Everything Beginners Should Know before Starting Crypto Trading
Bitcoin has once more hit peak popularity, which has sparked renewed interest in cryptocurrencies as alternate investment vehicles. It is not that difficult to understand why; cryptocurrency is exciting and it is extremely easy for anyone to start trading. Even if it is a new technology, the nature of trading it doesn’t differ tremendously from traditional financial instruments like stocks and forex. Just like any other instrument, you have to accept a certain amount of risk in order to earn a return. However, it still remains riskier than any other financial instrument because it is unregulated and this increases its volatility.
When you are just starting out, there are some essential things for you to know in order to make the right decisions. What are they? Check them out below:
Take cybersecurity seriously
Your crypto investment is no different than the cash you own, so you should treat them the same way that you would your real money. A number of people are unintentionally careless or lazy in regard to online security. If you have bad habits like using the same password for every website or using passwords that are easy to guess, then you need to correct your behavior. Keep long and difficult passwords and ensure they are unique for every website. You can use a password manager to help you keep track of your passwords.
Remember crypto is not insured
Crypto trading platforms don’t offer insurance. Depositing your money in a bank gives you some security because they have insurance, so you will receive compensation. The same doesn’t apply to cryptocurrencies. If the platform you are using gets hacked or goes bankrupt, your money will be gone for good. You can minimize the risk by keeping the crypto off the trading platform if you are not using it actively. It is best to have only a small portion of your coins on the platform.
Use a crypto wallet
Where do you keep the remaining portion of your portfolio? This is where a crypto wallet comes in. You can use a hardware or digital wallet for storing it, as you don’t want to leave it on the trading platform where it will be vulnerable to hackers. You can buy a physical hardware wallet, or you can install a digital wallet on your computer’s hard drive. A hardware wallet is not that different from the wallet you use for carrying your traditional currency. But, like your regular wallet, if you lose it, then you lose your crypto as well. Thus, you need to keep it in a safe place like a safe deposit box.
One of the most important things you need to know is that crypto trading will incur some transaction fees. There is a small transaction fee for moving your crypto to the trading platform from your wallet and vice versa. This can vary from platform to platform and is usually dependent on the size of your transaction and the time you make the transfer.
Coin conversion fee
While Bitcoin may have started the tide, it is a fact that it is no longer the only cryptocurrency in the market. There are other profitable options as well, which you have to have in your portfolio in order to diversify it properly and minimize your trading risks. Therefore, it is essential for you to know that converting one crypto into another will incur some conversion fees. This is the same that happens when you are exchanging traditional currencies.
Like transaction fees, the crypto conversion fee will depend on the currency you are exchanging, when you are exchanging it, the amount you are exchanging, and the one you are exchanging into. The fee can vary for different trading platforms because the value of the coins itself may vary. If you decide to use a different exchange, you will have to pay the transaction fee for moving your crypto between them.