An unprecedented Bitcoin price surge back in 2017 attracted many investors who wanted to profit from the emergence of this new digital asset class.
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. In this article, we would cover the most popular trading venues and explain what the differences are.
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 if you really need to sell your Bitcoin quickly that might not be the easiest option.
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. One major downside of the crypto exchanges its security vulnerability.
We have seen many occasions when the crypto exchanges have been hacked and clients digital assets disappear. Given the anonymous nature of Bitcoin and other cryptocurrencies, it is not possible to trace such funds and they might have been lost by their offers forever.
Binance is the largest cryptocurrency exchange in the world with hundreds of token listings but it might be not the best option for beginners. Coinbase, on the other hand, is the second-largest crypto exchange that is ideally suited for beginner investors.
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 can magnify as well.
Cryptocurrency trading is considered to be a “high-risk” money activity and your investment can go up and down in value. Some of the most popular CFD brokers that allow cryptocurrency trading are Plus500 and 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 or ZuluTrade, you can simply follow and copy the trading strategy of an experienced trader.
Cryptocurrency Automated Trading
Forex is one of the most popular markets with trillions of dollars being traded every day. Forex also presents a great opportunity for systematic traders, those who use computers to analyse charts and predict the price moves. Because currency price change is not significant but moves up and down a lot, you can trade only the spread and use leverage.
Many traders also use automation in a form of predefined trading algorithms or aka 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 not in your favour 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 the losing trade. 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: Haasbot, Gunbot, Zignaly, Bitcoin Code, Bitcoin Revolution to mention a few. Some are suited for beginner investors and some are for more advanced traders.
As you can see, if you want to start investing in cryptocurrencies, there are a number of options available. 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. And you can even invest in cryptocurrencies on autopilot with one of the trading robots by using a computer algorithm.