Crypto‑ it seems like it’s the center of conversation everywhere. Everyone from the seasoned citizen of the internet to mainstream traders on Wall Street are investing in this space. For the intrepid investor, cryptocurrency offers a way to access huge profits in a relatively short amount of time. How can you get in on crypto, and what are your best bets for taking advantage of this dynamic opportunity?
The Big Cryptocurrencies
First, let’s address the heart of the matter— cryptocurrencies. Cryptocurrencies are, yes, the currency of the space, which you can then trade and leverage on a cryptocurrency exchange. Just as in the real world, where some fiats are bigger and stronger, there are some ‘big’ currencies in the crypto space. Some of the heaviest hitters include:
- Binance Coin
And that’s just to name a few. The market is incredibly diverse at this point. In addition to these and Bitcoin, which could easily be characterized as the Euro or USD of the crypto world, there are many smaller currencies that are on the rise, offering huge potential returns for the lucky investor.
All of the action in the crypto world happens on cryptocurrency exchanges. These are platforms that offer a range of products and services, as well as cryptocurrencies. These products and services range from basic trading of currency to lending assets that generate revenue via interest.
The Basics of Crypto Trading
How do you invest in crypto? Very much how you would invest in an asset in the outside world:
- First, you would create an account at a cryptocurrency exchange
- Next, you would fund that account using fiat or other cryptocurrency
- Third, you would purchase a specific cryptocurrency
- Next, you would choose an investment or trading strategy
What strategies are available to you in the crypto space?
Many of the financial assets and services that define IRL markets exist in the crypto space, too. Two essentials to know are spot trading and futures trading. As in the ‘real’ world, spot trading happens now and futures trading happens at a set date down the road.
What does this mean in the context of crypto? Spot trading involves buying and selling cryptocurrencies, and these transfers happen in an instant. The buyer gets direct ownership of the asset and the seller relinquishes ownership. When someone has direct ownership of a cryptocurrency, they can then use it in other money-making crypto opportunities, such as staking.
The Futures market functions very differently. It does involve buying and selling, but it’s the buying and selling of contracts and not directly-owned assets. In other words, purchasing a contract in a futures market does not give you ownership of the cryptocurrency that is the basis of the contract. The trader instead owns the futures contract itself and agrees to either buy or sell the underlying currency at a future date. Why take this approach? For one, it allows for a healthy bit of speculation. Two, it also offers some buffer against the inherent volatility of many of the cryptocurrencies in the space, while also giving you the opportunity to benefit from that same volatility.
Investing in crypto isn’t overly complex, even though there is a learning curve in terms of terminology. For many users, the experience will be very like their investment efforts in the real world. With a bit of effort, anyone can enter the space and access some exciting opportunities.