be the easiest option.
Crypto CFD Brokers
Another popular way to trade Bitcoin is via CFD brokers. Usually, CFD brokers won’t invest in cryptocurrencies directly but would allow you to bet on the price move. Since you are not investing in the underlying asset, you don’t have to pay the whole price. Instead, you can trade the spread, or Contract for Difference (CFD). That allows you to start investing with a lower initial deposit but still get the full upside potential. But it is important to remember that losses do magnify too.
Cryptocurrency trading is considered to be a “high-risk” money activity and your investment can go up and down in value. One of the most popular CFD brokers that allow cryptocurrency trading is eToro.
While CFD brokers will mostly have sophisticated trading systems, designed for experienced traders, they also offer tools and resources designed for beginner traders. In some cases, like with eToro Social Trading, you can simply follow and copy the trading strategy of an experienced trader, their past and present performances are there for you to see, along with stats, portfolios and charts.
Cryptocurrency Automated Trading
Many traders also use automation in a form of predefined trading algorithms or that is 'trading robots' to place trading orders and therefore are not required to spend all the time in front of the screen. That is also very convenient as even a small price move against your trade can result in a significant loss. Automated trading is designed to give investors the ability to place a large number of small trades simultaneously and close their positions very fast as soon as the profit target per each trade is achieved.
Trading algorithms also have a stop-loss which allows you to instantly liquidate a losing trade, sometimes you will need to cut your losses. It is unrealistic to expect that all your trades will be profitable, but as long as on average you have more winners than losers, you will still make money.
There are a variety of the trading robots available on the market today. Here are just a few worth mentioning: Haasbot, Gunbot, Zignaly, Bitcoin Code and Bitcoin Revolution. Some are suited for beginner investors and some are for more advanced traders. You will need to do your own research to find the one that suits your style of trading.
Also see: Kraken crypto exchange review
As you can see, if you want to start investing in cryptocurrencies, there are a number of options available. With a little care and reading help and advice articles at Crypto Savvy UK you can venture into crypto trading with confidence. If you just want to buy and hold, you can easily go with the digital wallet. If you want to be actively involved in trading and make decisions, you can go with the crypto exchange or a CFD broker platform.
See our Help and Advice articles to educate yourself on the pros and cons of cryptotrading.