Basic information is needed to make trading of cryptocurrencies safer. Definitions, blockchaintechnology, information on different cryptocurrencies help users navigate their path through the landscape of digital currency.
What is cryptocurrency?
If we are going back to the basics, there is every use in knowing what cryptocurrency means. Cryptocurrency is a digital asset developed using the encryption method, cryptography, intended for use a medium of exchange.
The first cryptocurrency to hit the market was Bitcoin. The first mining and transfer transactions of Bitcoin, whose whitepaper was published in 2008 by a person group of persons called Satoshi Nakamoto, took place in January 2009.
Today, Bitcoin is considered the most valuable cryptocurrency.
What is Blockchain?
To better understand the world of cryptocurrencies, one should know what blockchain technology is.
Blockchain is a decentralized, transparent database system with a cryptographic infrastructure. Each block in the chain stores the relevant data using distributed ledger technology. A transaction in one block is reflected across all other blocks. So it is safe and transparent.
Blockchain technology can be adapted to many industries as it essentially aims to store data. Its first stop was the finance industry as it was an easy match.
It is expected to be adopted by other industries such as health, retail and travel in the future.
What is altcoin?
With the value of Bitcoin rising since its release, coins serving alternative purposes emerged and these are called altcoins.
What is Ethereum?
Ethereum is an altcoin created using the De-Fi protocol, and unlike the Bitcoin blockchain, it uses smart contracts. It was created by Vitalik Buterin.
How many types of cryptocurrencies are there?
There are over 12,000 types of cryptocurrencies, but not all of them are listed on cryptocurrency platforms. There are over 5,500 cryptocurrencies with a solid infrastructure and a high supply-demand balance.
What are the strategies around trading cryptocurrencies?
There are two strategies for trading cryptocurrencies: active and passive. The most common form of active strategy is day trading. With this strategy, market trends are closely followed, technical data are carefully interpreted, with trading of assets following market trends unfolding throughout the day.
Float trading is another form of active strategy. With this method, in contrast to the daily strategy, transactions are made by following and studying the charts, without taking any investment action for at least one day, while this method carries less risk than day trading, it also requires experience and a basic level of financial knowledge.
The third strategy is trend trading. With this method, trading is done with more popular cryptocurrencies spread over a longer period of time. It is a strategy for beginners to get more familiar with the market dynamics.
The final active strategy is instant trading. With instant trading, transactions are made in seconds exploiting market volatilities. It is a complex method requiring experience, preferred by investors often referred to as whales.
Passive trading strategy is a long-term investment method with low risk preferred by savers. This is done in two ways, index investing and the buy-and-hold method.
With the buy-and-hold strategy, investors buy cryptocurrencies based on fundamental analyses and hold them for the long term in their wallet. The retained assets can be flogged off when they hit their target value.
ETF movements and index purchase methods fall under the index investment framework. It is a less popular strategy.
Bu içerik en son 26 October 2022 tarihinde güncellenmiştir.
