Lesson 1 – A beginner’s guide to cryptocurrency trading

In recent years, cryptocurrencies have experienced unprecedented hype. Digital currencies, led by Bitcoin, have gained extreme popularity in just a few years. Although cryptocurrencies are increasingly becoming part of everyday life, terms such as “coin”, “blockchain”, or “wallet” remain unfamiliar to many newcomers.

What are cryptocurrencies?

Cryptocurrencies are a relatively new form of digital or virtual currency that utilizes cryptography for security, making them resistant to counterfeiting. Typically, cryptocurrencies can be exchanged and traded similarly to any other fiat currency.

Cryptocurrencies eliminate the need for intermediaries like banks in financial transactions and grants each user complete control over their money.

Why are cryptocurrencies significant?

1. Security: Thanks to their decentralized nature, cryptocurrencies are not dependent on a central authority or middleman. This independence makes them potentially resistant to central points of attack or failure, enhancing security as manipulation or unwanted interference becomes harder.

2. Anonymity: Transactions and accounts can be relatively anonymous, though the level of anonymity varies depending on the cryptocurrency.

3. Transparency: Since the transactions are recorded on a public ledger, the process is transparent. By accessing the public address of any user, you can view the transactions they have made.

4. Lower transaction fees: Traditional banking systems and online money transfers usually involve fees and exchange costs. In contrast, cryptocurrencies –– due to the miners (individuals who validate and verify transactions) being compensated by the network –– often involve little or no fees.

5. Accessibility: Cryptocurrencies are accessible to anyone with an internet connection, providing financial inclusion to those excluded from traditional banking systems.

Risks of cryptocurrency trading

Due to the fact that the market is very volatile, trading cryptocurrencies also involves risks. So, when making investment decisions, it’s important to remember to only invest what you are prepared to lose.